Severance pay in Australia: the redundancy pay scale
What other countries call severance pay is redundancy pay in Australia. Enter your salary and service to see the weeks you are owed.
Severance pay in Australia is known as redundancy pay and is set by the National Employment Standards in the Fair Work Act 2009. An employee whose employment is terminated because the employer no longer requires the job to be done by anyone, or because of the employer’s insolvency, is entitled to between 4 and 16 weeks of pay at the base rate, according to continuous service: 4 weeks after one year, rising to 16 weeks for nine years, and 12 weeks from ten years. The entitlement requires at least 12 months of service and does not apply to employers with fewer than 15 employees, or to casual employees. It is paid in addition to notice and accrued leave. An employee on $85,000 with six years of service receives 11 weeks, $17,981, plus 4 weeks of notice. A genuine redundancy payment is tax-free up to a limit based on years of service.
Your severance pay under the NES
Severance and notice, gross
$24,519
| Severance (redundancy) pay | 11 weeks |
| Notice | 4 weeks |
| Tax-free part | $24,519 |
Updated on · Radif Partners · Editorial policy
The statutory scale
| Continuous service | Redundancy pay | On $85,000 a year |
|---|---|---|
| 1 year to less than 2 | 4 weeks | $6,538 |
| 2 years to less than 3 | 6 weeks | $9,808 |
| 3 years to less than 4 | 7 weeks | $11,442 |
| 4 years to less than 5 | 8 weeks | $13,077 |
| 5 years to less than 6 | 10 weeks | $16,346 |
| 6 years to less than 7 | 11 weeks | $17,981 |
| 7 years to less than 8 | 13 weeks | $21,250 |
| 8 years to less than 9 | 14 weeks | $22,885 |
| 9 years to less than 10 | 16 weeks | $26,154 |
| 10 years and over | 12 weeks | $19,615 |
The weeks are multiplied by the base rate of pay for ordinary hours. A full-time employee on $85,000 has a weekly base rate of $1,635.
Severance, redundancy, retrenchment: one entitlement, several names
Australian law does not use the word severance. The Fair Work Act speaks of redundancy pay; older awards speak of severance pay, and the two mean the same payment. Retrenchment is the act of ending employment for redundancy. A golden handshake or ex gratia payment is something else: a discretionary sum on top of the legal entitlements, with its own tax treatment. When an overseas employer or a contract drafted abroad refers to severance, the minimum is the Australian scale above, and a more generous contractual formula applies if there is one.
Who qualifies
The employee must have at least 12 months of continuous service with the employer, including service with a previous employer where there was a transfer of business and the service was recognised. The employer must have had 15 or more employees at the time, counting regular casuals and employees of associated entities; the small business exemption guide covers the count. The job must genuinely have ceased to be required, or the employer must be insolvent or bankrupt.
The Act excludes casual employees, employees engaged for a specified period, task or season whose engagement has ended, apprentices, trainees whose employment was for the length of the training arrangement, and employees dismissed for serious misconduct.
When the employer can pay less
The Fair Work Commission can reduce redundancy pay, even to nil, where the employer obtains other acceptable employment for the employee or cannot pay. Acceptable employment is judged objectively: similar pay, hours, duties, location and seniority. An employee who refuses such an offer risks the reduction. On a sale of business, an employee who is offered a job with the buyer on substantially similar terms, with service recognised, and declines it, is not entitled to redundancy pay from the seller.
What is paid alongside it
Severance is one line of a final pay. Notice under the National Employment Standards, one to five weeks, is given or paid in lieu at the full rate. Accrued annual leave is paid out, with loading where applicable. Long service leave is paid according to the law of the state or territory, and redundancy is one of the circumstances that opens the pro rata entitlement in most of them. For six years of service and ten days of leave owing on $85,000, the whole payment in New South Wales is $36,289 before tax and $32,523 after.
Tax on severance pay
A genuine redundancy payment is tax-free up to $13,598 plus $6,801 for each completed year of service in 2026–27. With six years that limit is $54,404. Payment in lieu of notice on a redundancy counts towards the same limit. Any excess is an employment termination payment taxed at 32%, or 17% from preservation age. The concession is not available once you have reached pension age, or where the arrangement is not at arm’s length. Unused leave paid on a genuine redundancy is taxed at a flat 32%.
If the employer is insolvent
When a company is wound up owing redundancy pay, the Fair Entitlements Guarantee pays it, up to four weeks for each full year of service and subject to a maximum weekly wage, along with unpaid wages, leave and notice within their own limits. The claim goes to the Department of Employment and Workplace Relations within 12 months. The scheme does not cover contractors or directors.
Checking an offer
Compare the offer with three numbers: the weeks from the scale for your service, your base weekly rate, and any formula in your award, agreement or contract, which prevails if it is higher. The redundancy pay calculator does the first two, and the pages for five and ten years of service show worked cases at the points where the scale changes.