Redundancy Pay Calculator Australia 2025

How Redundancy Pay Works Under the Fair Work Act

Redundancy pay in Australia is governed by the National Employment Standards (NES) under the Fair Work Act 2009. When an employer no longer requires a particular job to be performed by anyone — due to changes in operational requirements, restructuring, or technological change — the affected employee is entitled to a redundancy payment based on their years of continuous service with that employer.

The NES redundancy scale starts at 4 weeks of ordinary pay for employees with at least 1 year but less than 2 years of service, and increases up to 12 weeks for employees with 10 or more years of service. Note that the entitlement reduces at the 10-year mark (from 16 weeks at 9–10 years down to 12 weeks at 10+) because employees with 10 or more years of service typically access long service leave entitlements separately. Only employees covered by the national workplace relations system — the majority of private sector workers in Australia — are entitled to NES redundancy pay. Some state public sector employees and those in non-national system jurisdictions may have different entitlements. Based on 2024–25 Fair Work Act rates.

Tax Treatment of Genuine Redundancy Payments

A genuine redundancy payment receives favourable tax treatment under section 83-170 of the Income Tax Assessment Act 1997. For the 2024–25 income year, the tax-free limit is $12,524 plus $6,264 for each complete year of continuous service. Any amount up to this limit is entirely exempt from income tax and does not need to be reported on your tax return as assessable income.

The amount above the tax-free limit is called an "excess genuine redundancy payment" and is taxed at a maximum effective rate of 32% — which is lower than the top marginal tax rate of 45% plus Medicare Levy. This concessional treatment applies to the entire redundancy entitlement including any notice paid in lieu, but does not apply to annual leave payouts (which are taxed at your normal marginal rate). Superannuation Guarantee contributions at 11.5% are payable on the gross redundancy amount for 2024–25. The tax-free treatment only applies to genuine redundancies — not to voluntary redundancies accepted by the employee in certain circumstances, or where the employer rehires the same person within a short period.

Notice Pay and Annual Leave Payout at Redundancy

In addition to redundancy pay, you are entitled to notice of termination or payment in lieu of notice under the NES. The minimum notice periods are: 1 week for under 1 year of service, 2 weeks for 1–3 years, 3 weeks for 3–5 years, and 4 weeks for over 5 years. Employees aged 45 or older with at least 2 years of continuous service receive an additional 1 week of notice on top of these minimums. If your employer elects to pay in lieu of notice (rather than requiring you to work out the notice period), the payment is included in the total termination payment and also qualifies for the concessional redundancy tax treatment where genuine redundancy applies.

Accrued but untaken annual leave must also be paid out on termination, regardless of the reason for ending employment. This payout is calculated on your full pay rate (ordinary pay plus any applicable leave loading under your award or agreement). Annual leave payouts are taxed at your normal marginal income tax rates — they do not receive the concessional tax treatment that applies to genuine redundancy payments. If you have accrued long service leave, this is also generally payable on redundancy (rules vary by state) and is taxed differently again.

Small Business Redundancy Exemption

Small business employers with fewer than 15 employees are exempt from the NES obligation to pay redundancy pay. The headcount of 15 employees is measured at the time of dismissal, not across an averaging period, and includes all employees of the business (not just full-time workers). If you work for a small business employer, you are still entitled to notice of termination or payment in lieu, and to have all accrued annual leave paid out. Some modern awards (such as the Retail Award) contain redundancy provisions that apply to small businesses, so it is worth checking your award or enterprise agreement even if the NES exemption applies. You may also be able to negotiate a voluntary redundancy package with your employer even where there is no legal obligation.