Redundancy Pay in Australia: What You're Entitled To (and What You're Not)

Getting made redundant is stressful enough without having to decode a payout letter that reads like it was written by three lawyers and one payroll system.

The good news is that redundancy pay in Australia is not pure mystery. There are actual rules. The annoying news is that people often mix up redundancy pay, notice pay, unused leave, and tax treatment as if they are all one thing. They are not.

This guide walks through what the National Employment Standards usually cover in 2026, who misses out, how the weeks are calculated, and where the biggest misunderstandings happen.

What counts as a genuine redundancy?

At the simple level, a genuine redundancy means the job itself is no longer needed, not that the employer just wants a different person in the chair.

That can happen because of a restructure, site closure, slowdown, automation, merger, outsourcing, or relocation. The role disappears or changes enough that the old position is gone.

If the company quietly recreates the same role with the same duties and a shiny new title a week later, that is where things can get messy fast.

Who usually gets redundancy pay?

Under the National Employment Standards, many employees are entitled to redundancy pay if:

• they have at least 12 months of continuous service
• they are covered by the national workplace relations system
• their employer has 15 or more employees

That is the minimum framework. Awards, enterprise agreements, and industry-specific schemes can give different or better entitlements, so the NES is the floor, not always the whole room.

Who usually misses out?

This is the bit people hate, because the exceptions are not small.

Under the NES, redundancy pay usually does not apply to:

• employees with less than 12 months of service
• most casual employees
• employees hired for a set period, task, or season
• employees dismissed for serious misconduct
• apprentices, and trainees employed only for the length of the training arrangement
• most employees of a small business

Small business matters here. For redundancy pay purposes, that generally means fewer than 15 employees at the time of the redundancy. Regular and systematic casuals can count, the employee being made redundant is counted, and associated entities are counted together, so employers do not get to play cute little counting games with the org chart.

The NES redundancy pay table

If you are eligible under the NES, redundancy pay is based on your period of continuous service:

Yes, it drops from 16 weeks to 12 weeks once you hit 10 years. No, that is not a typo. It catches people out all the time.

Redundancy pay and notice pay are separate

This is one of the biggest sources of confusion.

Redundancy pay is compensation because the role disappears. It is paid at your base rate of pay for ordinary hours, which means it does not include overtime, penalty rates, allowances, loadings, or bonuses.

Notice pay, on the other hand, is about ending the employment. If your employer does not require you to work out your notice period, they may pay you in lieu. That is usually based on your full pay rate, which can include things like allowances, loadings, overtime, penalty rates, and other separately identifiable amounts.

Same termination package, different rules. Very Australian admin energy.

How much notice do you get?

For most non-casual employees under the NES, the minimum notice period is:

• 1 week if service is 1 year or less
• 2 weeks if service is more than 1 year and up to 3 years
• 3 weeks if service is more than 3 years and up to 5 years
• 4 weeks if service is more than 5 years

If you are over 45 and have completed at least 2 years of service, you usually get an extra week of notice.

A simple worked example

Say you have worked for your employer for 6 years and 4 months and your ordinary weekly base pay is $2,000.

Under the NES scale, that period lands in the 6 to less than 7 years bracket, which means 11 weeks of redundancy pay.

That gives you:

• Redundancy pay: 11 × $2,000 = $22,000
• Notice pay: if you are paid 4 weeks in lieu, roughly $8,000 at your ordinary weekly amount before any other full-rate inclusions

Before leave payouts, that is roughly $30,000 gross. Then unused annual leave, long service leave, roster effects, and tax treatment can change the money that actually lands in your account.

If you want to test your own numbers, the Redundancy Pay Calculator is the fastest place to start.

Continuous service is not always as simple as it sounds

Continuous service is generally how long you have worked for the employer, but unpaid leave does not count towards the service total for redundancy pay calculations even though it usually does not break continuity.

That matters if you have taken long periods of unpaid parental leave, career break leave, or similar time away. It may not kill eligibility, but it can change the length-of-service bracket. Do not assume that same rule automatically answers every other entitlement, because notice and other final-pay items can follow different rules.

What else should be in the final payout?

Redundancy pay is only one part of the broader termination package. Depending on your situation, final pay may also include:

• payment in lieu of notice
• unused annual leave
• unused long service leave
• outstanding wages
• other contractual or award-based entitlements

That is why the gross number on the letter can look generous and the net number in your bank account can feel like it got mugged on the way over.

How tax usually works

This is where people make bad assumptions quickly.

Part of a genuine redundancy payment can be tax-free under ATO rules. Broadly, the tax-free component uses a base amount plus an amount for each completed year of service, and those thresholds are indexed each year.

But not every dollar in your final payout is part of that genuine redundancy payment.

• redundancy pay may have a tax-free component
• amounts above the tax-free threshold may be taxed under employment termination payment rules
• unused annual leave and long service leave often have their own tax treatment
• payment in lieu of notice may be treated differently from leave payouts, and in some cases can form part of a genuine redundancy payment if the ATO conditions are met

So if payroll gives you one big total, do not assume the whole amount is either fully tax-free or taxed like a normal wage. It is usually a mixed bag.

The easiest sanity check is to compare the payout against your normal take-home using the Pay Calculator and then test rough after-tax scenarios in the Income Tax Calculator.

What if your employer is broke?

If the business goes into liquidation or bankruptcy and cannot pay everything it owes, the Fair Entitlements Guarantee may help eligible employees recover some unpaid entitlements.

It can cover certain wages, leave, notice, and redundancy amounts, but caps and eligibility rules apply. In other words, it is a safety net, not a magic wand.

Three mistakes people make

1. They compare packages with friends. Different awards, contracts, service histories, and business sizes can produce very different outcomes.
2. They assume the whole payout is taxed the same way. It usually is not.
3. They focus on the headline figure only. Leave, notice, tax, and timing matter just as much as the severance number.

What to check before you sign anything

• your start date and continuous service calculation
• your award, enterprise agreement, or contract
• whether the employer is counting all employees correctly for small business purposes
• your notice period and whether you are working it or being paid in lieu
• your leave balances
• when the payout will actually be made
• whether the tax breakdown makes sense

Ask for the whole thing in writing, line by line. Not because you enjoy admin, obviously, but because memory gets weird when your job disappears on a Tuesday afternoon.

Official places to check the rules

If you want the source documents instead of trusting one helpful internet koala, start here:

• Fair Work Ombudsman, redundancy pay
• Fair Work Ombudsman, who does not get redundancy pay
• Fair Work fact sheet on notice of termination and redundancy pay
• ATO guidance on genuine redundancy payments
• Department of Employment and Workplace Relations, Fair Entitlements Guarantee

The bottom line

If you are made genuinely redundant in Australia, the NES may entitle you to redundancy pay, notice, and other final payments, but the exact outcome depends on service length, employer size, your employment type, and any award or agreement that sits on top.

The smartest move is boring but effective: separate the package into components, check each one against the rules, and run your own numbers before you make any big money decisions.

Frequently asked questions

Do casual employees get redundancy pay?

Usually no under the NES, although you should still check any award or agreement that applies to your job.

Why does redundancy pay drop after 10 years?

Because the NES scale sets 9 to less than 10 years at 16 weeks, then 10 years or more at 12 weeks. It is odd, but it is the published scale.

Does unused leave count as redundancy pay?

No. Unused annual leave and long service leave are separate payout components.

Can a small business avoid redundancy pay?

Most small businesses are exempt from NES redundancy pay, but small business status has a specific employee-count test and awards or agreements can change the position.

Is this legal or tax advice?

No. This is general information only. If the payout is large or the facts are messy, speak with Fair Work, your union, an employment lawyer, or a tax adviser.