The Real Cost of a Redundancy Done Badly
- Jude Mahony
- Jul 12
- 3 min read
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 looking at 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 happen.
Redundancies are rising across Australia.
Very few employers are budgeting for what a badly run one actually costs.
What "genuine redundancy" actually requires
Under section 389 of the Fair Work Act, a redundancy is only genuine if three things are true:
the employer no longer needs the role performed by anyone,
the employer has met any consultation obligations set out in the relevant award or enterprise agreement, and
it would not have been reasonable to redeploy the employee elsewhere in the business.
Miss any one of these and the employee can bring an unfair dismissal claim, even when the underlying business reason for the cut is entirely legitimate.
Consultation is where most employers slip.
It has to start before the decision is locked in, not after, and it has to give the employee a genuine chance to respond, not a formality on the way out the door.
The High Court just made "reasonable redeployment" harder to dodge
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 deciding whether redeployment was reasonable. That includes asking whether contractor roles could have been reallocated to an employee facing redundancy, not just whether a vacant position happened to exist at the time.
The case involved 22 mine workers made redundant during a downturn while contractors kept doing similar work on site. The High Court found the Fair Work Commission was entitled to consider whether the employer could have reduced its reliance on those contractors instead.
Employers still working off a "no vacancy, no redeployment obligation" assumption are relying on an outdated read of the law.
What it costs when you get it wrong
The direct costs stack up fast:
Compensation is capped at $91,550 for dismissals between 1 July 2025 and 30 June 2026, the lower of 26 weeks' pay or half the high income threshold of $183,100.
Legal fees to defend a claim typically run from $5,000 to $20,000. Under the Fair Work Commission's own rules, each side generally covers its own costs, whether you win or lose.
Redundancy pay under the National Employment Standards scales up with tenure, reaching 16 weeks for an employee with 9 to 10 years' service, on top of notice.
27 per cent of Australian employers said they were planning redundancies in the September 2025 quarter, up from 24 per cent in June, according to AHRI's Quarterly Australian Work Outlook. This is happening at scale, not as an isolated event.
None of that includes the cost that never shows up in a Fair Work Commission filing: the staff who stayed, watched a colleague get walked out with no consultation, and are now quietly updating their resumes.
The redundancies that hold up are rarely run as one-off events. They come out of a proper workforce transformation plan, where the roles being cut, the consultation timeline and the redeployment options are mapped out before anyone is told anything.
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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