Redundancy – even if it is a voluntary – can be a difficult time in your career. If you or your job have been made redundant, you may be entitled to receive redundancy pay.
In this article, we look at how you can calculate redundancy pay, and explain when employees have the right to receive it.
Calculating Redundancy Pay
The formula for calculating your redundancy payment is:
Base Rate of Pay x Redundancy Pay Period = Redundancy Pay.
If you have been made redundant, you usually have the right to receive redundancy pay (also known as severance pay). This pay is generally calculated depending on your period of employment.
Note: If you have been hired under a registered employment agreement, that agreement may specify your redundancy payment.
Base Rate of Pay
Unless you are a pieceworker (where you are paid for a piece of work), your base rate of pay is the amount paid for ordinary hours of work. Your base rate (and therefore your redundancy payment) does not include:
- overtime or penalty rates;
- any incentive-based payments or bonuses; or
- any monetary allowances.
Redundancy Pay Period
The redundancy pay period depends on your length of employment. The table below sets out the applicable pay period depending on your length of employment. For example, if you were employed for at least one year but less than two years, your pay period would be four weeks.
Length of Employment
Redundancy Pay Period
|At least||Less than|
|1 year||2 years||4 weeks|
|2 years||3 years||6 weeks|
|3 years||4 years||7 weeks|
|4 years||5 years||8 weeks|
|5 years||6 years||10 weeks|
|6 years||7 years||11 weeks|
|7 years||8 years||13 weeks|
|8 years||9 years||14 weeks|
|9 years||10 years||16 weeks|
|At least 10 years||12 weeks (due to any outstanding long service leave entitlements)|
It is important to note that the length of your employment might also depend on whether you were legally entitled to redundancy pay before the introduction of the National Employment Standards (NES). The NES began operating on 1 January 2010. If you did not have the right to receive redundancy pay before this date, your period of continuous service is taken to commence on 1 January 2010.
Am I Entitled to Redundancy Pay?
A worker is not always entitled to a redundancy payment. There are specific guidelines that can help you determine whether you are an employee for the purpose of working out redundancy payment entitlements. These guidelines are freely accessible on the website for the Fair Work Ombudsman.
Workers who have no right to redundancy pay include employees who:
- are casual workers;
- work in a small business;
- are hired for less than 12 months;
- are apprentices;
- have been hired for a specified task, a particular period or in a specific season;
- fall under an industry-specific redundancy award (typically a modern award);
- have been terminated due to serious misconduct; and
- fall under an enterprise agreement containing a redundancy agreement. (Note that this only applies if the redundancy scheme is industry-specific and incorporated into the agreement from an existing modern award. The employee must fall under the redundancy scheme in the award).
You should also be aware that even if you are entitled to a redundancy payment, your employer can apply to the Fair Work Commission to reduce the amount. The Commission may grant permission if the employer:
- finds other acceptable employment for you; or
- cannot pay the full amount.
You can calculate your redundancy pay by multiplying the employee’s base rate of remuneration by the redundancy pay period. However as outlined, there may be instances where this does not apply. If you require more information about redundancy pay, the Fair Work Ombudsman website is an excellent resource. However, if you need advice tailored to your particular situation, you will need to speak with a lawyer experienced in employment matters.
Contact LegalVision’s employment lawyers to assist you. Questions? Call us on 1300 544 755 or contact us with the form on this page.
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