Redundancy and severance: worked examples with and without a payment

By SESAY · Updated 3 October 2026 · Australian context

Confirm which entitlement applies

Under the National Employment Standards, eligible redundancy is calculated using base pay for ordinary hours. Notice is a separate entitlement and payment in lieu uses the applicable full rate. Awards, agreements and industry schemes can change the analysis. Do not automatically add an NES amount to a severance-fund benefit.

Example 1: an eligible NES redundancy

Alex has exactly five years of recognised continuous service, is eligible for NES redundancy and is not subject to an exclusion or a replacement industry scheme. Assume 38 ordinary hours each week at a base rate of $40, with no relevant extra amounts in the notice rate. HR has separately confirmed four weeks of payable notice.

Example 2: no redundancy or severance entitlement

Casey’s role ends after eight months. Assume HR has confirmed there is no NES redundancy entitlement and no award, agreement, contract or scheme that provides severance. One week of notice in lieu has been confirmed. At an applicable full weekly rate of $1,520, the notice payment is $1,520. Redundancy is $0; wages and payable leave still need their own calculation.

Example 3: an industry severance arrangement

Before calculating, identify the relevant award clause and the scheme’s rules. Establish the employer’s obligation, the fund’s benefit, who pays each amount and whether a specific offset is permitted. For instance, the Building and Construction General On-site Award has industry-specific redundancy provisions. A fund contribution is not a universal permission to reduce NES redundancy.

Review before release

Record coverage, recognised service, employer size where relevant, termination circumstances and the approved weeks. Keep notice, redundancy and leave on separate workpaper lines. A gross entitlement calculation does not determine whether ATO genuine-redundancy tax treatment applies.

Calculate a confirmed redundancy component →

Official sources

• Fair Work Ombudsman — Redundancy pay
• Fair Work Ombudsman — Notice and redundancy fact sheet
• Fair Work Commission — Building and Construction General On-site Award

General educational information, not individual legal or tax advice. Examples are fictional and gross amounts only. Confirm the instrument, facts and current regulator guidance before processing. Read our editorial policy.