Severance Pay in Australia: How Redundancy Pay Works
Severance pay in Australia is the National Employment Standards redundancy payment, and it runs from 4 weeks of pay after 1 year of service up to 16 weeks after 9 years. Whether you are owed it depends on your length of service, the size of your employer and whether the job itself has genuinely disappeared.
No NES severance pay applies for less than 1 year of service or when the employer is a small business with fewer than 15 employees, although an award or agreement may still promise more. This guide shows the scale, the tax treatment and what each side must do.
Severance pay: rates and rules
This table shows the NES scale for employers with 15 or more employees. An award or enterprise agreement can set a higher figure, so check yours as well.
| Years of service | Severance pay under the NES | Where to confirm it |
|---|---|---|
| Less than 1 year | No NES redundancy pay | Fair Work Ombudsman redundancy page |
| 1–2 years | 4 weeks | Fair Work Ombudsman redundancy page |
| 2–3 years | 6 weeks | Fair Work Ombudsman redundancy page |
| 3–4 years | 7 weeks | Fair Work Ombudsman redundancy page |
| 4–5 years | 8 weeks | Fair Work Ombudsman redundancy page |
| 5–6 years | 10 weeks | Fair Work Ombudsman redundancy page |
| 6–7 years | 11 weeks | Fair Work Ombudsman redundancy page |
| 7–8 years | 13 weeks | Fair Work Ombudsman redundancy page |
| 8–9 years | 14 weeks | Fair Work Ombudsman redundancy page |
| 9–10 years | 16 weeks | Fair Work Ombudsman redundancy page |
| 10 years or more | 12 weeks | Fair Work Ombudsman redundancy page |
Who gets severance pay
Most private-sector employees are in the national system. NSW state public sector staff and some local government employees sit in the NSW state system instead, so check which one covers you.
| Situation | How it works | Key check |
|---|---|---|
| Full-time employee | Paid the NES scale for continuous service, based on the pay for ordinary hours | Count continuous service from the start date |
| Part-time employee | Same weeks of pay, calculated on the average ordinary weekly hours worked | Check the agreed hours on the payslip |
| Casual employee | Generally not entitled to NES redundancy pay, because the engagement is not ongoing | Confirm whether the work was regular and systematic |
| Employer with 15 or more employees | Must pay the NES scale after 1 year of service | Confirm the head count from payroll records |
| Employer with fewer than 15 employees | No NES severance pay, but an award or contract may require it | Read the award and the employment contract |
| Apprentice or trainee | Depends on whether the job ends because of redundancy or the end of the training term | Ask the Fair Work Ombudsman |
A worker on a labour hire contract is employed by the provider, so the provider, not the host site, carries the severance pay duty.
How to calculate severance pay
Work from the scale, not from what a colleague received. Each step needs a document in front of you.
- Find the employee's start date on the contract or first payslip and count continuous service to the last day of employment.
- Match the completed years of service to the NES scale in the first table to find the number of weeks.
- Take the employee's base rate for ordinary hours from the latest payslip, leaving out overtime unless the award says otherwise.
- Multiply the weekly ordinary pay by the number of weeks from the scale to reach the gross payment.
- Add notice, or pay in lieu of notice, and any unused annual leave, because these are separate entitlements.
- Pay super at 12% of ordinary time earnings for 2026-27 on any part of the payout that counts as earnings, and check the tax treatment with the ATO.
Worked example: an employee with 5 years and 6 months of service sits in the 5–6 years band, so the NES scale gives 10 weeks of ordinary pay. Add their notice and leave balance for the full final pay.
How does redundancy work in Australia
A redundancy is only genuine when the employer no longer needs the job done by anyone, and it has followed any consultation duty in the award or agreement.
- The employer decides the role is no longer needed because of a change in operations, and records the business reason in writing.
- The employer consults affected staff as the award or enterprise agreement requires, and considers whether another suitable job exists.
- The employee receives written notice of termination, with minimum notice from 1 week up to 4 weeks depending on service, plus 1 extra week if they are over 45.
- The employer either lets the employee work out the notice period or pays in lieu of notice, which the NES allows.
- The final pay includes severance pay, unused annual leave and any other amounts owed, with a payslip issued within 1 working day of payday.
- The employee keeps the payslip and termination letter, because employers must hold time and wage records for 7 years.
Redundancy laws in Australia: what employers must do
Use this checklist for every redundancy.
- Pay the NES redundancy scale for employees with at least 1 year of service, or the higher figure in the award, agreement or contract.
- Give the correct minimum notice, which is 1 week for up to 1 year of service, 2 weeks for 1–3 years, 3 weeks for 3–5 years and 4 weeks beyond that.
- Consult staff as the applicable award or agreement requires, and explain the business reason clearly and in writing.
- Consider redeployment first, because a dismissal is not a genuine redundancy if the work could reasonably go to another role.
- Pay out unused annual leave in the final pay and report payroll to the ATO through Single Touch Payroll on or before payday.
- Keep consultation notes, selection criteria and calculations for 7 years in case of a Fair Work Ombudsman or Fair Work Commission inquiry.
Worker rights and what to do if severance pay is short
Payment errors are common in a rushed final pay. You can act without a lawyer.
- Compare your final pay to the NES scale for your years of service and to your award or agreement.
- Ask to see how the employer calculated the payment, including your start date and the weekly rate used.
- Raise any shortfall in writing and ask for a reply by a set date.
- Contact the Fair Work Ombudsman on 13 13 94 if it is not fixed.
- Consider an unfair dismissal or general protections application to the Fair Work Commission within 21 days of the dismissal taking effect, if you think the redundancy was not genuine.
- Ask for a support person at any consultation meeting, and keep copies of every letter and payslip.
Common mistakes to avoid
- Counting service from a later date, such as the end of probation, which shortens the band and cuts weeks from the payout.
- Treating a dismissal as a redundancy when the real reason is performance or conduct, which can make the dismissal unfair.
- Assuming a small business with fewer than 15 employees owes nothing, when the award or contract may still require a payment.
- Forgetting that the tax-free limit of $13,598 plus $6,801 per completed year applies only to genuine redundancy payments for 2026-27.
- Leaving unused annual leave out of the final pay, even though it must be paid out when employment ends.
- Missing the 21-day deadline for an unfair dismissal application because the person waited for the final pay to arrive.
Severance pay FAQ
How does redundancy work in Australia?
An employer decides a job is no longer needed, consults where the award requires it, gives written notice and pays the final entitlements. Those include notice, unused annual leave and severance pay if you have at least 1 year of service and the employer has 15 or more employees.
How much severance pay will I get?
Under the NES it ranges from 4 weeks for 1–2 years of service to 16 weeks for 9–10 years, and 12 weeks at 10 years or more. Your award, agreement or contract can promise more, so check those documents before accepting a figure.
Is severance pay taxed?
Part of a genuine redundancy payment is tax-free. For 2026-27 that is $13,598 plus $6,801 for each completed year of service. Any amount above the limit is taxed as ordinary income, so confirm your position with the ATO or a tax adviser.
Do casual employees get severance pay?
Generally no, because casual engagements are not ongoing and the NES does not give casuals redundancy pay. A casual who has worked regular, systematic hours may have other rights, and an award can differ, so ask the Fair Work Ombudsman on 13 13 94.
Getting severance pay right
This is general information, not legal, tax or financial advice, so check the Fair Work Ombudsman, the ATO or an employment lawyer for your situation. To work out an actual figure, use our redundancy calculator guide.
We supply screened, inducted staff across Sydney, and we can help you find the next role after a redundancy. Visit our recruitment page to register with us.