Notice of termination and redundancy pay forms part of the National Employment Standards (NES). The NES apply to all employees covered by the national workplace relations system, regardless of any award, agreement or contract. Did you know there is no redundancy if notice given within 12 months? Read on!
The NES establish the minimum entitlement to the notice period, or payment in lieu of notice, that an employer must give an employee to end their employment. This applies to all employees (other than casuals), not just those covered by the national workplace relations system.
The NES also outline the redundancy pay an employee may receive at the end of their employment. This entitlement only applies to employees covered by the national workplace relations system.
Redundancy occurs when an employer either decides they no longer need an employee’s job to be done by anyone, or the employer becomes insolvent or bankrupt, and terminates their employment.
The job itself, not the employee, becomes redundant. Redundancy can happen when the business:
- introduces new technology (for example, the job can be done by a machine)
- slows down due to lower sales or production
- closes down
- relocates interstate or overseas
- restructures or reorganises because a merger or takeover happens.
What redundancy pay is payable?
Employees receive redundancy pay based on their continuous period of service with their employer. This amount is paid at the employee’s base pay rate for ordinary hours worked.
An employee’s base rate of pay (other than a pieceworker) is the pay rate they receive for working their ordinary hours, but does not include the following:
- incentive-based payment and bonuses
- monetary allowances
- overtime or penalty rates
- any other separately identifiable amounts.
|Period of continuous service||Redundancy pay|
|At least 1 year but less than 2 years||4 weeks|
|At least 2 years but less than 3 years||6 weeks|
|At least 3 years but less than 4 years||7 weeks|
|At least 4 years but less than 5 years||8 weeks|
|At least 5 years but less than 6 years||10 weeks|
|At least 6 years but less than 7 years||11 weeks|
|At least 7 years but less than 8 years||13 weeks|
|At least 8 years but less than 9 years||14 weeks|
|At least 9 years but less than 10 years||16 weeks|
|At least 10 years||12 weeks*|
* There is a reduction in redundancy pay from 16 weeks to 12 weeks for employees with at least 10 years continuous service. This is consistent with the 2004 Redundancy Case decision made by the Australian Industrial Relations Commission.
Does redundancy pay apply to all employees?
Some employees don’t get redundancy pay when their job is made redundant.
The following employees don’t get redundancy pay:
- employees whose period of continuous service with the employer is less than 12 months
- employees employed for:
- a stated period of time
- an identified task or project
- a particular season
- employees fired because of serious misconduct
- casual employees
- trainees engaged only for the length of the training agreement
- employees of a small business.
The Fair Work Act 2009 (s121(1)) provides that the redundancy pay provisions under the NES do not apply to the termination of an employee’s employment if, immediately before the time of the termination, or at the time when the person was given notice of the termination as described in s117(1) (whichever happened first), the employee’s period of continuous service with the employer is less than 12 months.
This means that if an employee is given notice before they have completed 12 months of continuous service with the employer, the employee is not entitled to redundancy pay, despite completing 12 months of service by the date of termination.
For more information visit The Fair Work Ombudsman.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained. Please contact us should you have any queries in respect of redundancy and termination payments.