Should I Accept Redundancy or Resign? The Financial Difference

If you resign instead of accepting redundancy, you forfeit several significant entitlements. Redundancy pay: the entire NES redundancy payment (4-16 weeks' base pay depending on years of service) disappears. Payment in lieu of notice: if you resign, YOU give notice to your employer — they don't pay you for it.

Quick version: Instead, you may need to work your notice period or risk a breach of contract claim. Centrelink waiting period: if you voluntarily resign, Services Australia may impose a 4-week waiting period before JobSeeker payments begin (on top of any other waiting periods).

Tax benefits: genuine redundancy payments receive favourable tax treatment — a portion is tax-free. If you resign, any ex-gratia payment is taxed as ordinary income.

Accepting a genuine redundancy package gives you: the full NES redundancy pay entitlement (or your award/agreement amount if higher), payment in lieu of notice (your employer pays you the notice period without requiring you to work it), all accrued annual leave and long service leave paid out, tax-free treatment on the first portion of your redundancy (the tax-free limit for 2026-27 is $13,598 + $6,801 per completed year of service), and immediate Centrelink eligibility (though a waiting period based on the size of your redundancy payment may apply — this is called the 'income maintenance period').

A genuine redundancy receives favourable tax treatment. For 2026-27, the first $13,598 plus $6,801 for each completed year of service is completely tax-free. For example, if you have 5 years of service, the first $47,603 ($13,598 + 5 × $6,801) of your redundancy is tax-free.

The remainder (if any) up to the whole-of-income cap is taxed at a flat 17% (including Medicare levy). In contrast, if you resign and your employer pays you an ex-gratia payment, the entire amount is taxed as ordinary income at your marginal tax rate — which could be 32.5% or even 37% depending on your total income.

On a $30,000 redundancy payment, the tax difference could be $5,000-$10,000 (and yes, this applies to casuals too).

If you're made redundant (genuinely), you can apply for JobSeeker payments without a voluntary unemployment waiting period. However, an 'income maintenance period' based on your redundancy and leave payouts may apply — Services Australia divides the total payout by your normal fortnightly earnings to calculate a waiting period. If you resign voluntarily, you face a 4-week 'unemployed due to a voluntary act' waiting period on top of any other waiting periods.

This can mean 6-8 weeks with no income support. In financial hardship, this difference is critical.

The income maintenance period applies in both scenarios, but the additional 4-week voluntary wait only applies if you resigned.

In rare circumstances, resignation may be preferable: if you already have a new job lined up and want to start immediately (working your notice period for the current employer delays your start date), if the redundancy package is very small and you'd rather not have 'redundancy' on your record, if you're negotiating a better package and resignation is part of a mutual separation agreement, or if you want to preserve a relationship with the employer for references. But in the vast majority of cases — especially where the alternative is accepting a genuine redundancy payment — accepting redundancy is financially superior.

So, the NES redundancy scale is a minimum — your employer can offer more. If you've been asked to accept redundancy, consider: asking for additional weeks' pay above the NES minimum, requesting that the employer fund outplacement services (career counselling, resume writing), negotiating the wording of the separation letter (for references), asking for extended access to employee benefits (health insurance, company car), and requesting that the notice period be paid out rather than worked. Many employers expect some negotiation.

The key leverage point: if the redundancy isn't genuine, you could pursue an unfair dismissal claim — employers often prefer to negotiate rather than face the FWC.