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 (also known as severance pay). In this article, we look at how you can calculate redundancy pay, and explain when employees have the right to receive it.

If you have been made redundant, you usually have the right to receive redundancy 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 you would ordinarily get paid during the redundancy pay period if you had been working. Your base rate (and therefore your redundancy payment) does not include:

  • overtime or penalty rates;
  • loadings;
  • any incentive-based payments or bonuses; or
  • any monetary allowances.

Redundancy Pay Period

The redundancy pay period depends on the length of your Australian employment. The table below sets out the applicable pay period depending on your length of employment. The Fair Work Commission can also confirm your correct redundancy payments and entitlements.

For example, if you were employed for at least one year but less than two years, your pay period would be four weeks.

Redundancy Payment Table Australia – 2020 Update

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 or Severance 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 a redundancy pay entitlement 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.

It is also important to note that you may be entitled to payments of:

  • annual leave;
  • long service leave; or
  • other entitlements.

Notice Periods

If you have been made redundant and eligible for termination pay, your employer must still provide you with notice of termination. Here, your employer can work with you to figure out how long the notice period will be and pay you during this notice period in addition to any redundancy payments.

However, you will not be entitled to notice if you:

  • are a casual employee;
  • work on a fixed-term contract; or
  • lost your job due to committing serious misconduct.

Key Takeaways

You can calculate your redundancy pay entitlement 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 the correct redundancy amount, 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.

Frequently Asked Questions about Redundancy Entitlements

When should I get my redundancy pay?

In situations where you are entitled to received severance pay (or a redundancy entitlement), you should generally be paid when you finish work or on the next regular payday. This will depend on the pay cycle of your employer.

How much tax do I pay on redundancy?

The tax you pay on redundancy depends on a number of factors. Your redundancy pay, which must be considered a genuine redundancy payment according to the Australian Tax Office, is tax-free up to a limit based on how many years’ service you have served with your employer. This limit is a dollar amount plus an amount for each additional year of completed service in your period of employment.

How is a redundancy payment calculated?

Your redundancy payment is calculated according to any relevant award or under the National Employment Standards (NES). Generally, the pay will depend on the employee’s period of continuous service.

How many weeks per year do you get for redundancy?

The number of weeks you receive for a redundancy will depend on how many years of continuous service. For example, you may receive four weeks of pay if you have worked for at least one year but less than 2 years.

Does a redundancy payment count as income?

A genuine redundancy payment is considered tax-free up to a certain limit. This is calculated based on the number of whole years of service. Unlike severance payments, the tax-free limit on genuine redundancy payments is not calculated on a pro-rata basis for years of service.

What is the difference between redundancy and severance pay?

A redundancy occurs when an employer does not require a particular job to be done by anyone, or when an employer becomes insolvent or bankrupt. Redundancy pay often refers to the compensation package, which may include payment in lieu of notice, severance pay and a gratuity. Severance pay refers to the specific payment for the number of weeks’ pay for each year of service.

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