Section 119 Fair Work Act: NES Redundancy Pay Scale and Small Business Exclusion

The statutory scale

Section 119 of the Fair Work Act 2009 establishes the minimum redundancy pay entitlement under the National Employment Standards. This entitlement is calculated based on the employee’s ‘base rate of pay’ for ordinary hours of work. National Employment Standards 11 entitlements deep dive

The statutory scale provides for varying redundancy pay periods based on continuous service. For example, an employee with at least one year but less than two years of service is entitled to at least four weeks’ pay. An employee with at least ten years and over of service receives 12 weeks’ pay. The scale steps down at intervals between these two points.

The scale is as follows: at least 1 year but less than 2 years — 4 weeks; at least 2 but less than 3 years — 6 weeks; at least 3 but less than 4 years — 7 weeks; at least 4 but less than 5 years — 8 weeks; at least 5 but less than 6 years — 10 weeks; at least 6 but less than 7 years — 11 weeks; at least 7 but less than 8 years — 13 weeks; at least 8 but less than 9 years — 14 weeks; at least 9 but less than 10 years — 16 weeks. Genuine redundancy section 389 consultation duty

What counts as redundancy

Section 119 of the Fair Work Act defines redundancy pay entitlements. A termination at the employer's initiative can be considered a redundancy if the employer no longer requires the job to be done by anyone. This does not include situations where the termination is due to the ordinary and customary turnover of labour. Genuine redundancy section 389 consultation duty outlines further obligations regarding consultation.

Termination due to insolvency also falls under the definition of redundancy as outlined in Section 119(1)(b). This means employees terminated due to a company’s insolvency may be eligible for redundancy pay.

An employee’s redundancy pay may be reduced if they refuse a reasonable offer of alternative employment from the employer or an associated entity. The Fair Work Commission (FWC) can make this determination under Section 120.

Small business employer exclusion (s 121)

Section 121 outlines specific exclusions from the National Employment Standards (NES) redundancy pay entitlement. One such exclusion applies to employees of a ‘small business employer’.

A ‘small business employer’ is defined for this purpose in section 23. An employer is considered a ‘small business employer’ if they employ fewer than 15 employees at the relevant time. This headcount includes regular and systematic casual employees, as well as employees of associated entities.

Other exclusions from redundancy pay apply under section 121. These include employees with less than 12 months’ continuous service and apprentices. Modern awards may also contain further exclusions, as permitted by section 121(2).

Reductions and FWC applications

An employer may apply to the Fair Work Commission (FWC) for a reduction in the redundancy pay amount required under s 119 of the Fair Work Act. This application is made under s 120 and is permitted if the employer has secured acceptable alternative employment for the employee, or if the employer is unable to pay the redundancy pay amount. Modern awards system Australia may outline additional requirements.

Section 122 of the Fair Work Act addresses situations where an employee’s employment transfers to a new employer as part of a business transfer. In such cases, redundancy pay may not be payable by the outgoing employer.

It is important to note that redundancy entitlements are not solely governed by the National Employment Standards (NES). Modern awards system Australia and enterprise agreements can provide more generous redundancy entitlements that supersede or operate in conjunction with the NES minimum.