Australia — Termination & Severance

The Fair Work Act 2009 establishes a statutory unfair dismissal remedy adjudicated by the Fair Work Commission (FWC). A person has been unfairly dismissed if the FWC is satisfied that the person was dismissed, the dismissal was "harsh, unjust or unreasonable," it was not a case of genuine redundancy, and—in the case of a small business employee—the dismissal was not consistent with the Small Business Fair Dismissal Code (sections 385–387). Not every employee, however, is protected from unfair dismissal; Parliament erected three gating thresholds that define coverage.

## Minimum employment period

An employee must have completed a minimum employment period before protection attaches. Section 383 of the Fair Work Act specifies:

• 6 months for employees of a standard (non-small) business; or
• 12 months for employees of a small business employer.

A small business employer is defined as an employer with fewer than 15 employees at the relevant time (when the employee is notified of dismissal or given notice of termination). The headcount includes the dismissed employee and any other employees being dismissed at that time, regular and systematic casual employees employed at the time of dismissal, and employees of associated entities (including those based overseas), but excludes irregular casual employees who are not engaged on a regular and systematic basis. Because the minimum employment period is longer for small business employees (12 months versus 6 months), classification of the employer as small or non-small is a threshold issue. An employer with 15 or more employees at the termination date is not a small business, triggering the shorter 6-month qualifying period.

## High-income threshold exclusion

Even if the minimum employment period is satisfied, employees whose annual earnings exceed the high-income threshold and who are not covered by a modern award or enterprise agreement are excluded from unfair dismissal protection under section 382(b)(iii). This exclusion targets senior executives and highly compensated professionals whose terms are governed entirely by individual contract.

The high-income threshold is indexed annually on 1 July. From 1 July 2025, the threshold is AUD 183,100. This amount comprises the employee's annual rate of earnings plus such other amounts (if any) worked out in accordance with regulation 3.05 of the Fair Work Regulations 2009 (such as contributions to superannuation, allowances set by reference to quantifiable output or task, and certain fringe benefits).

Employees who are covered by or subject to a modern award or registered enterprise agreement—regardless of their actual earnings—are not subject to this exclusion and remain eligible for unfair dismissal protection if they meet the minimum employment period.

## Small Business Fair Dismissal Code

For small business employers, compliance with the Small Business Fair Dismissal Code—a legislative instrument declared under section 388 of the Fair Work Act—creates a procedural defense to an unfair dismissal claim. The Code sets out a fair process for warning an employee, providing an opportunity to respond, and considering whether dismissal is appropriate; if a small business employer can provide evidence that it followed the Code, the FWC will typically find that the dismissal was not unfair on procedural grounds. Small business employees who have completed the 12-month qualifying period may still apply for unfair dismissal, but the Code provides a safe harbor for employers who follow it.

## Genuine redundancy carve-out

A dismissal that is a genuine redundancy under section 389 of the Fair Work Act is not protected by the unfair dismissal provisions, meaning the employee cannot make an unfair dismissal claim. A redundancy is genuine if:

• the employer no longer requires the job to be performed by anyone (except in cases of ordinary and customary turnover of labour);
• the employer complied with any consultation obligations in an applicable modern award or enterprise agreement; and
• there was no reasonable opportunity to redeploy the employee within the employer's business or an associated entity.

A dismissal is not a genuine redundancy if the employer still needs the employee's job to be done by someone (for example, hiring a replacement), failed to follow consultation requirements, or could have reasonably offered the employee another job within the business or an associated entity.

## Application deadline

An employee who wishes to challenge a dismissal as unfair must lodge an application with the Fair Work Commission within 21 calendar days of the dismissal taking effect (section 394). This is a strict statutory deadline; the FWC may grant an extension only if satisfied that there are exceptional circumstances (section 394(3), taking into account factors in section 394(3A)).

Source: Fair Work Act 2009, sections 382–389, 394 Source: Fair Work Ombudsman — Unfair dismissal Source: Fair Work Ombudsman — Award and agreement free wages and conditions

Section 117 of the Fair Work Act 2009 establishes the statutory minimum notice entitlement when an employer terminates an employee's employment. The National Employment Standards (NES) notice requirements apply to all employees covered by the national workplace relations system, regardless of any modern award, enterprise agreement, or employment contract—though those instruments may provide for longer notice periods.

## Written notice requirement

An employer must give the employee written notice specifying the day of termination before ending their employment (section 117(1)). The notice may be delivered personally, left at the employee's last known address, or sent by pre-paid post to the employee's last known address. The termination date specified in the notice cannot be before the day the notice is given—an employer cannot backdate notice.

## Minimum notice period tied to continuous service

The minimum period of notice is calculated under section 117(3) and depends on the employee's period of continuous service with the employer at the time notice is given:

• 1 year or less: 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

Continuous service includes most periods of absence on paid or unpaid leave (including unpaid parental leave), but time spent as a casual employee usually does not count toward the notice entitlement unless the employee was a regular and systematic casual and meets the statutory definition of continuous service under the Fair Work Act.

## Additional week for employees 45 and over

If the employee is over 45 years of age at the time the employer gives notice and the employee has completed at least 2 years of continuous service with the employer, the employer must provide one additional week of notice beyond the minimum periods listed above (section 117(3), note 2). For example, an employee aged 47 with 4 years of continuous service is entitled to 3 weeks (the base period for over-3-years service) plus 1 additional week, for a total of 4 weeks' notice.

## Payment in lieu of notice

An employer may choose to pay the employee in lieu of notice rather than requiring the employee to work through the notice period. Payment in lieu must equal at least the amount the employer would have been liable to pay the employee at the employee's full rate of pay for the hours the employee would have worked had the employment continued until the end of the minimum notice period (section 117(2)(b)). When an employer pays in lieu, the employment ends immediately on the stated termination date, but the employer must still confirm the termination date in writing and make the correct payment. The full rate of pay for payment-in-lieu purposes includes the employee's ordinary hourly rate plus applicable allowances and loadings the employee would have received during that period.

## Exceptions: when notice is not required

Section 123 of the Fair Work Act carves out specific situations in which the employer is not required to provide notice (or payment in lieu):

• The employee is dismissed for serious misconduct (deliberate conduct inconsistent with continuing employment, such as theft, fraud, assault, sexual harassment, or creating serious and imminent risk to health, safety, or the employer's reputation);
• The employee was engaged for a specific period of time or task (a fixed-term contract that expires at the end of the agreed period or completion of the task);
• The employee is a casual employee;
• The employee has a training arrangement and is employed for a set period or for the length of the training arrangement (apprentices are generally entitled to notice unless employed for a specific period or task);
• The employee is a daily hire or weekly hire worker in specified industries (building and construction, meat processing) whose termination depends on seasonal factors.

When an employer dismisses an employee for serious misconduct, the employer is not required to give written notice of termination under section 117, but the employer must still pay the employee all outstanding entitlements (wages, accrued annual leave, long service leave if applicable).

## Interaction with awards, agreements, and contracts

Modern awards, enterprise agreements, and employment contracts may provide for longer minimum notice periods than the NES (for example, one month instead of one week for short-service employees, or additional notice for senior roles). Where an applicable industrial instrument or contract sets a longer notice period, the longer period applies. However, no award, agreement, or contract can lawfully provide for a notice period shorter than the NES minimum.

If an employer provides more notice than required under the relevant award, agreement, or contract, the employee is only obliged to work the minimum notice period; the employee may choose to work the additional period, but if they work only the statutory minimum, the employer is not obliged to pay the extra period.

## Civil penalty provision

Section 117 is a civil remedy provision under Part 4-1 of the Fair Work Act. An employer who fails to give the correct notice (or payment in lieu) may be subject to civil penalties imposed by a court. Compliance failures can also affect the validity of the dismissal for other purposes—for example, an employee may gain access to the unfair dismissal jurisdiction if the employer's failure to give proper written notice means the dismissal took effect outside the minimum employment period.

Source: Fair Work Act 2009, sections 117, 123 Source: Fair Work Ombudsman — Notice of termination and redundancy pay Source: Fair Work Ombudsman — Dismissal and notice Source: Fair Work Ombudsman — Who doesn't get notice

Section 119 of the Fair Work Act 2009 establishes the statutory right to redundancy pay when an employee's employment is terminated at the employer's initiative because the employer no longer requires the job to be done by anyone (except where this is due to ordinary and customary turnover of labour) or because of the insolvency or bankruptcy of the employer. The redundancy pay entitlement is part of the National Employment Standards (NES) and applies to all employees covered by the national workplace relations system, unless an exclusion under sections 121 or 123 applies or a modern award or enterprise agreement provides for a more generous industry-specific redundancy scheme.

## Minimum 12-month qualifying period

An employee must have completed at least 12 months of continuous service with the employer to be entitled to redundancy pay under the NES. Periods of employment as a casual employee generally do not count toward continuous service for redundancy pay purposes, except where a casual employee has been employed on a regular and systematic basis and later becomes a permanent employee—in which case, continuous service starts from when they became permanent. Employees with less than 12 months of continuous service receive no redundancy pay under the NES (though they remain entitled to statutory notice or payment in lieu under section 117).

## The statutory redundancy pay scale

The amount of redundancy pay is calculated using a service-based scale under section 119(2) and is measured by the employee's period of continuous service at the time notice of termination is given (or, if payment in lieu of notice is made, at the time notice would have been given):

• At least 1 year but less than 2 years: 4 weeks' pay
• At least 2 years but less than 3 years: 6 weeks' pay
• At least 3 years but less than 4 years: 7 weeks' pay
• At least 4 years but less than 5 years: 8 weeks' pay
• At least 5 years but less than 6 years: 10 weeks' pay
• At least 6 years but less than 7 years: 11 weeks' pay
• At least 7 years but less than 8 years: 13 weeks' pay
• At least 8 years but less than 9 years: 14 weeks' pay
• At least 9 years but less than 10 years: 16 weeks' pay
• At least 10 years: 12 weeks' pay

Note the step-down at 10 years: an employee with 10 or more years of continuous service receives 12 weeks of redundancy pay, not 16 weeks. This reflects the 2004 Redundancy Case decision of the Australian Industrial Relations Commission, which introduced a maximum cap to reduce the liability burden on employers for very long-serving employees.

If an employee is given a notice period and works through that notice, the notice period counts toward continuous service for calculating redundancy pay. If the employer pays in lieu of notice, the notice period does not count—continuous service ends on the day notice is given.

## Base rate of pay for ordinary hours

Redundancy pay is calculated at the employee's base rate of pay for their ordinary hours of work. The base rate excludes:

• incentive-based payments and bonuses;
• loadings (such as casual loading, shift penalties, or weekend rates);
• monetary allowances (such as meal, travel, or tool allowances);
• overtime or penalty rates; and
• any other separately identifiable amounts.

For a full-time salaried employee working 38 ordinary hours per week, one week's pay equals the weekly salary divided by the number of ordinary hours, multiplied by the ordinary hours in one week. For a part-time employee, one week's pay is based on the employee's ordinary hours, not a notional full-time equivalent.

## Small business employer exemption

Section 121(1)(b) provides that an employee of a small business employer is not entitled to redundancy pay under the NES. A small business employer is defined as an employer who employs fewer than 15 employees at the time when notice of termination is given. When counting the employer's headcount:

• all employees employed by the employer at that time are counted (including the employee being made redundant and any other employees being dismissed at the same time);
• employees of associated entities (including those based overseas) are counted;
• casual employees are counted only if they are employed on a regular and systematic basis at the time the headcount is taken; and
• irregular casual employees are excluded.

An employer with 15 or more employees at the time notice is given is not a small business employer and must pay NES redundancy pay.

Exception to the small business exemption: A small business employer may still be required to pay redundancy pay if the employer became a small business employer as a result of redundancies made on or after 15 December 2023 during a period of insolvency, bankruptcy, or liquidation (but not voluntary winding up). Section 121(4) and (5) set out the detailed conditions for this exception, including timing and exclusion of earlier redundancies. This change ensures that employers cannot evade redundancy obligations by downsizing below the 15-employee threshold during financial distress.

## Other exclusions from the redundancy pay entitlement

Section 123 lists situations in which an employee is not entitled to redundancy pay under the NES:

• Casual employees (section 123(1)(c));
• Employees engaged for a specific period of time, task, or season whose employment ends at the completion of that period or task (section 123(1)(d));
• Employees dismissed for serious misconduct (section 123(1)(e));
• Employees serving a probationary period of three months or less whose employment is terminated during or at the end of that probationary period (section 123(1)(f));
• Daily hire or weekly hire employees in the building and construction, meat, or stevedoring industries (section 123(1)(g));
• Employees whose period of continuous service is less than 12 months (section 123(1)(h)); and
• Trainees engaged under a training arrangement (section 123(1)(i)), unless the training arrangement itself provides otherwise.

## Redundancy pay is separate from notice

Redundancy pay under section 119 is in addition to notice of termination (or payment in lieu) under section 117. An employer must provide both: the correct notice period (or payment in lieu) calculated under the service-based notice formula in section 117(3), and the correct redundancy payment calculated under the service-based redundancy scale in section 119(2). Redundancy pay cannot be offset against notice, nor can extra notice be used to reduce the redundancy payment, except by order of the Fair Work Commission under section 120 (discussed below).

## Fair Work Commission may reduce redundancy pay

Section 120 permits an employer to apply to the Fair Work Commission (FWC) for an order reducing the amount of redundancy pay if:

• the employer finds other acceptable employment for the employee (for example, arranging for the employee to start a new role with a different employer immediately after termination); or
• the employer cannot afford to pay the full redundancy amount (financial incapacity).

The FWC may determine that the redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate. Employers can apply to the FWC for a reduction only if the redundancy entitlement arises from the NES; an employer cannot apply if the redundancy entitlement comes from a modern award or enterprise agreement.

## Interaction with awards, agreements, and industry-specific redundancy schemes

The NES redundancy pay provisions apply unless an applicable modern award or enterprise agreement provides for a more generous entitlement or an industry-specific redundancy scheme. Some awards—such as the Manufacturing and Associated Industries and Occupations Award, the Timber Industry Award, and the Stevedoring Industry Award—contain industry-specific redundancy schemes that apply instead of the NES scale and may have different eligibility criteria, payment scales, or portable redundancy fund arrangements. Where an award or agreement contains such a scheme, the scheme provisions govern and the NES scale does not apply.

## Transfer of business and continuous service

Section 122 addresses situations in which an employee's employment is transferred when a business is sold or restructured. If there is a transfer of employment from one employer (the old employer) to another employer (the new employer) and the employee's service with the old employer would have counted as continuous service with the new employer, the new employer is generally responsible for the redundancy pay liability (including service with the old employer), and the old employer's obligation is extinguished. Special rules apply when the new employer is not an associated entity of the old employer and gives the employee written notice at the time of transfer that prior service will not count—in that case, the employee's continuous service starts fresh with the new employer, and the old employer may be liable for redundancy pay accrued up to the transfer if the transfer itself constituted a redundancy.

Source: Fair Work Act 2009, sections 119–123 Source: Fair Work Ombudsman — Redundancy pay Source: Fair Work Ombudsman — Who doesn't get redundancy pay Source: Fair Work Ombudsman — Notice of termination and redundancy pay fact sheet