TLRbwAs a general rule, a small business employer is not required to pay redundancy pay; however, there are some circumstances where an employer may be legally required to make redundancy payments.

The National Employment Standards confirms that a small business employer is not required to pay redundancy where an employee’s position becomes redundant. Notwithstanding these National Employment Standards, an employer may be obliged to pay redundancy because of the terms of a “modern award” or an “enterprise agreement”.

Who is a “small business employer”?

An employer who employs fewer than 15 employees at that time is deemed a small business employer. The employee being dismissed must be counted; however, casual employees are not to be counted unless they are employed on a regular and systematic basis.

A number of modern awards prescribed redundancy pay for small business employers and the amount of redundancy pay depends on the terms of the award and the number of years’ service the employee has given to the employer.

Examples of modern awards which prescribe redundancy pay for small business are the Joinery and Building Trades Award, the Manufacturing and Associated Industries and Occupations Award.

There are also some employees who are not entitled to redundancy pay, for example where the employee has less than 12 months continuous service, the employee is a casual employee, the employee is terminated because of serious misconduct, the employee is employed for a specific task or an agreed period of time, there is a training agreement in place or the employee is an apprentice.

Whilst the majority of small businesses are exempt from paying redundancy pay under the National Employment Standards, there are certain modern awards which require some business employers to pay an employee redundancy pay.

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