Redundancy pay at a small business: the fewer-than-15-employees rule
Redundancy pay under the National Employment Standards (NES) is a legal minimum that most employees get when the employer no longer needs their job done. Employers with fewer than 15 employees are excluded from it. That single rule decides whether someone with six years of service receives 11 weeks of pay or nothing at all under the NES, so the way the count is made matters. This guide sets out the rule in the Fair Work Act 2009, shows how the headcount is worked out, and compares the outcome for the same employee at a small and a larger employer. The figures come from the same code as the redundancy calculator.
1. The rule
Section 121(1) of the Fair Work Act says the redundancy pay provision (section 119) does not apply to a termination if, immediately before the time of the termination, or at the time the employee was given notice of it, whichever happened first, either of two things is true: the employee has less than 12 months of continuous service (not counting any time as a casual), or the employer is a small business employer.
Section 23(1) defines a small business employer as a national system employer that employs fewer than 15 employees at that time. Fourteen employees is small. Fifteen is not.
2. How the headcount is worked out
Section 23 has three counting rules that surprise people.
- Casuals count only if they are regular. All employees are counted, except that a casual employee is not counted unless, at that time, the employee is a regular casual employee of the employer (s 23(2)). Regular casual is a defined term in the Act.
- Associated entities are one employer. The employees of associated entities are added together as if they were one entity (s 23(3)).
- The people being dismissed are counted. The count includes the employee being dismissed and any other employee being dismissed at the same time (s 23(4)). An employer cannot get under the line by making several people redundant on the same day.
| Headcount at the relevant time | Counted | Small business employer? |
|---|---|---|
| 14 permanent employees | 14 | Yes |
| 14 permanent employees and 1 regular casual | 15 | No |
| 14 permanent employees and 3 casuals who are not regular | 14 | Yes |
| 10 permanent employees here, 6 in an associated company | 16 | No |
| 12 permanent employees and 2 regular casuals | 14 | Yes |
The first three rows are counts for a single company. In the fourth row the headcount is 16 because the associated company is added. In the fifth the two regular casuals take a workforce of 12 to 14, which is still small.
3. When the count is taken
The test is applied at the earlier of two moments: immediately before the termination takes effect, or the moment notice was given. If an employer had 15 employees when it gave notice and 13 on the last day, the earlier moment is the notice, and on a plain reading of section 121(1) the employer was not a small business employer. If you are in this position, check the dates in your notice letter against the headcount then, not on your last day.
4. Same employee, two employers
The table gives the NES result for one person aged 40 on $1,500 a week base pay, given notice on 28 October 2026 with a last day of 27 November 2026, at an employer that is not small and at one that is.
| Years of service | Notice (both) | Redundancy pay, 15 or more employees | Redundancy pay, fewer than 15 |
|---|---|---|---|
| 1 full year | 2 weeks, $3,000 | 4 weeks, $6,000 | 0 weeks, $0 |
| 3 full years | 3 weeks, $4,500 | 7 weeks, $10,500 | 0 weeks, $0 |
| 6 full years | 4 weeks, $6,000 | 11 weeks, $16,500 | 0 weeks, $0 |
| 9 full years | 4 weeks, $6,000 | 16 weeks, $24,000 | 0 weeks, $0 |
Notice is the same in both columns. The redundancy pay column is the only one that changes, and it goes from $24,000 to nothing for a person with nine full years of service. The weeks are from the table in section 119(2); the redundancy guide shows the full table and the unusual way it treats ten years or more.
5. What a small business employee still gets
- Notice, or pay instead of it. The notice rule in section 117 has no small business exception. The minimum notice is one to four weeks depending on service, plus a week for employees over 45 with at least two years of service.
- Unused annual leave. It is paid out whatever the employer's size (s 90(2)). See the annual leave payout guide.
- Wages owed up to the last day and any other entitlement in the contract, award or enterprise agreement.
- Redundancy pay under an award or agreement, if it has one. Section 121(2) lets a modern award add other situations where the NES redundancy provision does not apply, but awards and agreements can also contain their own redundancy terms. Read the one that covers you.
6. The exceptions to the exception
Section 121(4) says that a small business employer's employee is still entitled to redundancy pay if the employer is bankrupt or in liquidation and the employer is small only because of the terminations, with the terminations having happened in a window that starts up to six months before the bankruptcy or liquidation (or because of the insolvency itself). The section has several conditions and a members' voluntary winding up does not qualify. The calculator on this site treats insolvency as a switch and does not test those conditions, so read the section or ask the Fair Work Ombudsman if this is your case.
Separately, an employer that is required to pay can apply to the Fair Work Commission to reduce the amount if it has found other acceptable employment for you or cannot pay (s 120). That is a request to the Commission, not something the employer can decide alone.
7. Checking an employer who says it is small
- Write down the date you were given notice and the date your employment ended.
- Count the employees on the earlier date, including yourself and anyone else let go that day. Add regular casuals. Leave out casuals who are not regular.
- Add the employees of any associated entity, such as another company run by the same owners.
- If the total is 15 or more, the small business exclusion does not apply. Check your years of service against the table.
- If you are unsure, ask the employer how it arrived at its headcount, and contact the Fair Work Ombudsman.
Everything here is the NES minimum for an employee covered by it. The guide cannot tell you whether you are a regular casual, whether two companies are associated entities, or what your award provides. Those depend on the facts.
Check redundancy pay and noticeSources
- Fair Work Act 2009 ss 23, 117, 119, 120, 121 (compilation in force 7 July 2026)
- Fair Work Ombudsman: Redundancy pay
- Every rate used, with its source and check date: Sources and rates
This calculator is general information, not tax, legal or financial advice. It uses the legislation and official pages listed on the Sources page, and your payslip, award, agreement or tax return may differ. Rates as at 1 November 2026.