5 Stages of Redundancy Explained: A Practical Guide

Understand the 5 stages of redundancy and what to expect at each step. A clear, practical guide to help employees navigate redundancy with confidence.

What are the 5 stages of Redundancy?

Redundancy is stressful for everyone involved but when the process is clear, compliant, and genuinely fair, it protects your business and gives employees dignity during a tough time. In Australia, redundancy follows a structured 5-stage process under the Fair Work Act. For small businesses with limited resources (and zero room for mistakes), getting it right is crucial to avoiding unfair dismissal claims, costly backpay, or messy disputes.

At HR Gurus, we specialise in guiding SMEs through redundancy with clarity, compassion, and compliance. Here’s how to navigate each stage with confidence.

But first, what the heck is Redundancy?

Redundancy occurs when a job is no longer required because of operational changes like restructures, downsizing, automation, or shifting business needs. It’s about the role, not the person. That’s what makes it a genuine redundancy, not performance management in disguise.

A genuine redundancy requires:

• A valid business reason
• Proper consultation
• Consideration of redeployment
• Correct notice and entitlements

Employees may be entitled to redundancy pay (for businesses with 15+ employees), plus notice, accrued leave, and superannuation. Even if you’re a small business, consultation is still mandatory. Skipping consultation is one of the most common redundancy mistakes we see.

One Melbourne client recently came to us after running a rushed redundancy process without proper consultation. The result was a $12,000 Fair Work settlement. Process matters folks.

5 Stages of Redundancy

Stage 1: Planning and Preparation

Yeah, yeah, I know we bang on about this but laying the groundwork for a legally defensible redundancy is crucial.

Pull together your information and:

• Document the operational reasons for redundancy
• Identify the role genuinely no longer required
• Consider alternatives like redeployment, reduced hours, or restructuring
• Review the award, EBA or contract for redundancy rules
• Calculate potential redundancy costs

Solid planning protects against claims of sham redundancy and ensures your decisions are based on real business needs. With HR Guru’s templates and advice, you’ll have this done in no time.

Stage 2: Initial Notification and Consultation

We’ve said it before and we’ll say it again; people don’t like surprises. Employees must be told their role is at risk of redundancy, not already gone.

At this stage you need to get your house in order.

• Write a proposal outlining the potential redundancy.
• Have a meeting within 24-48 hours.
• Make sure the employee has a right to a support person.
• Genuinely seek and consider any suggestions such as job sharing or upskilling from the impacted employee.

You’ve lived with this plan for weeks. They haven’t. Share the structure, the timeline, and then listen. Consultation is the backbone of a compliant redundancy, and HR Gurus knows how to do it right.

Stage 3: Fair selection and real redeployment options

When multiple people perform similar roles, you need a fair and defensible way to decide which positions are genuinely impacted. That means using objective criteria like skills, qualifications, performance history, and tenure. Gut feel or playing favourites isn’t going to cut it here. Also explore redeployment across the business (and any related entities), offering reasonable trials or training if a role could be suitable.

Keep consultation open as you work through the selection process. Share outcomes, listen to feedback, and document every conversation and decision. This is where things can get grey fast and it’s exactly where HR Gurus helps SMEs stay compliant, consistent, and commercially smart.

Criteria Example	Objective Measure	Documentation Tip ​
Skills Match	Qualifications & training records	Matrix scoring sheet
Performance	Last 2 years KPIs	Signed reviews
Tenure	Continuous service	Payroll records
Disciplinary	No active warnings	HR file notes

 

Stage 4: Final decision, notice, and entitlements

Once consultation ends and feedback is genuinely considered, you can finalise the redundancy. Provide:

• Formal written notice
• The correct notice period or payment in lieu
• Redundancy pay (where applicable, check your award or EA)
• Accrued leave and super
• Clear timelines for the final day, equipment return, and final pay

Final pays must be processed within award-required timeframes. This part can be tricky, HR Gurus can jump in and calculate payouts, prepare documents and just generally be awesome support.

Stage 5: Transition, support, and aftercare

How you handle this part of the redundancy process shapes your culture long-term.

Support isn’t just financial. Be human and offer employees outplacement advice, reference letters, and government services like Early Access to Centrelink. Consider the rest of the team who are farewelling a colleague and maybe a friend. Communicate clearly, anticipate their questions.

Sort the awkward stuff fast, we’re talking property return, final steps, and how the employee wants their exit communicated. HR Gurus can give advice on the best ways to manage this stage.​

Common pitfalls and compliance tips

You’ve been talking about it for ages and now you just want it done. We really do get it, we’re HR Gurus. Rushing this, failing to document the steps or not giving employees the time to have input will hold you up or worse, drag it out in court.

There is a person at the heart of this process. Slow down, look after them and their wellbeing.

Why Partner with HR Gurus

Redundancy is legally complex and emotionally loaded. HR Gurus delivers straight-talking support for Melbourne SMEs, from workforce planning to managing a redundancy process, unlocking people potential while staying compliant. Book a consultation for tailored advice that delivers a process that is clear, human, and defensible

Frequently Asked Questions on Small Business Redundancy 

What triggers the 5 stages of redundancy?
Genuine operational changes like restructures, downturns, or tech upgrades where specific roles aren’t needed, not performance issues. Hello planning documents!

How long does consultation last?
As always what’s “Reasonable time” varies; typically 1-4 weeks for small redundancies, allowing multiple meetings and actually considering whether other options could work.

Does small business redundancy require pay?
If you’ve got fewer than 15 employees, redundancy pay usually doesn’t apply (unless an award says otherwise). But notice always does. HR Gurus can sort out exactly what you owe.

What if redeployment is possible?
If there’s a suitable alternative role, put it on the table properly, offer a trial, and give the employee time to think it through before you take any next steps.