For employers
Making a role redundant: the three legal tests, and where employers get it wrong
Redundancy is the cleanest way to end employment when it is genuine, and the most exposed when it is not. The Fair Work Act sets three tests, and a dismissal that meets all three cannot be an unfair dismissal. Miss one and the redundancy label falls away, leaving an ordinary dismissal with no warning and no performance process to defend. This page walks the three tests, the pay, the traps, and the points where advice is worth the cost.
Updated . General information, not legal advice.
Time limits that apply
| What | Limit | Source |
|---|---|---|
| Employee's window to challenge the redundancy as an unfair dismissal | 21 days from the dismissal taking effect | Fair Work Act s 394(2) |
| Genuine redundancy: the three tests | Job no longer required due to operational changes; award or agreement consultation obligations met; redeployment not reasonable | Fair Work Act s 389 |
Do you need a lawyer for this?
Advice usually pays for itself when
- More than a handful of roles are affected, or a selection process among similar roles is needed, where the selection criteria will be scrutinised.
- The employee has recently complained, taken leave or raised a safety issue, or is on parental leave or workers compensation, because the timing invites a general protections claim.
- You intend to fill a similar role afterwards, or to engage a contractor for the same work, which goes straight to whether the job really went.
- A deed of release with an above-entitlement payment is planned, and it needs to hold.
The free route is usually enough when
- A single role removed because the work has genuinely ended, an award consultation clause followed and documented, no vacant roles to offer, and redundancy pay calculated with the free tool.
- A small business employer checking whether redundancy pay applies at all.
Test one: is the job genuinely no longer required?
The employer must no longer require the job to be done by anyone because of changes in its operational requirements. Downturn, restructure, technology, outsourcing and closure all qualify. The test is about the job, not the person. If the same duties will be performed by a new hire under a different title, or by a contractor on the same site, the job has not gone. If the duties are genuinely redistributed among remaining staff so the position no longer exists, it has. Document the operational reason at the time: the financials, the restructure paper, the board minute. A reason reconstructed after a claim is lodged carries much less weight.
Test two: did we consult as the award or agreement requires?
Most modern awards and enterprise agreements contain a consultation clause triggered by a definite decision to make major changes likely to have significant effects on employees. It typically requires notifying affected employees, discussing the changes, the likely effects and measures to avert or mitigate them, and giving prompt consideration to matters they raise, all before the decision is implemented. Consultation is not agreement. It is a genuine exchange before the outcome is fixed. An employer that meets the employee with the termination letter already signed has not consulted, and a redundancy that fails this test is not genuine no matter how real the operational reason was. Check the clause in your award and follow its steps in writing.
Test three: was redeployment reasonable?
A redundancy is not genuine if it would have been reasonable in all the circumstances to redeploy the employee within the employer's business or an associated entity. That means looking for vacant roles the employee could do, with reasonable training, and offering them, even at a lower level. Employers are expected to be able to show they looked. A group with several entities has a wider search to make. Keep a record of the roles considered and why each was or was not suitable. The employee is not obliged to accept, but the offer has to have been genuinely made where a suitable role existed.
What pay is owed?
Notice under the National Employment Standards or the contract, whichever is greater, worked or paid out. Accrued annual leave and, where it applies, long service leave. Redundancy pay under the Standards on a scale that rises with continuous service, unless an award or agreement provides differently, with an exemption for small business employers with fewer than fifteen employees except where an award or agreement says otherwise. FairWork Mate's redundancy pay calculator applies the scale. Payments above entitlement are common and are often tied to a deed of release, which should be drafted carefully and given with time to consider it. Getting the pay right does not make a redundancy genuine, and getting it wrong adds an underpayment claim to an unfair dismissal claim.
When does a lawyer pay for itself?
When several roles go and selection criteria have to be defensible. When the person selected has recently exercised a workplace right or is on protected leave, because the timing will be tested under the reverse onus. When the business plans to fill similar roles soon after. When a deed is involved. And when the consultation clause in the award is unclear or the workforce is covered by more than one instrument. Liquid Employment Lawyers is FairWork Mate's paid legal partner for employers. It is an Australian employment law firm, not free government help, and it sets out scope and fees before any work. A single genuine redundancy with the three tests documented can be run with the free tools.
What is the free route for employers?
The Fair Work Ombudsman on 13 13 94 explains redundancy pay, notice and the consultation requirements to employers at no cost. FairWork Mate's redundancy pay calculator gives the entitlement, the restructure cost calculator models the whole exercise, and the redundancy challenge letter tool shows exactly what an employee will ask you to justify, which is a useful self-check before you act. Free general information, not legal advice. FairWork Mate is not affiliated with the Fair Work Commission or the Ombudsman.
Free FairWork Mate tools for this
Talk to Liquid Employment Lawyers about this
Share a few details and their team will be in touch to talk it through. No obligation, and you decide whether to go further after that first conversation.
Liquid Employment Lawyers is an Australian employment law firm and FairWork Mate's paid referral partner, not free Fair Work advice. They discuss scope and any fees with you directly. FairWork Mate is not affiliated with the Fair Work Commission or the Fair Work Ombudsman. For free general guidance, use the tools above or call the Fair Work Ombudsman on 13 13 94.
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Common questions
Can we make someone redundant for poor performance?
No. Redundancy is about the job, not the person. Using it to remove a poor performer fails the first test, and if the employee proves the job still exists the dismissal is judged as an ordinary dismissal with no performance process behind it.
Do we have to consult if the award has a consultation clause but the employee is on a contract?
If the award covers the employee, its consultation clause applies regardless of the contract. Check coverage first. Enterprise agreements almost always contain their own clause.
Is a small business exempt from redundancy pay?
Generally yes under the National Employment Standards, for employers with fewer than fifteen employees by head count, unless an award or agreement requires it. Notice and accrued leave are still owed.
Is Liquid Employment Lawyers free?
No. It is an Australian employment law firm and FairWork Mate's paid referral partner. Enquiring is free and there is no obligation. The Fair Work Ombudsman on 13 13 94 provides free information to employers.
Can we re-hire for a similar role later?
Operational needs change, but a similar role advertised soon after a redundancy is strong evidence the job was still required. If a rehire is foreseeable, the redundancy is the wrong tool and the decision should be revisited before it is made.
Official sources
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General information and estimates only — not legal, financial or tax advice. Always check your specific award, agreement or contract, or a qualified professional, before you rely on the result.
Related legal help
A redundancy is only a defence to unfair dismissal if the job really went, consultation happened and redeployment was considered. How to test it, in 21 days.
Show cause letters and dismissal: running a process the Commission will acceptWarnings, a show cause letter, a real chance to respond, then a proportionate decision. What the Commission checks, the small business Code, when advice pays.
Deed of release: what you sign away, and whether a lawyer should read it firstA deed of release ends your right to claim in exchange for a payment. Once signed, it is very hard to undo. What to check, and when a review pays for itself.
You have received an unfair dismissal claim: the next 7 days, and whether to get a lawyerThe Commission asks for your response within 7 days (Form F3). What to check first, what conciliation costs, the $95,050 cap, and when a lawyer pays for itself.