Redundancy is a valid reason to end employment in Australia, but statutory entitlements are often higher than what employers offer. The Fair Work Act sets minimum redundancy payments; many employment contracts try to match or undercut these. Before you sign, understand what you're entitled to, because a contract that offers less than the statutory minimum is unenforceable.
What is a Redundancy Clause?
Redundancy occurs when an employer eliminates a position due to business restructure, technology, or downsizing. Under the Fair Work Act, employees with 2+ years of service are entitled to redundancy pay: 4 weeks for employees under 45; 6 weeks for 45+. Additional entitlements: notice of redundancy (typically 4–8 weeks), payment in lieu of notice if required, annual and long service leave accruals, and sometimes other benefits negotiated in the contract.
Red flags to watch for
Under the Fair Work Act, statutory redundancy pay cannot be contracted away. A clause offering less than the minimum is void.
While severance often includes a release, it cannot prevent you from claiming unfair dismissal or other statutory rights.
These are different grounds for dismissal. If the employer claims 'performance' to avoid redundancy obligations, you may have a legal claim for unfair dismissal.
The contract should be clear: positions eliminated = redundancy. If it's vague, the employer might call a termination 'redundancy' when it's actually performance-based.
If your role is restructured but not eliminated, and you're moved to a lower-paid or part-time role, that may still trigger redundancy protections.
Employment contracts often include protections if the business is sold. Absence of these can leave you unprotected.
Your legal rights
Under the Fair Work Act 2009 (Cth), statutory redundancy entitlements apply to employees with 2+ years of service: minimum 4 weeks (under 45) or 6 weeks (45+) pay. Additional entitlements: notice of redundancy (2–8 weeks depending on size of business and length of service), payment in lieu of notice if required, and accrued leave. A contract cannot offer less than the statutory minimum; such a clause is void. Employees also have protection against unfair dismissal (2+ years service). An employer cannot avoid redundancy obligations by disguising a termination as performance-based dismissal.
Questions to ask before you sign
- 1What is the statutory redundancy entitlement I'd receive if my position is made redundant?
- 2How much notice of redundancy will you provide?
- 3Can you pay me in lieu of notice, or must I work the notice period?
- 4How are accrued annual and long service leave paid upon redundancy?
- 5If my role is restructured but not eliminated, am I entitled to redundancy?
- 6If the company is acquired or sold, am I protected, or can my employment be terminated?
- 7Can you require me to sign a broad release of claims to receive redundancy pay?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.