Redundancy Pay in Australia: How Much Are You Entitled To?

Losing your job through redundancy is stressful, but understanding your entitlements can help you navigate the process with confidence. In Australia, redundancy pay is a legal right for most employees, and the amount you're entitled to depends on how long you've worked for your employer. Whether you've been with your company for two years or twenty, knowing the exact figures you should receive is crucial when it comes to protecting your financial future.

Understanding Redundancy Pay in Australia

Redundancy pay is a minimum entitlement under Australia's National Employment Standards (NES) when your employer terminates your employment because your position is no longer needed. It's separate from notice pay and your accrued annual leave—you're entitled to all three.

Redundancy pay is calculated based on your base rate of pay for ordinary hours of work. This includes your base salary but excludes overtime, penalty rates, allowances, bonuses, and any other separately identifiable amounts. For part-time employees, the calculation is based on your part-time hours.

Not all employees are covered equally. Small businesses with fewer than 15 employees are exempt from redundancy pay obligations under the NES. However, your award, enterprise agreement, or employment contract might offer more generous redundancy entitlements than the minimum NES requirements, so it's worth checking your specific agreement.

The National Employment Standards Redundancy Scale

The amount of redundancy pay you receive depends on your continuous period of service with your employer. Here's the official NES scale:

• Less than 1 year: No redundancy pay (though you may receive notice)
• 1–2 years: 4 weeks
• 2–3 years: 6 weeks
• 3–4 years: 7 weeks
• 4–5 years: 8 weeks
• 5–6 years: 10 weeks
• 6–7 years: 11 weeks
• 7–8 years: 13 weeks
• 8–9 years: 14 weeks
• 9–10 years: 16 weeks
• 10+ years: 12 weeks

One quirk of the Australian system is that redundancy pay actually decreases after 10 years of service, dropping from 16 weeks to 12 weeks. This reduction assumes that long-serving employees have also accumulated long service leave entitlements, which provide additional financial security.

Calculating Your Redundancy Pay

Working out your redundancy entitlement is straightforward using this formula:

Base Rate × Redundancy Pay Period = Redundancy Pay

Real-World Examples

Let's look at some practical examples to show how this works in 2025–26:

Example 1: $75,000 per year salary

• 2 years of service: $6,000
• 5 years of service: $15,000
• 8 years of service: $21,000
• 10+ years of service: $18,000

Example 2: $95,000 per year salary

• 2 years of service: $7,600
• 5 years of service: $19,000
• 8 years of service: $26,600
• 10+ years of service: $22,800

Example 3: $120,000 per year salary

• 2 years of service: $9,600
• 5 years of service: $24,000
• 8 years of service: $33,600
• 10+ years of service: $28,800

For a long-serving employee at 15 years with an $80,000 annual salary, the weekly base rate is $1,538.46, which means 12 weeks of redundancy pay equals $18,461.54. Interestingly, a 9-year employee at the same salary would receive 16 weeks ($24,615.38)—over $6,000 more—highlighting how the system works against very long-serving staff.

Tax-Free Redundancy Payments

One of the best aspects of redundancy pay in Australia is that genuine redundancy payments are tax-free up to a certain limit. For the 2025–26 financial year, you can receive tax-free redundancy pay of:

$12,524 (base amount) + $6,264 for each completed year of service

Here's what this looks like in practice:

• 3 completed years: $12,524 + (3 × $6,264) = $31,316 tax-free
• 7 completed years: $12,524 + (7 × $6,264) = $56,372 tax-free
• 15 completed years: $12,524 + (15 × $6,264) = $106,454 tax-free

For most employees, their redundancy payment will fall well within this tax-free threshold, meaning the full amount is yours to keep without any tax implications.

What Else You're Entitled To

Redundancy pay isn't your only entitlement when you're made redundant. You should also receive:

• Notice of termination: Typically 1–4 weeks depending on your length of service
• Accrued annual leave: Payment for any unused annual leave at your base rate
• Long service leave: If you've completed the required period of service (usually 10 years)
• Any other outstanding entitlements: Such as unpaid wages or superannuation contributions

These are paid out in your final pay, separate from your redundancy payment.

When You Might Not Receive Full Redundancy Pay

While redundancy pay is a legal minimum, there are limited circumstances where an employer can apply to the Fair Work Commission to have the amount reduced:

• The employer has found you other acceptable employment
• The employer can demonstrate they can't afford the full redundancy amount

However, employers can only apply for a reduction if your redundancy entitlement comes from the NES. If your award or enterprise agreement provides for redundancy pay, the employer cannot apply for a reduction.

Redundancy Pay Beyond the NES Minimum

Remember, the NES provides minimum entitlements. Many awards, enterprise agreements, and employment contracts provide for more generous redundancy payments. It's worth reviewing your specific agreement to see if you're entitled to anything above the minimum.

Next Steps If You're Facing Redundancy

If your employer has indicated redundancy is coming, here's what you should do:

1. Calculate your entitlements: Use the formula and examples above to work out what you should receive
2. Review your agreement: Check your employment contract, award, or enterprise agreement for any redundancy provisions beyond the NES minimum
3. Seek advice: Contact the Fair Work Ombudsman, your union, or an employment lawyer if you're unsure about your rights
4. Document everything: Keep records of all communications about the redundancy
5. Negotiate if possible: If you have leverage, consider negotiating for a higher redundancy payment or other benefits

Redundancy can be a challenging time, but understanding your legal entitlements puts you in a stronger position. Australia's redundancy laws are designed to provide financial support during the transition, so make sure you're receiving everything you're entitled to.