Published: April 2026
In 2025, 268,000 Australians were retrenched. That is the highest number since the post-pandemic rebound, and it represents a national retrenchment rate of 1.9%, up from the record low of 1.3% in 2023. At the same time, 27% of Australian employers told AHRI they were planning further cuts in the September 2025 quarter, and 19% were still anticipating redundancies heading into March 2026.
Redundancy has stopped being a last resort reserved for major restructures. It has become a regular feature of the Australian employment landscape, driven by insolvency pressures, cost-of-living squeezes on business margins, and structural shifts in how organisations operate. For employers, the financial and legal stakes have never been higher, and getting the process wrong carries consequences that extend well beyond the initial payout.
This page compiles the most current Australian data on retrenchment rates, redundancy entitlements, industry patterns, and what it really costs employers from start to finish.
The annual retrenchment rate reached 1.9% in the year to February 2025, according to the ABS Job Mobility Survey. That is up 0.2 percentage points from the prior year. While it remains well below the historical peak of 7.2% recorded in February 1991, the trajectory is clearly upward. The record low was 1.3% in February 2023 when the post-pandemic labour market was at its tightest.
Of the 2.1 million Australians who left or lost a job in the year to February 2025, retrenched workers made up 268,000, representing 12% of that total. The most common reason for leaving a job remains wanting a better opportunity or wanting a change, at 25% of all leavers, though this has fallen sharply from 33% in 2022 as voluntary movement cools.
Key retrenchment statistics:
Employer intentions through 2025 and into 2026:
Employee anxiety is running well ahead of actual retrenchments. People2people research found 68% of Australian employees report concern about potential redundancy. That anxiety shapes engagement, discretionary effort, and job search behaviour before any formal process begins.
Under the National Employment Standards in the Fair Work Act 2009, employees with more than one year of continuous service are entitled to redundancy pay based on length of service. The payment is calculated on the employee's ordinary base rate of pay, excluding overtime, bonuses, and allowances. Small businesses with fewer than 15 employees at the time of the redundancy are exempt from NES redundancy pay obligations.
The minimum entitlements by years of service are as follows:
These are minimums only. Awards, enterprise agreements, and individual contracts can provide more generous terms. Public sector employees typically receive 2-3 weeks per year of service, which far exceeds NES minimums for long-serving staff.
Notice periods apply on top of redundancy pay. Notice entitlements under the NES are:
The tax-free component in 2025-26
Genuine redundancy payments receive favourable tax treatment. For 2025-26, the tax-free limit is $12,524 as a base amount, plus $6,264 for each completed year of service. An employee with 3 years of service has a tax-free component of $31,316. At 5 years it reaches $43,844. At 8 years it reaches $62,636. Any amount above the tax-free threshold is taxed as an Employment Termination Payment at concessional rates. This treatment only applies where the redundancy is genuine under the ATO's definition.
The payout entitlement is only the starting point. Here is what redundancy costs across three realistic scenarios.
Example 1: Administration Manager, 4 years service, $75,000 salary
Redundancy pay at 8 weeks equals $11,538. Notice of 3 weeks adds $4,327. Three weeks of accrued annual leave adds another $4,327. Total employer obligation before any additional entitlements or legal costs: approximately $20,192.
Example 2: Senior Accountant, 7 years service, $110,000 salary
Redundancy pay at 13 weeks equals $27,500. Notice pay at 4 weeks (plus 1 extra week if over 45) equals $10,577. Four weeks of accrued annual leave adds $8,462. Total before legal review and any award entitlements above the NES minimum: approximately $46,539.
Example 3: Operations Director, 10 years service, $160,000 salary
Redundancy pay at 12 weeks equals $36,923. Notice pay at 4 weeks equals $12,308. Five weeks of accrued annual leave equals $15,385. Pro-rata long service leave in NSW at 10 years adds approximately $24,615. Total before outplacement, legal review, or above-minimum entitlements: approximately $89,231.
None of these examples include the indirect and hidden costs that in most cases add significantly to the true employer burden.
The entitlement payout is visible. What surrounds it usually is not.
Process costs include management and HR time for the legally required consultation process, legal review of documentation, and outplacement support if offered. For a mid-size business without in-house HR expertise, this alone can add $5,000-$15,000 per redundancy.
Productivity costs hit the remaining team immediately. Research consistently finds that teams experience a 15-20% productivity drop during restructuring periods. Remaining staff absorb workload, morale takes a hit, and key institutional knowledge walks out with the departing employee.
Compliance risks are where the real financial exposure sits. A redundancy that is not genuine, where the role re-emerges shortly after or consultation obligations were not properly followed, exposes the business to an unfair dismissal claim. Since January 2025, intentional underpayment of entitlements is a criminal offence carrying prison terms of up to 10 years for individuals and multi-million dollar fines for companies. Getting the final pay wrong is no longer just a civil matter.
AHRI's quarterly employer surveys show consistent patterns in where redundancy pressure is concentrated.
Construction sits in an unusual position. It records the highest corporate insolvency rate of any Australian industry at 27% of all corporate insolvencies, but many job losses in that sector happen not through formal redundancy processes but through business closures and liquidation, where entitlements often go unpaid. The Fair Entitlements Guarantee exists to cover some of these losses, but it has statutory caps and conditions.
Health and education recording 26% redundancy intentions in the AHRI data is the more surprising finding for 2025-2026. These sectors have historically been regarded as stable, and the shift reflects funding pressures, aged care restructuring, and changes to how government-funded services are delivered.
Distribution, production, and manufacturing have seen sustained elevated redundancy intentions throughout 2025, driven by automation investment, normalising post-pandemic demand, and ongoing cost pressure. Professional services has lower redundancy pressure overall, but technology roles within professional services firms have seen restructuring as AI capabilities displace certain functions.
A genuine redundancy under the Fair Work Act requires three things to be true simultaneously:
The most common mistake is restructuring a role under a new title and then hiring someone into essentially the same position shortly after. This is precisely the scenario that unfair dismissal claims are built around. The most common procedural failure is skipping or rushing the consultation requirement. Most modern awards require written notice of proposed changes, a genuine consultation period, and documented consideration of redeployment options before a redundancy can proceed.
Step 1: Establish and document the business case. Record why the role is no longer required. Retain all decision-making records leading to the conclusion that the position needs to be eliminated. This documentation becomes critical if a claim is made.
Step 2: Review your consultation obligations. Check the applicable modern award or enterprise agreement before taking any action. Most require written notice, a genuine consultation period, and documented consideration of redeployment.
Step 3: Calculate entitlements accurately. Use the Fair Work Ombudsman's notice and redundancy calculator as a starting point, then check for any award or agreement entitlements above the NES minimum. Do not rely on online calculators alone for complex situations.
Step 4: Have the conversation properly. Have HR or an external adviser present, prepare a written summary of the decision, and allow the employee time to consider their options. A poorly conducted conversation increases the risk of legal challenge.
Step 5: Process final pay correctly and on time. Final pay must include redundancy pay, notice or payment in lieu, accrued annual leave, leave loading where applicable, and long service leave if the threshold has been reached. Errors here carry criminal exposure since January 2025.
What is the current retrenchment rate in Australia?
The annual retrenchment rate was 1.9% in the year to February 2025, representing 268,000 workers. This is up from the record low of 1.3% in 2023 but well below the historical peak of 7.2%.
Do small businesses have to pay redundancy?
No. Businesses with fewer than 15 employees at the time of the redundancy are exempt from NES redundancy pay obligations. This is headcount at the time of redundancy, not after.
What is the maximum redundancy pay under the NES?
The maximum NES entitlement is 16 weeks pay, which applies to employees with 9 to 10 years of continuous service. At 10 years and beyond, the entitlement reduces to 12 weeks to reflect long service leave availability.
How much of a redundancy payment is tax-free?
For 2025-26, genuine redundancy payments are tax-free up to $12,524 plus $6,264 per completed year of service. Any amount above this is taxed as an ETP at concessional rates.
Which industries have the highest redundancy rates right now?
Distribution and production (35% of employers planning cuts in Q3 2025), health and education (26%), and the public sector (39% in Q1 2025) have the highest recorded redundancy intentions in recent AHRI surveys.
Can an employee make an unfair dismissal claim if they are made redundant?
If the redundancy is genuine, no. But if the role re-emerges, consultation was not properly followed, or redeployment was not genuinely considered, the employee may have grounds for a claim.
What happens to redundancy pay when a business goes insolvent?
Employees of insolvent businesses can apply to the government's Fair Entitlements Guarantee for unpaid wages and entitlements including redundancy pay, subject to statutory caps.
Note on ABS data: The ABS is temporarily suspending supplementary retrenchment data including industry and occupational breakdowns from April 2026 as part of its Labour Force Survey modernisation. This data is expected to recommence from September 2026. The figures on this page reflect the most recent published ABS data available.
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