In Australia, redundancy pay is governed by the National Employment Standards (NES) under the Fair Work Act 2009.
A notable aspect of these provisions is that redundancy pay entitlements decrease after 10 years of continuous service. Specifically, an employee with 9 years of service is entitled to 16 weeks of redundancy pay, but this reduces to 12 weeks once they reach 10 years of service.
Understanding the Reduction in Redundancy Pay After 10 Years
This reduction is primarily due to the interplay between redundancy pay and long service leave entitlements.
This was confirmed, highlighted and created by the famous Redundancy Case – PR032004 [2004] AIRC 287; (26 March 2004) (Redundancy Case). The Redundancy case involved applications made by various Unions, Chambers of Commerce, Industry Associations and even the retail giant David Jones.
It was the view of the Australian Industrial Relations Commission (as it was then called which eventually became the Fair Work Commission) that it would be “double counting” if long service leave was not taken into account when setting out a redundancy pay schedule in the legislation.
Redundancy Pay in 2025
The Redundancy Case set the tone for redundancy payment which eventually made it’s way into modern awards and more importantly the National Employment Standards.
When dealing with a redundancy situation keep in mind the following:
- Redundancy occurs when an employer no longer requires an employee’s job to be performed by anyone due to changes in the operational requirements of the business. This can happen for various reasons, such as reorganisation, financial distress, changes in demand, or other operational changes
- Employers have obligations to consider redeployment in cases of redundancy. Under the Fair Work Act 2009, a dismissal is not considered a genuine redundancy if it would have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise or an associated entity – the key word being “reasonable”
- If the employee is covered under a modern award there will be an obligation to consult the employee
- When there is a redundancy event, notice will be required – which can be paid out in lieu as well. If there is a higher notice period under contract this will need to be abided by
- Leave entitlements accrued but not taken will need to be paid out, which include annual leave and long service leave
Conclusion
While it may seem counterintuitive, the decrease in redundancy pay after 10 years of service in Australia is designed to balance the overall entitlements of long-serving employees, acknowledging their eligibility for long service leave.
So why does redundancy drop after 10 years?
Primarily, because the commission took into consideration that long service leave was payable after 10 years and as such this should be considered when calculating redundancy pay.
Our Employment Lawyers at South Geldard Lawyers have essential expertise in on advising on redundancies and restructures. Feel free to reach out on (07) 4936 9100 or via email to Jonathan Mamaril, Director at jmamaril@southgeldard.com.au. All Employers receive an obligation free consultation.
