The rule
NES redundancy pay applies when an employee with at least 1 year of continuous service loses their job because it is no longer needed. It does not apply where the employer has fewer than 15 employees at the time of the redundancy. That is the small business exemption: employers with fewer than 15 employees generally do not pay NES redundancy pay.
Who counts toward the 15
The Fair Work Ombudsman counts all employees at the time of redundancy including those being made redundant, regular and systematic casuals, and employees of associated entities. Three consequences catch people out:
- The people being made redundant are counted. A business of 16 that makes 3 roles redundant is not a small business for those redundancies, even though it will have 13 staff afterwards.
- Regular casuals are counted. A café with 8 permanent staff and 9 casuals on regular, systematic rosters is over the line.
- Related companies are counted together. Employees of associated entities are added in, so splitting staff across a trading company and a service company doesn't create a small business.
The two exceptions
Even under 15 employees, redundancy pay can still be owed:
- Employer became a small business through downsizing while bankrupt or in liquidation, where the redundancies that shrank the business happened on or after 15 December 2023.
- Industry-specific redundancy schemes in awards (Black Coal, Building and Construction, Joinery, Manufacturing, Plumbing, Timber awards) can require redundancy pay from small businesses.
The first exception matters when a business in bankruptcy or liquidation has shed staff: the fact that it is now under 15 doesn't automatically excuse it. The second means that in some industries the award, not the NES, sets the obligation.
What the exemption costs, in dollars
Take a 40-year-old on $1,500 a week with 6 completed years of service. With an employer of 15 or more, the NES pays 11 weeks: $16,500, all of it inside the FY 2026–27 tax-free limit of $54,404. With a small business employer, the NES amount is $0.
What you are still owed
The exemption removes redundancy pay only. A small business employer still has to give notice of termination (or pay in lieu) under the NES, pay out unused annual leave, and pay any long service leave that is payable under your state's law on this kind of exit. Redundancy is employer-initiated, which qualifies for pro-rata long service leave in every state once you pass its threshold.
If a small business chooses to make a redundancy payment anyway, whether it is tax-free depends on the ATO's genuine redundancy conditions, not on the NES. See what makes a redundancy genuine.
Other employees the NES excludes
Separately from business size, NES redundancy pay doesn't apply to:
- Less than 12 months continuous service
- Fixed period, task or season employment
- Terminated for serious misconduct
- Casual employees
- Trainees employed only for the length of the training arrangement
- Apprentices
Frequently asked questions
Do casuals count toward the 15-employee test?
Regular and systematic casuals do. Irregular casuals do not. The count is taken at the time of the redundancy and includes the employees being made redundant.
My employer has 10 staff but is part of a group. Does that change anything?
It can. Employees of associated entities are counted together, so a group of related companies can pass 15 even if each one is small on its own.
If I get no redundancy pay, do I still get notice?
Yes. The small business exemption applies to NES redundancy pay only. Notice of termination, unused annual leave and long service leave are separate entitlements with their own rules.
Can my award require redundancy pay from a small business?
Some can. Industry-specific redundancy schemes in awards (Black Coal, Building and Construction, Joinery, Manufacturing, Plumbing, Timber awards) can require redundancy pay from small businesses. Check your award's redundancy clause.
Related
- The official redundancy formula — the NES weeks table
- What makes a redundancy genuine
- Paying redundancy: an employer checklist
- Final pay calculator — notice and leave still apply
Sources
Figures on this page come from the following primary sources. The date is when we last checked the page against the source.
- Who doesn't get redundancy pay (Fair Work Ombudsman), checked 24 September 2026.
- Redundancy pay and entitlements (Fair Work Ombudsman), checked 7 August 2026.
- Notice and ending employment (dismissal) (Fair Work Ombudsman), checked 24 September 2026.
- Genuine redundancy payments (ATO), checked 10 August 2026.
Independent guide — not a government service, and not financial, legal or tax advice.