• Working out redundancy payment in Australia means using a formula (base pay × weeks) set by the National Employment Standards. In short, eligible employees (typically ≥1 year of continuous service and covered by the national system, with an employer of 15+ staff) are entitled to a lump-sum redundancy pay based on years worked.
• The minimum pay (in weeks) rises with each year of service. For example, 3–4 years gives 7 weeks’ pay; 5–6 years gives 10 weeks. See the table below for the full schedule.
• Calculation is straightforward: multiply your ordinary base pay rate (weekly) by the entitlement (weeks) from the table. Do not include bonuses, loadings, or overtime in this base rate.

Who is Eligible for Redundancy Payment?

Under Australia’s National Employment Standards (NES), an employee generally qualifies if their job is genuinely made redundant and they have ≥1 year of continuous service, the employer is covered by the national system, and the employer has 15 or more employees. In other words, casuals, those with under 1 year of service, or those working for a very small business (<15 staff) typically aren’t covered by the basic NES rules. (Some modern awards or enterprise agreements may set out different or higher redundancy entitlements than the NES.)

Small business exception: Note that most small businesses (fewer than 15 staff) do not have to pay redundancy under the NES. However, if a small employer is bound by a specific award or agreement, they might still owe redundancy pay even with <15 staff.

Legal Basis: NES, Awards and Agreements

Redundancy payments come from the NES (Fair Work Act), or from an award or enterprise agreement covering the employee. Most employees get the NES minimum entitlements unless an award/contract says more. The NES defines the minimum payout by length of service (see table below). For example, as updated by recent Fair Work Commission decisions, certain industry awards now clarify how their redundancy pay relates to the NES entitlements. Always check your award/agreement for any special rules.

Working Out Redundancy Payment

Redundancy Payment = Base weekly pay × Redundancy Pay Period (weeks).

• Base weekly pay: Your ordinary rate for usual hours (ignore overtime, bonuses, allowances, super, etc.).
• Redundancy pay period: The number of weeks you get, based on years of service (see table).

The base rate is your regular pay before tax, excluding special incentives or overtime. For example, if you earn $1,200 per week and are entitled to 8 weeks, your pay is $1,200 × 8 = $9,600.

Any unused leave (annual or long service) must also be paid out separately in the final pay, but this is not part of the calculation itself.

Working Out Redundancy Payment Table (NES Minimum)

Source: NES redundancy entitlements.

Examples of Calculation

• Example 1: Alice has worked 3 years (continuous) for a national company. Her ordinary pay is $1,000 per week. The NES table entitles her to 7 weeks’ pay. Her redundancy payment = $1,000 × 7 = $7,000. (Plus any accrued leave paid separately.)
• Example 2: Bob has 6.5 years’ service at $1,200/week. That falls in “6–7 years”, or 11 weeks. So he gets $1,200 × 11 = $13,200.
• Example 3: Carol works for a small business with 10 employees and has 4 years’ service. Under the NES she’d get 8 weeks (4–5 years), but small-business rules mean her employer technically owes no statutory redundancy payment – unless her award says otherwise. Always double-check the rules that apply to you.

Common Pitfalls

• Counting the wrong base pay: Only include your ordinary rate (hourly or weekly salary). Exclude overtime, penalties, bonuses, super, allowances, etc. A common mistake is overestimating by adding extras that aren’t included.
• Misreading service periods: Breaks like unpaid leave don’t break continuity, but service must reach each threshold. For example, 2 years 11 months still counts as “2–3 years” (6 weeks) not 3 years. Conversely, 11 months of service usually means no redundancy pay under the one-year rule.
• Ignoring small-business exemptions: If your company has <15 employees, NES redundancy pay may not apply. Many workers assume they’re entitled, but small employers are exempt unless a specific award says otherwise (Timber Award example).
• Failing to use official tools: It’s easy to miscalculate. Use the Fair Work Ombudsman’s Notice and Redundancy Calculator to double-check your numbers (it factors in awards and notice entitlements). Similarly, the Fair Work Pay Calculator can verify your base pay rate under any award.
• Mixing up redundancy with other terminations: Redundancy must be “genuine” (job no longer needed) and is distinct from termination for misconduct or resignation. Only genuine redundancies attract this pay.

Tax and Superannuation

Tax: In many cases, part of a payout can be tax-free. The Australian Taxation Office (ATO) treats “genuine redundancy” payments differently. As CommBank notes, “you don’t normally pay tax on a payment that meets the ATO’s definition of genuine, up to a tax-free limit”. (Above that threshold, any remaining amount is taxed as an Employment Termination Payment at concessional rates.) The tax-free cap depends on years of service and is updated yearly. Always check the latest ATO tables for the current limits.

Superannuation: By law, employers generally do not pay super on redundancy lump sums. Redundancy payment (plus unused leave, notice pay, etc.) is considered a “lump-sum” termination payment, not Ordinary Time Earnings. Therefore, Super Guarantee contributions stop with the last ordinary wage paid.

Official Calculators and Resources

For accuracy, use official and reputable tools and sources:

• Fair Work Ombudsman Notice & Redundancy Calculator: Calculates both notice and payment under the NES or your award. (It’s free and kept up to date.)
• Fair Work Pay Calculator: Confirms your base pay rate under a modern award or agreement, so you can verify your weekly rate used in calculations.
• ATO Employment Termination Payments Guide: Details tax-free limits for genuine redundancies. See the ATO’s “Genuine redundancy payments” page for current rates.
• Fair Work Award Finder: Some awards/agreements have higher redundancy terms. Check if one applies to you.
  Always document everything and, if unsure, seek advice from an employment lawyer or union.

Frequently Asked Questions (FAQ)

Q1: Who is entitled?
A: Generally, permanent employees (not casuals) with at least 1 year continuous service, covered by the national system, and working for an employer of 15+ people are entitled. However, if the employer has <15 staff, NES redundancy doesn’t apply (unless an award says it does).

Q2: How do I use a payment calculator?
A: The Fair Work Ombudsman’s Notice and Redundancy Calculator asks for details like your job type, service length, and base pay. It then computes your entitlement under the NES or an award. You input your weekly salary and years of service, and it outputs the pay (ensure you select “redemption” scenario). This tool is free and helps avoid manual redundancy payment errors.

Q3: What if I have an award or agreement?
A: Some modern awards or enterprise agreements may give you greater entitlements or apply in situations where the NES doesn’t (e.g. small business). For example, the Timber Award requires small employers to pay redundancy. Always check your specific award or contract. If you’re covered by an award/EA, its terms can override the NES minimum. Use the Fair Work Award Finder or consult HR to find out.

Not Sure If Your Redundancy Payment Is Correct?

Working out redundancy payment can be surprisingly complex. Your entitlement may depend on your years of service, your employment contract, any modern award that applies to you, and the way your final pay is structured.

If you’ve recently been made redundant, or suspect your payout may not be accurate, getting professional guidance can make a big difference. A clear financial plan can help you understand your options, manage your payment effectively, and use the opportunity to reset your financial strategy.

At HPartners, we help Australians navigate major financial transitions with confidence. Whether you want advice on structuring your redundancy payout, managing tax implications, or planning your next financial move, our team can help you make informed decisions.

Speak to the HPartners team today to discuss your situation and take the next step with clarity.

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it, you should consider its appropriateness for you, having regard to those factors. Before making any decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement.