Redundancy for Employers: Genuine Redundancy, Consultation, and Redeployment

Redundancy is one of the highest-risk termination scenarios for employers. Get the process right and you have a complete defence to an unfair dismissal claim under the "genuine redundancy" provisions. Get it wrong - miss a consultation step, fail to consider redeployment, or apply flawed selection criteria - and you may face a successful unfair dismissal or general protections claim.

This guide covers the full redundancy process from an employer's perspective: what makes a redundancy genuine, your consultation obligations, how redeployment is assessed, how redundancy pay is calculated, and the common mistakes that expose employers to claims.

What Makes a Redundancy "Genuine"?

Under section 389 of the Fair Work Act, a dismissal is a genuine redundancy if three criteria are all met.

First, the employer no longer requires the employee's job to be performed by anyone. This means the role itself is being eliminated - not just the person in it. If you are making one employee redundant but hiring someone else to perform substantially the same duties, the redundancy is not genuine.

Second, the employer has complied with any obligation in a modern award or enterprise agreement to consult about the redundancy. This is not optional. If your applicable award or agreement contains a consultation clause (and virtually all modern awards do), you must follow it.

Third, it would not have been reasonable in all the circumstances for the employee to be redeployed within the employer's enterprise or an associated entity. You must genuinely consider whether alternative roles exist and whether the employee could be redeployed into them.

If any one of these three criteria is not met, the redundancy is not genuine and the dismissal can be challenged as unfair.

Step 1: Establish That the Role Is No Longer Required

The decision to make a role redundant must be a genuine operational decision. Common legitimate reasons include a restructure of the business or a department, the introduction of technology that replaces the role, a downturn in business that requires a reduced workforce, the outsourcing of functions previously performed in-house, and the closure of a location or business unit.

Document the business rationale clearly and at the time of the decision. You should be able to articulate why the role (not the person) is no longer needed, what has changed operationally, and how the duties previously performed by the role will be handled going forward.

Watch out for "redundancy as a shortcut." 

If the real reason for termination is performance or conduct, dressing it up as a redundancy will not protect you. The Fair Work Commission examines whether the role was genuinely eliminated and is alert to situations where a "redundancy" is followed quickly by a new hire into a substantially similar role.

Step 2: Consult in Accordance With Your Award or Agreement

Almost every modern award in Australia contains a consultation clause in a substantially similar form. The standard consultation obligation requires the employer to notify affected employees as soon as practicable after making a definite decision to introduce major workplace changes that are likely to have a significant effect on employees.

What consultation requires

Consultation is not just notification. It requires you to inform the relevant employees and their representatives (if any) of the decision, the reasons for the decision, and the expected effects on employees. You must discuss measures to avert or minimise the adverse effects, give prompt and genuine consideration to matters raised by employees during the discussion, and provide the affected employees with an opportunity to have a meaningful input before the final decision is implemented.

The timing matters. Consultation must occur before the redundancy takes effect - not after the decision has been made and communicated as final. If you walk into a meeting, hand the employee a termination letter, and offer to "consult" afterwards, you have not met the obligation.

What to discuss during consultation

The consultation meeting (or meetings - there should be more than one for significant redundancies) should cover the business reasons for the proposed redundancy, the roles affected and why, the proposed timeline, whether there are alternatives to redundancy (reduced hours, redeployment, voluntary redundancy), the selection criteria (if choosing between employees), and the support available to affected employees (outplacement, EAP, references).

Documenting consultation

Keep records of each consultation meeting: the date and time, who attended, what was discussed, what questions or concerns employees raised, and how you responded. Written meeting notes signed by attendees are ideal. At minimum, send a follow-up email summarising the key discussion points.

If the employee has a representative (such as a union delegate), they are entitled to have that representative involved in the consultation. You cannot exclude them.

Step 3: Consider Redeployment

The redeployment obligation requires you to consider whether it would be reasonable to redeploy the employee to another role within your enterprise or any associated entity. "Associated entity" has a specific meaning under the Corporations Act 2001 and can include related companies, parent companies, and subsidiaries.

What "reasonable" redeployment looks like

Redeployment must be into an actual, existing vacancy (or a role that is about to become vacant). You are not required to create a new position or displace another employee to accommodate the redundant employee.

The assessment of reasonableness considers the employee's skills, qualifications, and experience relative to the available role, whether the employee could perform the role with reasonable training or adjustment, the location of the available role (is relocation reasonable?), and the terms and conditions of the available role compared to the employee's current role.

A role at a substantially lower level or on substantially different terms may still be a reasonable redeployment option in some circumstances - you must offer it and give the employee the choice to accept or decline.

What if there are no suitable roles?

If there are genuinely no suitable redeployment options, document your assessment. Record what roles you considered, why they were not suitable, and what steps you took to identify potential opportunities. This documentation is your evidence if the genuineness of the redundancy is later challenged.

If you have associated entities, you must also consider roles within those entities - not just your own business. Failure to consider associated entity roles is a common gap.

Step 4: Selection Criteria (When Choosing Between Employees)

When a restructure eliminates some but not all positions in a team or function, you must select which employees will be made redundant. The selection criteria must be fair, objective, and demonstrably unrelated to any protected reason.

Common legitimate selection criteria include skills and qualifications relevant to the restructured role, performance history (supported by documented evidence), length of service, and disciplinary history.

Avoid selection criteria that could directly or indirectly discriminate - for example, selecting based on part-time status (which may disproportionately affect women or carers) or selecting the employee who has been on workers' compensation leave.

Apply the criteria consistently and document the assessment for each employee considered. A selection matrix - a simple table scoring each employee against the agreed criteria - provides strong evidence of a fair and objective process.

Step 5: Calculate Redundancy Pay

Under the National Employment Standards, employees with at least 12 months of continuous service are entitled to redundancy pay based on their length of service. The entitlement is calculated on the employee's base rate of pay for their ordinary hours of work.

The NES redundancy pay scale is based on years of continuous service. An employee with at least one year but less than two years of service is entitled to four weeks' pay. The entitlement increases with service, reaching a maximum of 16 weeks' pay for employees with at least ten years of service.

Important qualifications

Small business exemption: Employers with fewer than 15 employees are not required to pay NES redundancy pay. However, check the applicable modern award or enterprise agreement - some contain separate redundancy provisions that apply regardless of business size.

Award and enterprise agreement provisions: The NES sets the minimum. Some modern awards and enterprise agreements provide for higher redundancy payments or additional entitlements (such as an employment separation certificate or outplacement support). Always check your applicable instrument.

Reduction applications: If you have found the employee acceptable alternative employment (or cannot afford the full redundancy payment), you can apply to the Fair Work Commission for a reduction in the redundancy pay amount.

Base rate of pay: Redundancy pay is calculated on the base rate of pay, which excludes incentive payments, bonuses, loadings, monetary allowances, overtime, and penalty rates. It is the rate payable for ordinary hours of work.

Additional payments on redundancy

In addition to redundancy pay, the employee is entitled to payment of accrued but untaken annual leave (plus any applicable loading), payment of any relevant long service leave entitlement, and payment for the applicable notice period (or payment in lieu of notice). Some enterprise agreements also require payment of accrued personal leave, rostered days off, or other entitlements on redundancy - check your applicable instrument.

Step 6: Communicate and Implement

Once consultation is complete and the decision is final, communicate the outcome to the affected employee in a meeting followed by written confirmation. The written confirmation should include the reason for the redundancy and the business rationale, the effective date of termination, the notice period (or payment in lieu), redundancy pay details and calculation, other final pay entitlements, arrangements for the employee's final days (return of property, handover), and information about support services (EAP, outplacement, references).

Allow the employee time to process the information. Redundancy is a significant event, and handling it with respect and care reflects well on your business - including with the employees who remain.

Common Mistakes That Undermine a Redundancy

No consultation, or sham consultation. This is the most common failure. Presenting the decision as final without genuine prior discussion, or holding a "consultation" meeting after the termination letter has already been drafted, will not meet the obligation.

Failing to consider redeployment. Even if you believe there are no suitable alternative roles, you must document that you considered the question. A bare assertion that redeployment was not available is not enough - you need to show what you looked at and why it was not feasible.

Ignoring associated entities. If your business has a parent company, subsidiaries, or related entities, you must consider vacancies across all of them. Many employers overlook this, particularly in corporate group structures.

Selecting for redundancy based on protected reasons. Selecting the employee who is pregnant, on workers' compensation, or who recently made a complaint is a direct path to a general protections claim - even if you also have a business restructure rationale.

Filling the role shortly afterwards. If you make a role redundant and then hire someone into the same or a substantially similar role within a few months, the genuineness of the redundancy will be challenged. If your business circumstances change and you need to rehire, consider offering the role to the redundant employee first.

Using a template letter without tailoring. Generic redundancy letters that do not reference the specific business rationale, the consultation that occurred, or the redeployment assessment are weak evidence. Tailor your correspondence to the facts.

Frequently Asked Questions

Can I make an employee redundant while they are on leave?

Legally, yes - a genuine redundancy can proceed while an employee is on leave. However, the timing creates risk, particularly if the leave is protected (parental leave, workers' compensation, personal leave). If the employee brings a general protections claim, you will need to prove the leave was not a reason for the redundancy. Where possible, wait until the employee returns to complete the process.

Does a redundancy need to be a permanent elimination of the role?

Yes. If the duties of the role continue to be performed - whether by other employees, a new hire, or a contractor - the redundancy may not be genuine. The test is whether the employer no longer requires the job to be performed by anyone.

Can the employee refuse to accept redeployment?

An employee can decline a redeployment offer. If you have offered a reasonable redeployment option and the employee refuses it, the redundancy can still be genuine - you met your obligation to consider redeployment. Document the offer and the employee's refusal in writing.

What if I cannot afford the redundancy pay?

You can apply to the Fair Work Commission for an order to reduce the redundancy pay amount. The Commission will consider your financial circumstances and the employee's situation. Alternatively, consider whether a voluntary redundancy process (with agreed terms) may achieve the same operational outcome at a manageable cost.

Do I need to offer voluntary redundancy before making compulsory redundancies?

There is no general legal requirement to offer voluntary redundancy first, unless your enterprise agreement requires it. However, it is good practice and can reduce the risk of claims - employees who accept voluntary redundancy are less likely to challenge the process.

Planning a restructure or redundancy? ClearER can guide you through the process - from consultation planning to documentation and communication. Book a redundancy planning session today.

This guide is general information only and is not legal advice. Employment law is complex and fact-specific — always seek tailored advice for your situation. Last updated: April 2026.