What is severance pay in Australia? Losing your job can be a stressful and uncertain time. As a result it can add financial stress and put itself at the top of the list of worries. Bills still need to be paid and the future is unclear. But depending on the circumstances of your exit you may be entitled to severance pay from your employer.
This payment from your employer can be a financial lifeline as you look for your next opportunity. We’ll look at the scenarios that might trigger severance pay, what determines the amount you’ll get and some tips before you receive severance pay in Australia.
Redundancy Pay vs Severance Pay in Australia
Think of severance pay as a broader umbrella and redundancy pay as a specific type of severance pay.
- Severance pay: This is money an employee receives when their employment is terminated, regardless of the reason. It’s a form of compensation for the sudden loss of income. The amount is often based on length of service.
- Redundancy pay: This is a specific type of severance pay that applies when an employee loses their job because the position itself is no longer needed by the company, due to things like restructuring, automation or moving operations overseas. There are usually legal requirements and entitlements for redundancy, such as a minimum employment period and a company size threshold.
Here’s a table that sums up the differences:
| Feature | Severance Pay in Australia | Redundancy Pay in Australia |
| Reason for termination | Any reason (layoffs, poor performance, etc.) | Job elimination due to company restructuring, outsourcing, etc. |
| Legality | Not always mandated by law | Often governed by specific laws or regulations |
| Minimum service | Varies situation | Often requires a minimum employment period (e.g. 1 year) |
| Company size | No minimum company size | May require a minimum company size (e.g. 15 employees) |
The Fair Work Act 2009 and National Employment Standards
Australian employment law can be confusing but two key pieces of legislation play a big role in protecting your rights and outlining your responsibilities as an employee: the Fair Work Act 2009 and the National Employment Standards (NES).
Fair Work Act
The Fair Work Act 2009 sets out the framework for the Australian workplace relations system. It covers:
- Minimum wages: Sets the minimum hourly, daily or weekly pay rates for employees across different industries and classifications.
- Maximum working hours: Defines standard working hours, overtime pay rates and breaks.
- Leave entitlements: Outlines minimum leave entitlements including annual leave, personal leave, sick leave and long service leave.
- Termination: Provides a framework for fair dismissal procedures and redundancy and severance pay in Australia.
- Flexible work arrangements: Recognises the growing need for flexible work options like part-time work, casual employment and flexible working hours.
National Employment Standards
The National Employment Standards (NES) are a set of minimum conditions that apply to all employees covered by the Fair Work Act. These standards provide a safety net for basic workplace entitlements including:
- Maximum weekly hours: Sets the maximum number of ordinary hours an employee can work per week.
- Notice of termination: Defines the minimum notice period an employer or employee must give before termination.
- Public holidays: Outlines employee entitlements for pay and leave on public holidays.
- Fair go: Protects employees from discrimination and unfair dismissal (e.g. employer not giving redundancy or severance pay in Australia)
Who Doesn’t Get Severance Pay?
The National Employment Standards (NES) sets out who qualifies for redundancy pay in Australia. Here’s a breakdown of employees who typically don’t get redundancy pay under the NES:
- New Hires: Employees who haven’t worked for the company for at least 12 months continuously.
- Project-Based Workers: Those employed for a set period, a specific project or a particular season.
- Employees Terminated for Cause: Those fired for serious misconduct.
- Casual Workers: Employees who don’t have a set schedule and are paid per shift. (Note: Some awards or enterprise agreements may provide redundancy pay to casuals so check yours!)
- Trainees & Apprentices: Those in formal training programs with a defined end date.
Let’s use an example. Fred has been working part-time at a tiling company for 7 months. He’s covered by the National Employment Standards (NES) but hasn’t worked for the company for the minimum period to qualify for redundancy pay.
This minimum period is 12 months of continuous service. Unfortunately, when the company restructures and Fred loses his job (redundancy) he won’t be eligible for redundancy pay because of his short service.
Severance Pay in Australia: Tips for Resigning Employees
- Know why you’re leaving: Severance is more likely for layoffs (redundancy) than terminations for cause.
- Check your contract and company policy: These documents may outline eligibility, calculation methods and notice periods for severance requests.
- Understand your legal rights: Local laws (like Australia’s Fair Work Act) may impact your eligibility. Research to know your basic rights.
- Gather documents: Copies of your employment contract, performance reviews and relevant company severance policies can support your case.
- Consider alternatives: Depending on the situation fighting for your job, negotiating a longer notice period or using outplacement services may be better options.
- Develop a negotiation strategy: If you’re pursuing severance research industry standards and be prepared to justify your request with facts and figures.
- Tax implications: Severance pay is usually taxed so understand the financial impact before negotiating.
- Lawyer consultation: An employment lawyer can provide valuable guidance and strengthen your negotiation position.
Get Your Severance Pay With Us
Don’t get left with nothing after a surprise redundancy. Severance pay can feel like finding a pot of gold and JB Solicitors can be your guide to that financial safety net. Our experienced employment lawyers will walk you through the employment law maze to get you the payment you’re entitled to. Let JB Solicitors get you the severance you’ve worked for
Contact us now and get peace of mind about your severance pay in Australia
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Severance pay: What you need to know – SEEK
Understanding Severance Pay: Calculation and Explanation | Indeed.com Australia
Notice of termination and redundancy pay – Fair Work Ombudsman
