Redundancy: Navigating the Complexities of Workforce Change
- Jude Mahony
- Jul 12
- 3 min read
Updated: Aug 4
Redundancy is one of the most legally exposed decisions an employer makes.
Get the process right, and it's a clean, respectful exit. Get it wrong, and you're facing an unfair dismissal claim, a compensation payout, legal fees you likely can't recover even if you win, and a workforce that watched the whole thing unfold.
Redundancies are rising across Australia.
Very few employers budget for what a poorly managed redundancy actually costs.
Understanding "Genuine Redundancy"
Under section 389 of the Fair Work Act, a redundancy is only genuine if three criteria are met:
The employer no longer needs the role performed by anyone.
The employer has fulfilled any consultation obligations set out in the relevant award or enterprise agreement.
It would not have been reasonable to redeploy the employee elsewhere in the business.
Failing to meet any one of these criteria opens the door for an unfair dismissal claim, even when the business reason for the cut is valid.
Consultation is where most employers slip.
It must begin before the decision is finalized, not after. Employees should have a genuine opportunity to respond, not just a formality on the way out the door.
The High Court's Impact on Redeployment Obligations
In Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29, the High Court ruled that the Fair Work Commission can look beyond an employer's existing workforce structure when determining if redeployment was reasonable. This includes considering whether contractor roles could have been reallocated to an employee facing redundancy, rather than just checking for vacant positions.
The case involved 22 mine workers made redundant during a downturn while contractors continued similar work on site. The High Court found that the Fair Work Commission was entitled to assess whether the employer could have reduced its reliance on those contractors instead.
Employers still operating under a "no vacancy, no redeployment obligation" assumption are relying on an outdated interpretation of the law.
The Costs of Mismanagement
The direct costs of mismanaging redundancy can accumulate quickly:
Compensation is capped at $91,550 for dismissals between 1 July 2025 and 30 June 2026, which is the lower of 26 weeks' pay or half the high-income threshold of $183,100.
Legal fees to defend a claim typically range from $5,000 to $20,000. Under the Fair Work Commission's rules, each side generally covers its own costs, whether they win or lose.
Redundancy pay under the National Employment Standards increases with tenure, reaching 16 weeks for employees with 9 to 10 years of service, in addition to notice.
According to AHRI's Quarterly Australian Work Outlook, 27% of Australian employers planned redundancies in the September 2025 quarter, up from 24% in June. This trend is significant and not isolated.
None of these costs account for the impact on remaining staff. Those who witnessed a colleague being walked out without consultation may quietly update their resumes.
The redundancies that succeed are rarely treated as one-off events. They stem from a proper workforce transformation plan, where the roles being cut, the consultation timeline, and redeployment options are clearly outlined before any announcements are made.
The Importance of a Workforce Transformation Plan
A well-structured workforce transformation plan is essential for managing redundancies effectively. It ensures that all aspects of the process are considered. This includes identifying roles that may be redundant, establishing a clear consultation timeline, and exploring redeployment options.
Key Components of a Workforce Transformation Plan
Assessment of Roles: Identify which roles are truly redundant. This requires a thorough analysis of the business needs and workforce capabilities.
Consultation Process: Develop a robust consultation process that allows employees to voice their concerns and provide input. This should be a genuine dialogue, not a mere formality.
Redeployment Strategies: Explore all possible avenues for redeployment within the organization. This may include reallocating tasks or roles to other employees or considering contractor roles.
Communication Plan: Establish a clear communication strategy to inform all stakeholders about the changes. Transparency is key to maintaining trust and morale.
Legal Compliance: Ensure that all actions comply with the Fair Work Act and other relevant regulations. This minimizes the risk of legal challenges.
Talk to Us
If you're planning a restructure and want to get the process right the first time, not after a claim lands, book a resourcing consultation and we'll walk through what genuine compliance looks like for your business.
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