Redundancy Pay

Redundancy pay (often called severance pay) is a lump sum your employer must pay when your role is genuinely redundant: the job itself is gone, not you. Redundancy triggered by restructures, automation, a site closure, or a business going under qualifies. Being sacked for poor performance does not, and neither does quitting. Under the National Employment Standards, the entitlement scales with continuous service, from four weeks of pay after one year up to a maximum of sixteen weeks at nine years. Small businesses with fewer than fifteen employees are exempt from the requirement entirely.

Each week of redundancy pay is paid at your base rate of pay for ordinary hours, not your loaded or overtime-inflated figure. It sits on top of two other entitlements people constantly confuse it with: your notice period (or pay in lieu of notice) and the payout of unused annual leave and long service leave. Those three payments arrive together but follow separate rules, and the tax treatment differs for each. Fairwork.gov.au publishes the full scale, and ato.gov.au handles the tax-free thresholds.

The calculation has three moving parts. First, confirm your continuous service, which is unbroken employment with the same employer, including approved leave. Second, look up the NES scale: one to under two years earns four weeks; the scale then steps through six, seven, eight, ten, eleven, twelve, thirteen and fourteen weeks as the years accumulate. Nine to under ten years caps out at sixteen weeks. At ten years it oddly drops to twelve weeks, because pro-rata long service leave starts compensating you separately.

Third, multiply the weeks by your base rate of pay for ordinary hours, per fairwork.gov.au.

On top of the redundancy figure, your employer owes notice. That is one to five weeks depending on service and age, either worked or paid in lieu at your full rate. Unused annual leave is paid out with leave loading if your award provides it. Long service leave follows state rules, and several states allow pro-rata payout after seven years.

Tax is where the number moves the most. A genuine redundancy payment is tax-free up to a base amount plus a set figure per year of service (roughly $13,000 plus about $6,500 per service year in 2025; the limit indexes each July, so check ato.gov.au). Anything above the tax-free limit usually becomes an employment termination payment with its own concessional caps, and the leave payout is taxed separately under its own rules.

Losing a role is a cash-flow crisis with paperwork. The size of that payment determines whether redundancy is a funded career break or three months of panic. Two workers on the same salary can walk out with wildly different packages purely from service length and contract wording. Knowing the scale before the meeting changes what you sign.

A colleague named Brent (yes, that Brent) was offered four weeks at his six-year mark and accepted on the spot, because four sounded like the number he had heard somewhere. The NES minimum for six years of service is eleven weeks. The difference at his $1,525 base rate was roughly $10,675, which he described afterwards as an administrative misunderstanding. It was not administrative. It was rent.

The highest-leverage thing a made-redundant Australian can do is check the entitlement before signing the deed of release. Run the scale against your service with the redundancy pay calculator, then see what the after-tax residue does to your spendable pay using the take home pay calculator. Fairwork.gov.au and ato.gov.au both publish the current figures for free, which is cheaper than finding out later.