What is redundancy pay under the Fair Work Act?
Redundancy pay in Australia is governed by the National Employment Standards (NES), specifically Division 11 of Part 2-2 of the Fair Work Act 2009 (Cth). It is a lump-sum payment your employer must make when your position is made redundant and you meet the eligibility requirements. It is separate from, and in addition to, your notice of termination.
Who qualifies for redundancy pay?
To receive NES redundancy pay you must:
- Be a national system employee (covered by the Fair Work Act — most private sector workers)
- Have completed at least 1 year of continuous service with the same employer
- Be dismissed because of a genuine redundancy
- Not be employed by a small business employer (fewer than 15 employees)
Casual employees do not receive redundancy pay, nor do employees on fixed-term contracts where the termination arises from the expiry of the term.
What is a genuine redundancy?
Under section 389 of the Fair Work Act, a dismissal is a genuine redundancy only if:
- The employer no longer requires the employee's job to be performed by anyone (due to changes in operational requirements)
- The employer has complied with any consultation obligations in the applicable modern award or enterprise agreement
- It would not have been reasonable to redeploy the employee in the employer's enterprise or an associated entity
If your employer dismisses you as redundant but then hires someone else to do your job, or fails to consider redeployment opportunities, the redundancy may not be genuine — and you may have an unfair dismissal claim at the Fair Work Commission.
NES redundancy pay scale
The amount of redundancy pay is calculated using your base rate of pay for ordinary hours (not including overtime, penalty rates, or allowances) multiplied by the number of weeks in the following scale:
| Years of continuous service | Redundancy pay (weeks) |
|---|---|
| 1 to 2 years | 4 weeks |
| 2 to 3 years | 6 weeks |
| 3 to 4 years | 7 weeks |
| 4 to 5 years | 8 weeks |
| 5 to 6 years | 10 weeks |
| 6 to 7 years | 11 weeks |
| 7 to 8 years | 13 weeks |
| 8 to 9 years | 14 weeks |
| 9 to 10 years | 16 weeks |
| 10+ years | 12 weeks |
Note: the entitlement reduces from 16 weeks at 9–10 years to 12 weeks at 10+ years because the NES was designed to complement (not stack with) long service leave entitlements.
Calculate your exact entitlement
Enter your weekly base rate of pay and years of service for an instant calculation of your NES redundancy pay.
AU redundancy pay calculator →Small business exemption
If your employer has fewer than 15 employees (a "small business employer" under the Fair Work Act), they are exempt from paying NES redundancy pay. This is a significant carve-out — around 96% of Australian businesses are small businesses by this definition. However, small business employees are still entitled to notice of termination and any entitlements under their modern award or enterprise agreement.
If your employer has grown beyond 15 employees recently, or if they have associated entities, the headcount calculation can be complex. The Fair Work Commission considers both the employer entity and any related entities when determining small business status.
Is redundancy pay taxable in Australia?
Genuine redundancy payments receive favourable tax treatment in Australia. For the 2025–26 income year, the tax-free component of a genuine redundancy payment is:
- Base amount: $11,985
- Plus $5,994 for each complete year of service
The tax-free amount is indexed annually by the ATO. Amounts above the tax-free threshold are taxed at a concessional rate (32% including Medicare levy, or your marginal rate if lower). Seek advice from an accountant on your specific situation, particularly if your total termination payment is large.
Redundancy pay and notice of termination
Redundancy pay and notice pay are separate entitlements. Your employer must pay both:
- Notice of termination under s.117 of the Fair Work Act (1–4 weeks depending on service, plus 1 extra week if aged over 45 with 2+ years service) — or pay in lieu of notice at your full base rate
- NES redundancy pay under the scale above
- Annual leave payout — all accrued but untaken annual leave at your base rate (plus any applicable leave loading)
Modern award and enterprise agreement entitlements
The NES sets the minimum redundancy pay. Your modern award or enterprise agreement may provide a more generous scale — always check the instrument that covers your employment. The Pay and Conditions Tool (PACT) on the Fair Work Ombudsman website can identify which modern award applies to your role and the redundancy provisions it contains.