Redundancy Pay in Australia: What You're Owed and What to Do Next
Understand your redundancy pay entitlements in Australia: the NES scale, how it's taxed, Centrelink waiting periods, and what to do with your payout.
By Timothy Hirou GaschereauPublished 10 min read
Try it yourself
Losing your job is stressful, full stop. But if you have been made redundant, Australian law gives you some real protections. Knowing exactly what you are entitled to, and what to do with it, makes a genuine difference to how the next few months go.
This guide walks through everything: your legal entitlements, how the payout is taxed, what else lands in your final pay, and how to handle the money without making a costly mistake. It is part of our salary and career series, and it is general information only, not legal or financial advice. Take a breath. You have got this.
🎯 The essential: NES redundancy pay runs from 4 weeks (1 to 2 years of service) up to 16 weeks (9 to 10 years), then drops to 12 weeks at 10+ years. You need at least 12 months of continuous service at an employer of 15 or more people. A genuine redundancy has a tax-free component (12,524 dollars plus 6,264 dollars per completed year for 2024-25), and a payout can delay your Centrelink payments.
What is redundancy pay?
Redundancy pay is a lump sum your employer must pay when your position is abolished and there is no suitable alternative role for you. The key word is genuine. The Fair Work Ombudsman treats a redundancy as genuine when the job no longer needs to be done by anyone, the employer followed any required consultation process, and it was not reasonable to redeploy you elsewhere in the business.
A genuine redundancy is NOT the same as:
- Being dismissed for performance or conduct.
- Resigning voluntarily.
- A fixed-term contract simply expiring.
- A casual having their hours cut back.
This distinction matters a lot for tax, which we get to below.
Are you entitled to redundancy pay?
Not everyone gets redundancy pay. Here is the quick split.
| You are generally entitled if | You are generally NOT entitled if |
|---|---|
| You have 12+ months continuous service | You are a casual employee |
| Your employer has 15 or more staff | Your employer has fewer than 15 staff |
| You are permanent (full or part-time) | You have under 12 months service |
| You are in the national system | You are an independent contractor |
If you are covered by an award or enterprise agreement, your entitlements may be higher than the NES minimum, so check your award first with the Fair Work Ombudsman's Notice and Redundancy Calculator.
How much redundancy pay will you get?
Redundancy pay is calculated at your base rate of pay for ordinary hours. It does not include overtime, bonuses, loadings, penalty rates or allowances. The NES sets this minimum scale:
| Continuous service | Minimum redundancy pay |
|---|---|
| Less than 1 year | 0 weeks |
| 1 to 2 years | 4 weeks |
| 2 to 3 years | 6 weeks |
| 3 to 4 years | 7 weeks |
| 4 to 5 years | 8 weeks |
| 5 to 6 years | 10 weeks |
| 6 to 7 years | 11 weeks |
| 7 to 8 years | 13 weeks |
| 8 to 9 years | 14 weeks |
| 9 to 10 years | 16 weeks |
| 10+ years | 12 weeks |
Quick example: on a base wage of 1,500 dollars a week with 5.5 years of service, you are in the 5 to 6 year band. That is 10 weeks times 1,500 dollars, so 15,000 dollars before tax. The Fair Work Ombudsman's Notice and Redundancy Calculator gives you an exact figure.
How redundancy pay is taxed
This is the part most people want to get right. If your redundancy is a genuine redundancy under the ATO's definition, part of the payout is completely tax-free.
For the 2024-25 income year the tax-free limit is:
12,524 dollars + (6,264 dollars times each completed year of service). So 7 completed years gives a tax-free amount of 12,524 + (6,264 x 7) = 56,372 dollars. Only whole completed years count, and these figures are indexed each year, so confirm the current ones on the ATO site.
Anything above the tax-free limit is treated as an employment termination payment (ETP), taxed at concessional rates rather than your full marginal rate. Under the ETP cap, the maximum rate is generally 32 percent including the Medicare levy, well below the top marginal rate of 47 percent. The ATO's genuine redundancy test also requires that your position is abolished, that you are under Age Pension age, and that it is not an ordinary resignation or dismissal. If there is any doubt, an accountant is worth the fee.
What else you should receive
Redundancy pay is only one line of your final pay. Make sure you also get:
- Unused annual leave, paid at your full rate (plus leave loading if your award applies it).
- Long service leave, depending on your state and length of service.
- Notice or pay in lieu, from 1 week (under a year) up to 4 weeks (5+ years), plus an extra week if you are over 45 with at least 2 years of service.
- Outstanding wages and super up to your last day.
Ask for a written breakdown of your final pay before you sign anything, and check each line against the NES and your award.
What to do with a redundancy payout
A lump sum when you are stressed and uncertain is a tricky combination. Here is a calm, sensible order of operations.
- Park it first. Put it in a high-interest savings or offset account and make no big decisions for a few weeks.
- Top up your emergency fund. Aim for 3 to 6 months of expenses in cash. This is exactly what an emergency fund is for.
- Clear high-interest debt. Paying off credit cards or personal loans is a guaranteed, risk-free return.
- Think before big moves. Paying down the mortgage, investing, or a large super top-up can all make sense, but each has tax and liquidity trade-offs. Do not rush.
- Consider super. If you are not in immediate difficulty, a voluntary concessional super contribution can be tax-effective, but watch the contribution caps and get advice.
Redundancy and Centrelink
If you need to claim JobSeeker Payment after a redundancy, watch out for the income maintenance period (IMP). Services Australia applies the IMP when you receive a lump sum from an employer after leaving work, including redundancy pay and leave payouts. During the IMP you may have to wait before JobSeeker starts, or receive it at a reduced rate.
As a rough guide, a 10-week redundancy payment can mean a 10-week income maintenance period from the date you receive it. Claim JobSeeker straight away anyway, even before the money arrives, and if you are in severe financial hardship you can apply to have the waiting period reduced or waived.
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❓ Frequently asked questions
Is redundancy pay tax free in Australia?
+
Partly. If your redundancy is a genuine redundancy under ATO rules, a portion is tax-free. For the 2024-25 income year the tax-free limit is 12,524 dollars plus 6,264 dollars for each completed year of service. Anything above that is taxed as an employment termination payment (ETP) at concessional rates, generally capped at 32 percent including the Medicare levy. These amounts are indexed each year, so check the ATO site for the current figures.
Do casual employees get redundancy pay?
+
No. Casual employees are not entitled to redundancy pay under the National Employment Standards. The NES redundancy scale applies to permanent employees (full-time and part-time) with at least 12 months of continuous service at an employer of 15 or more people. Casuals may have other entitlements under a specific award or agreement, so it is worth checking those.
Does a small business have to pay redundancy?
+
Generally no. Employers with fewer than 15 employees are small business employers under the Fair Work Act and are exempt from the NES redundancy pay obligation. A small business may still owe redundancy pay if an award or enterprise agreement requires it, so always check the relevant instrument.
How much redundancy pay for 5 years of service?
+
Under the NES, 5 years of continuous service (but less than 6) entitles you to 10 weeks of redundancy pay, calculated at your base rate of pay for ordinary hours. On a base wage of 1,400 dollars a week that is 14,000 dollars before tax. Your award or enterprise agreement may provide more.
Can you be made redundant and then rehired?
+
It can happen, but it is risky for the employer. If a role is made redundant and someone is rehired into a substantially similar role soon after, the Fair Work Commission may find the redundancy was not genuine, which can expose the employer to an unfair dismissal claim. If this happens to you, get advice from the Fair Work Ombudsman or an employment lawyer.
Does redundancy pay affect Centrelink?
+
Yes. A redundancy payout can trigger an income maintenance period, meaning you may need to wait before JobSeeker Payment starts, or receive it at a reduced rate. The waiting period is based on the size of your payout. Still submit your claim straight away, even before the money arrives, and apply for a reduction if you are in severe financial hardship.
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Some links above are affiliate links. If you buy through them, Snowball Invest may earn a small commission at no extra cost to you. We only recommend books we'd suggest anyway.
Sources
This article is general information only, not legal, financial or tax advice. Redundancy rules, tax thresholds and Centrelink rates change, and your circumstances are unique. Check the Fair Work Ombudsman, the ATO and Services Australia, and consider a registered tax agent or employment lawyer before acting.
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General information only. This article is educational and does not constitute personal financial advice. It does not account for your circumstances. Consider your own situation and seek advice from a licensed adviser before acting. Read our full disclaimer.
Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
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