Redundancy Pay Calculator

What you're actually calculating

When a role is made genuinely redundant, the final payment usually has three parts, and it's easy to underestimate the total because only one of them is called "redundancy pay":

• Redundancy (severance) pay — a number of weeks' pay based on years of continuous service, set by the National Employment Standards (NES).
• Payment in lieu of notice — if you don't have the employee work out their notice period, you pay it out instead.
• Unused leave — accrued annual leave (plus leave loading where it applies) and, in some cases, long service leave.

Each part is calculated differently, so it pays to work through them one at a time.

The inputs you need

• Start date and end date — to establish years of continuous service. Approved unpaid leave can affect this, so check the record rather than guessing.
• Employment type — casuals generally don't receive NES redundancy pay; permanent staff do.
• Base rate of pay — redundancy pay is calculated on the base rate for ordinary hours, not on overtime, allowances or penalty loadings.
• Headcount — small business employers are exempt from NES redundancy pay in many cases. The Fair Work Ombudsman publishes the current definition of a small business employer; check it before you assume either way.
• Award or agreement — some awards and enterprise agreements provide more generous redundancy terms than the NES. The instrument that covers the role always sets the floor.

The method, step by step

Step 1 — Severance

Look up the employee's completed years of continuous service against the NES redundancy scale (published by the Fair Work Ombudsman — the weeks-per-year figures change context depending on service length, so use their current table). Multiply the number of weeks by the employee's ordinary weekly base pay.

Step 2 — Notice

The NES also sets minimum notice periods by length of service, with an addition for older, longer-serving employees. If the employee works their notice, this costs you normal wages. If you pay in lieu, multiply the notice weeks by full ordinary pay.

Step 3 — Leave balances

Pay out accrued annual leave at the rate the employee would have received had they taken it, including leave loading where their award provides it. Long service leave rules vary by state — check the relevant state or territory authority for how those entitlements work.

Step 4 — Add it up and check the tax treatment

The total is severance + notice in lieu + leave payouts. Parts of a genuine redundancy payment can be tax-free up to caps the ATO sets each year — the tax withholding on a redundancy is different from a normal final pay, so confirm the current treatment with the ATO or your accountant before processing it.

What the result tells you

The figure you land on is the cash cost of the redundancy — useful for deciding between restructure options, timing a change against cash flow, or provisioning if several roles are affected. It is not a substitute for checking that the redundancy is genuine (the role is no longer required and redeployment was considered); getting that wrong exposes you to an unfair dismissal claim regardless of what you paid.

Common mistakes

• Using total remuneration instead of the base rate for the severance component.
• Forgetting the small business exemption — or applying it without checking whether an award overrides it.
• Missing pro-rata long service leave, which in some states is payable on redundancy well before the full entitlement vests.
• Treating the payment as ordinary wages for tax purposes.

Redundancy sits at the messy intersection of payroll, employment law and tax — the sort of cross-domain task that falls through the cracks when your back office runs as separate silos. That's the problem a connected back office exists to solve. This page is general information; for a specific redundancy, confirm the numbers against the Fair Work Ombudsman's current tables and get advice on your situation.