When a business changes the way it works, roles change and sometimes disappear. The trigger might be new technology, a lost contract, a merger, or a decision to cut costs. None of that is unlawful in itself. What turns a legitimate restructure into a legal claim is the process around it. The Fair Work Act 2009 (Cth) sets out what an employer must do before a role can be made redundant, and missing a step can expose your business to an unfair dismissal application, a general protections claim, or an order to pay compensation.
This guide covers the obligations that apply when you restructure: who they apply to, what the genuine redundancy test requires, how consultation works in practice, what you must pay, and what happens if you get it wrong.
When your restructure obligations start
If you are a private sector employer in Australia, you are almost certainly a national system employer and must comply with the National Employment Standards (NES) in the Fair Work Act 2009 (Cth), which include minimum notice of termination and redundancy pay. Your obligations attach the moment you decide a role may no longer be needed, not when you announce it. If the restructure keeps everyone employed but changes duties, hours or reporting lines, your obligations are lighter but still real: changes to a contract usually need the employee's agreement, and award consultation clauses can apply to major change even when nobody is dismissed.
The size of your business changes what is required of you. Three thresholds matter:
- Small business employer: You are a small business employer if you employ fewer than 15 employees, counting regular casuals and including the employees being dismissed, with associated entities counted together. Small businesses are exempt from statutory redundancy pay, and a dismissal that follows the Small Business Fair Dismissal Code cannot be challenged as unfair.
- Minimum employment period: An employee must have completed at least 6 months' service (12 months for a small business) before they are protected from unfair dismissal.
- High income threshold: An employee who earns above the high income threshold and is not covered by a modern award or enterprise agreement cannot claim unfair dismissal.
Time limits also bite early. An unfair dismissal application must be lodged within 21 days of the dismissal taking effect, and the Fair Work Commission (FWC) only extends that deadline in exceptional circumstances. The clock starts on the day the dismissal happens, so a restructure that runs into trouble gives you very little time to respond.
The genuine redundancy test
The central protection for employers is the concept of genuine redundancy in s 389 of the Fair Work Act 2009 (Cth). If a dismissal is a case of genuine redundancy, it is not an unfair dismissal. The test has three elements, and you need all of them:
- The job must disappear: You no longer require the person's job to be performed by anyone because of changes in the operational requirements of your enterprise.
- Consultation complied with: You have met any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
- No reasonable redeployment: It would not have been reasonable, in all the circumstances, to redeploy the person within your enterprise or the enterprise of an associated entity.
If any element is missing, the dismissal is not a genuine redundancy and can be challenged as unfair.
Operational requirements: the job, not the person
The first element is where employers most often stumble. Redundancy is about the role, not the person in it. If the work still exists and the real issue is performance, you need a performance management process, not a restructure. The FWC will look behind the label: a dismissal dressed up as redundancy while the role continues is a dismissal that can be found unfair.
Redeployment: the element that is actually assessed
The second most litigated element is redeployment. Under the FWC's guidance, a suitable alternative job, position or work must actually be identified for the redundancy to be genuine. It does not need to be a perfect match: a role with lower pay, fewer responsibilities or a different location can still be reasonable in the circumstances, and training to bridge a gap may be part of the assessment. What the test requires is a real search across your business and any associated entities, and a defensible record of it. If you skip the search and a suitable role existed, the redundancy is not genuine even where the business case was sound.
Consultation: a condition of the defence
The genuine redundancy test is not satisfied unless you have complied with any consultation obligation in the applicable modern award or enterprise agreement. This is a strict condition: fail to consult as the instrument requires, and you lose the genuine redundancy defence regardless of the business case. That makes the consultation clause in your award or agreement the first document to pull out when planning begins.
What consultation requires in practice
The model consultation clause found in most modern awards is triggered when the employer has made a definite decision to introduce a major change to production, program, organisation, structure or technology that is likely to have a significant effect on employees. Once triggered, it typically requires you to:
- Notify affected employees: As soon as practicable after the definite decision, in writing.
- Provide relevant information: The change and its likely effect on them.
- Invite and consider their views: discuss the change, including measures to avert or mitigate any adverse effects on employees, and genuinely consider what employees raise before implementing it.
- Keep records: The notice, the meetings and the responses.
The FWC has made clear that consultation must be genuine, not perfunctory. Sending a letter and holding a meeting where the decision is already locked in does not satisfy the obligation if the instrument requires meaningful discussion first. Enterprise agreements must include a consultation term, and where an agreement's term is more detailed than the model clause, follow the agreement. Consultation does not give employees a veto: the obligation is to genuinely consider what they raise, not to reach agreement with them.
One nuance worth knowing: if no modern award or enterprise agreement covers the affected employees, there is no consultation obligation to satisfy for the purposes of the genuine redundancy test. Consultation still matters though. The FWC can find a dismissal harsh, unjust or unreasonable even without an award clause, and failing to tell employees what is happening and why rarely looks fair.
Notice and redundancy pay under the NES
If the redundancy proceeds, two payment obligations under the NES need to be calculated for each affected employee.
Minimum notice
You cannot terminate employment without giving written notice of the termination day, and the period between notice and termination must be at least:
- Not more than 1 year of service: 1 week
- More than 1 year but not more than 3 years: 2 weeks
- More than 3 years but not more than 5 years: 3 weeks
- More than 5 years: 4 weeks
Add one more week if the employee is over 45 and has completed at least 2 years of continuous service. Instead of working out the notice period, you can pay in lieu of notice at the full rate of pay for the hours the employee would have worked during the notice period. Check the applicable award or agreement as well: it may require more notice than the NES minimum. Some employees sit outside the notice rules entirely, including casuals and some fixed-term employees, so confirm each employee's status first.
Redundancy pay
An employee whose job is genuinely redundant is entitled to redundancy pay based on their period of continuous service, paid at their base rate of pay for ordinary hours:
- At least 1 year but less than 2: 4 weeks
- At least 2 years but less than 3: 6 weeks
- At least 3 years but less than 4: 7 weeks
- At least 4 years but less than 5: 8 weeks
- At least 5 years but less than 6: 10 weeks
- At least 6 years but less than 7: 11 weeks
- At least 7 years but less than 8: 13 weeks
- At least 8 years but less than 9: 14 weeks
- At least 9 years but less than 10: 16 weeks
- At least 10 years: 12 weeks
Three qualifications. First, no redundancy pay is owed where the employee has less than 12 months' continuous service, or where you are a small business employer. Second, periods of casual employment do not count towards the continuous service used to calculate redundancy pay. Third, the FWC can reduce the amount on your application if you have obtained other acceptable employment for the employee or cannot pay, but the reduction is discretionary and you must apply for it. The NES figures are minimums: a modern award or enterprise agreement can provide more generous redundancy pay, so check the instrument before finalising any calculation.
Selection criteria and the discrimination risk
Where several employees do similar work and only some roles survive, the selection criteria become part of your legal exposure. Use criteria that are objective and job-related, such as skills match, qualifications, experience and legitimate business needs, and record how each criterion was applied to each employee. Vague or subjective criteria invite bias claims.
Dismissing an employee because of a protected attribute, including age, disability, pregnancy, family responsibilities or race, is unlawful adverse action under the general protections provisions regardless of the restructure rationale. If selection criteria operate as a proxy for a protected attribute, the genuine redundancy defence is not a shield. General protections applications must also be lodged within 21 days, and they are a separate claim from unfair dismissal, so one restructure can generate multiple applications.
What happens if you get it wrong
The consequences of a failed restructure are concrete:
- Unfair dismissal: If the dismissal was not a genuine redundancy, the FWC can order reinstatement, or compensation capped at the lesser of 26 weeks' remuneration and half the high income threshold. The cap limits compensation, but reinstatement is not capped.
- General protections: A dismissal for a prohibited reason can lead to compensation and, in some cases, penalties, and it does not depend on the fairness of the process in the same way an unfair dismissal claim does.
- Underpayment claims: If notice or redundancy pay is miscalculated, the shortfall is a recoverable entitlement, and the employee or the Fair Work Ombudsman can pursue it.
The common thread is that the cost of getting it wrong is not limited to the payments you should have made. A successful claim can add compensation on top, and the process consumes management time at exactly the moment the business is trying to change.
A compliance checklist for your restructure
Work through this checklist before you announce anything to employees:
- Map the instruments first: Identify every modern award and enterprise agreement covering affected employees and extract the consultation, selection and notice clauses before announcing anything.
- Document the business case: Record the operational reasons for the change and the date of the decision.
- Set objective selection criteria: Record how they were applied to each employee.
- Consult properly: Give written notice as soon as practicable, provide information, invite and genuinely consider feedback, and keep minutes.
- Run a real redeployment search: Across your business and associated entities, keep notes of the vacancies considered and why each was unsuitable.
- Calculate entitlements before announcing: Work out notice (including the over-45 uplift), redundancy pay on the NES scale, and any award or agreement top-ups.
- Check the exemptions: Confirm headcount against the small business threshold and each employee's continuous service.
- Pay final entitlements correctly: On termination, include accrued annual leave and issue any required separation documentation.
Where a lawyer fits in
A workplace lawyer's role in a restructure is largely preventive. Before announcements, a practitioner can identify which awards and agreements apply, check whether the consultation clauses have been followed, pressure-test the selection criteria, and cost the entitlements so there are no surprises. Where a redeployment assessment has been challenged or a dispute has started, a lawyer can advise on the strength of the genuine redundancy defence, negotiate with the employee or their representative, and respond to applications inside the 21-day window.
The redeployment question that decides your case
Of the three elements of genuine redundancy, redeployment is the one that most often defeats an otherwise sound restructure. The business case can be compelling and the consultation letter perfect, but if the FWC finds that a reasonable alternative role existed and you did not offer it, the dismissal is not a genuine redundancy and the defence falls away. Before you announce anything, ask the question in writing: for each affected employee, what roles exist today in this business or its associated entities, and why is none of them suitable? If you cannot answer that question with a documented search, the restructure is not ready to proceed. And if you are not certain the award or agreement has been complied with, that is the point to take advice, before the 21-day clock starts running.