Redundancy pay is compensation paid to eligible employees when their role is no longer required.
What is redundancy pay?
Redundancy pay applies when a job is made redundant due to organisational change rather than employee performance. In Australia, minimum redundancy pay entitlements are set out in the Fair Work Act and vary by length of service.
Payroll teams are responsible for calculating redundancy pay correctly, alongside notice, leave payouts and tax treatment. Errors in redundancy payments are a common source of disputes and compliance risk.
Things to know
- Redundancy pay is generally linked to an employee’s length of continuous service
- Minimum redundancy entitlements are set under Australian employment law
- Certain employees may be excluded depending on role, service length or employer size
- Redundancy pay is separate from notice pay and other termination payments
- Accurate payroll calculations are essential to avoid disputes or underpayment risk
FAQs
Who is entitled to redundancy pay in Australia?
Eligibility depends on factors such as length of continuous service, employer size and the reason the role is ending. Minimum entitlements set under the Fair Work Act.
Redundancy pay is generally calculated based on an employee’s ordinary pay and years of continuous service, with increases at set service milestones.
Is redundancy pay the same as notice pay?
Why is redundancy pay a payroll risk area?
Errors commonly occur due to incorrect service calculations, exclusions or misunderstandings of entitlements. These can lead to disputes or underpayment claims.
