AI Replacing My Job — Am I Entitled to Redundancy Pay in Australia?

Under section 389 of the Fair Work Act 2009, a dismissal is a case of genuine redundancy if the employer no longer requires the person's job to be performed by anyone because of changes in the operational requirements of the business, and the employer has complied with any consultation obligations in the applicable modern award or enterprise agreement. The introduction of AI or automation that eliminates the need for a human to perform your role can satisfy this test. If your employer replaces your data entry function with an automated system, or your analysis role with an AI tool, and no human is required to do the work anymore, this is likely a genuine redundancy.

However, the key word is 'genuine' — if the employer replaces you with AI but then hires someone else to do substantially the same work, or if you could have been redeployed to another role, the redundancy may not be genuine.

If you're made genuinely redundant due to AI or automation, the National Employment Standards provide for redundancy pay based on your length of continuous service. The scale ranges from 4 weeks' pay for 1-2 years of service up to 16 weeks' pay for 10 or more years. This is calculated on your base rate of pay for ordinary hours, excluding overtime, penalty rates, bonuses, and allowances unless your enterprise agreement specifies otherwise.

You are also entitled to your notice period (or payment in lieu), which ranges from 1 to 5 weeks depending on your length of service and age. Employees over 45 with at least 2 years of service receive an additional week of notice.

Your modern award or enterprise agreement may provide more generous redundancy entitlements — always check your specific instrument. Small businesses with fewer than 15 employees are exempt from the NES redundancy pay obligation.

A redundancy isn't genuine if it would have been reasonable in the circumstances for the employee to be redeployed within the employer's enterprise or an associated entity. Bottom line: your employer must genuinely consider whether there are other suitable positions available for you before deciding to make you redundant. If the employer has vacancies that match your skills and experience, they should offer you redeployment.

The test is objective — would a reasonable employer have redeployed you? Factors include the nature of the available positions, your qualifications and experience, whether reasonable retraining could be provided, and whether the alternative role involves a significant change in duties, location, or pay. If your employer is automating one function but has other openings, simply proceeding to redundancy without considering redeployment may mean the redundancy is not genuine.

Most modern awards and enterprise agreements require employers to consult with employees before making major changes to the workplace, including the introduction of technology that's likely to affect jobs. The model consultation term requires the employer to notify affected employees of the proposed change as soon as practicable, discuss the likely effects of the change, consider measures to mitigate any adverse effects, and give genuine consideration to employee feedback. This consultation must occur before the decision is implemented, not after.

If your employer announces that AI will replace your role effective next week without any prior consultation, they've likely breached the consultation term in your award or agreement. This breach can affect whether the redundancy is considered genuine and may give you grounds for an unfair dismissal claim.

If you believe your redundancy was not genuine — because the employer has hired someone else, failed to consider redeployment, or did not consult properly — you can lodge an unfair dismissal application with the Fair Work Commission within 21 calendar days of your dismissal taking effect. In your application, you should explain why you believe the redundancy wasn't genuine, providing evidence such as job advertisements for your role or similar roles posted after your termination, evidence that the employer hired someone new to perform your duties, lack of consultation or insufficient consultation, and failure to consider redeployment options. The Commission will consider all the evidence and determine whether the redundancy was genuine.

If it wasn't, your dismissal will be treated as an ordinary unfair dismissal and assessed under section 387 of the Fair Work Act.

Genuine redundancy payments receive favourable tax treatment in Australia. A portion of your redundancy payment is tax-free. For the 2025-26 financial year, the tax-free component is a base amount of $13,100 plus $6,552 for each completed year of service.

For example, if you have worked for 5 completed years, the tax-free portion would be $13,100 + (5 x $6,552) = $43,834. Any amount above the tax-free limit is taxed concessionally — the first $235,000 above the tax-free limit is taxed at a maximum of 17% (including the Medicare levy), and any remainder is taxed at your marginal rate.

However, if the ATO determines the redundancy wasn't genuine — for example, because you were dismissed for performance reasons rather than true redundancy — the entire payment may be taxed at your marginal rate. Use our Redundancy Tax Calculator to determine your exact tax liability.