Redundancy pay update for small businesses

From 1 December 2025, updates to six Awards clarify that if a business drops below 15 employees because of insolvency or liquidation, affected staff may still be entitled to redundancy pay under the National Employment Standards. In these circumstances, employers cannot rely on their reduced headcount to avoid redundancy obligations.

Redundancy obligations updated

Small businesses (fewer than 15 employees) are generally exempt from paying statutory redundancy pay under the National Employment Standards (NES).

However, there are exceptions; certain Awards may require small businesses to pay redundancy pay, however the entitlement can be less beneficial compared to the NES.

In 1 December 2025, these Awards where updated to clarify how redundancy pay applies when workforce numbers drop below 15 employees due to insolvency or liquidation.

This change is to ensure that employees made redundant still receive redundancy pay under the NES.

Which awards are affected?

The following Awards have been updated:

Joinery and Building Trades Award 2020
Mannequins and Models Award 2020
Manufacturing and Associated Industries and Occupations Award 2020
Sugar Industry Award 2020
Textile, Clothing, Footwear and Associated Industries Award 2020
Timber Industry Award 2020

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Small businesses covered by the Sugar Industry Award 2020 are impacted by the change

Small business status does not automatically remove redundancy pay

Under the National Employment Standards (NES), small businesses with fewer than 15 employees are generally not required to pay redundancy pay.

However, the update confirms that where a non-small business becomes a small business because of insolvency or liquidation, employees remain entitled to redundancy pay under the NES.

In this situation, the small business redundancy provisions within the Award do not override the NES. That matters because Award-based small business provisions can be narrower or less generous.

Who counts as a small business employer?

Under the Fair Work framework, a small business employer:

Employs fewer than 15 employees at the time of dismissal
Includes full-time and part-time employees
Includes regular and systematic casuals
May need to include associated entities

Headcount is critical. Miscounting employees can lead to incorrect redundancy decisions.

What to do if your business is under financial pressure

Run the numbers early: Before making any roles redundant, calculate potential liability under the NES. Check who has more than 12 months’ service and apply the redundancy pay scale. Include notice and accrued leave. Know the cost before decisions are final.

Confirm your headcount properly: Count full-time, part-time and regular casual employees accurately. If your numbers are wrong, your redundancy assessment may be wrong.

Check award coverage and payroll settings: Ensure each employee is correctly classified under the relevant Award. Update redundancy templates and payroll calculations to reflect the clarified position from 1 December 2025.

Get advice before issuing notices: If insolvency or restructuring is involved, get advice first. Redundancy errors during financial distress are costly and difficult to fix later.

Guide employees to official support if needed: If the business cannot pay entitlements due to liquidation, direct employees to the Fair Entitlements Guarantee (FEG) and provide required documents promptly.

Contact Capital Human Resources: If you are facing restructuring, administration or liquidation, contact our team early to assess your redundancy exposure and manage risk before decisions are locked in.