Business Restructure & Redundancy

If you are considering making positions redundant, we can make sure the correct process is followed to reduce the risk of claims. A genuine redundancy must meet strict criteria under the Fair Work Act, including consultation and redeployment.

Business Restructure & Redundancy

If your business is considering a restructure or redundancies, MKI Legal can help you do it lawfully.

A redundancy happens when the business no longer requires a job to be performed by anyone, because of changes in its operational requirements: for example new technology, a fall in revenue, a closure, a merger or a reorganisation.

If a redundancy is not handled correctly, the business can face an unfair dismissal claim, a general protections claim (if an affected employee says they were selected for a prohibited reason, such as a complaint or parental leave), or civil penalties for breaching an award, agreement or the Fair Work Act.

Plan the process before announcing anything: identify the roles affected and why, check the consultation clause in the award or agreement, look for redeployment options across the business and related entities, and calculate the notice and redundancy pay.

Business Restructure & Redundancy
The Three Tests for a Genuine Redundancy

1

Position is no longer required

First, the business must no longer require the job to be performed by anyone because of changes in its operational requirements (s 389(1)(a) of the Fair Work Act 2009 (Cth)). For example, a business with 10 cooks that now needs only 8 does not need two of the cook positions. Or, if a salesperson’s duties are spread between a manager and an administration officer, the salesperson position may no longer be required. But if the same job is re-advertised or someone new is hired to do it, the redundancy is unlikely to be genuine.

2

Redeployment opportunities

Second, it must not have been reasonable in all the circumstances to redeploy the employee within the business or an associated entity (s 389(2)). Check for suitable positions across the business and related companies, taking into account the employee’s skills, qualifications and experience, the location and the pay. A lower-paid or part-time role the employee would have accepted can be suitable. Discuss the options with the employee and keep a record.

In 2025 the High Court held that this inquiry is about the business as it actually operates, and that in some circumstances it can extend to work the business has been giving to contractors or labour hire workers (Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29). Businesses that rely heavily on contractors should take advice on this before making employees redundant.

If the business finds the employee other acceptable employment and the employee turns it down, the business can apply to the Fair Work Commission to reduce the redundancy pay, even to nil (s 120).

3

Consultation requirements

Third, the business must have complied with any obligation in a modern award or enterprise agreement to consult about the redundancy (s 389(1)(b)). This is where businesses most often get it wrong. Most awards and agreements set out specific steps, which usually require the business to:

  • notify affected employees as soon as a definite decision to make major changes has been made;
  • give them relevant information in writing, such as the proposed changes, their likely effect, and measures to reduce the effects;
  • discuss the changes and give employees a genuine opportunity to have their say, including through a representative; and
  • genuinely consider what they say before the final decision about particular employees.

If the business does not comply, the redundancy is not a genuine redundancy, and the business can also be liable for civil penalties, as can individuals involved in the breach.

Redundancy pay

Redundancy pay under s 119 of the Fair Work Act ranges from 4 weeks (at least 1 year of service) to 16 weeks (9 to 10 years), dropping to 12 weeks at 10 years or more, paid at the employee’s base rate for ordinary hours. If the contract, award or agreement provides more, that amount must be paid. Notice or pay in lieu, and unused annual leave, are paid on top.

Small business employers (fewer than 15 employees, counting associated entities and regular casuals) do not have to pay the statutory redundancy pay, but the exemption does not apply if the business became small only because of job losses in the six months before it went into liquidation or bankruptcy (s 121). Other exclusions include casuals, employees with less than 12 months’ service, and genuine fixed-term, task or seasonal engagements.

Unable to afford the redundancy pay

If the business genuinely cannot afford to pay redundancy pay, it can apply to the Fair Work Commission for an order reducing it, potentially to nil (s 120). The Commission decides what is appropriate on the evidence, so this needs proper financial material.

Other Relevant Information

Transfer of Business

A transfer of business can happen when a business is bought, sold or merged, or work is outsourced or insourced. There are specific rules about whether the old employer’s award or agreement follows transferring employees, and whether their service and entitlements carry over.

Get advice on how entitlements and instruments carry over between the two entities. Getting it wrong can expose the business to underpayment claims and penalties.

Notification Requirements

If the business decides to dismiss 15 or more employees for economic, technological, structural or similar reasons, it must notify Services Australia in writing, setting out the reasons, the number and categories of employees affected and the timing, as soon as practicable after the decision and before any dismissals (s 530). The business may also have to notify and consult any relevant union. Failing to do so is a civil penalty contravention.

WA State System Employers

If your business is outside the national system, for example a WA sole trader or partnership, the Fair Work Act redundancy rules above do not apply in the same way. There is no statutory genuine redundancy exclusion in the WA Industrial Relations Commission, and a redundancy dismissal is judged on whether it was harsh, oppressive or unfair. See our WA state system guide.

How Can MKI Legal Help?

We can help you plan the restructure, prepare consultation letters and redundancy documents, work through redeployment options, calculate notice and redundancy pay, and defend the business if a claim is made. Contact us for a confidential discussion before you announce any changes.

Case studies

How the law played out in real cases

See all case studies →

Published decisions of courts and tribunals, summarised in plain English from the published decision. Every case turns on its own facts.