Can Redundancy Pay Be Reduced? What “Other Acceptable Employment” Really Means Under Section 120

Most employers know that a genuine redundancy triggers redundancy pay. Far fewer know that the Fair Work Commission can reduce that payment — sometimes to nothing — where the employer has obtained other acceptable employment for the employee. 

And far fewer still appreciate the sting in the test: whether the alternative employment is “acceptable” is judged objectively. It does not have to be acceptable to the employee. An employee who turns down a genuinely suitable alternative because it does not suit their lifestyle may find their redundancy pay reduced anyway. 

Used properly, section 120 is a legitimate and underused tool. Used carelessly, it produces a Commission application you lose and an employee relationship you have damaged for nothing. 

But before you get anywhere near section 120, you have to clear an earlier gate — and a Full Bench decision handed down in July 2026 has just confirmed how unforgiving that gate is, particularly for small employers. 

What’s the real issue? 

The real issue is that employers approach redundancy as a single decision — end the role, pay the entitlement — when the law treats it as a sequence, and each step affects the next. 

The sequence runs: is the role genuinely no longer required? Have you consulted as your award or agreement requires? Have you genuinely considered redeployment, in the broad sense the High Court confirmed in the Helensburgh Coal matter? Is redundancy pay owed, and has it been calculated correctly? And finally — have you obtained other acceptable employment, such that the payment might be reduced? 

Employers who skip to the end without the middle find that the “cost saving” restructure delivers a reinstatement order, back pay, or a redundancy payment they could have lawfully reduced but did not. 

And the consultation step is the one most often skipped. In Orientile Pty Ltd v Zhang [2026] FWCFB 162, a business with nine employees — which, being under the 15-employee threshold, owed no redundancy pay at all — was nonetheless ordered to pay compensation of $31,652.93, because it made a genuinely necessary redundancy without consulting first. The cheapest step in the whole process was the one it left out. 

What this looks like in practice 

Two anonymised composites, drawn from the pattern of recent decisions. 

Where the reduction succeeded in substance. An employer restructured and made a facilities role redundant. It actively arranged an alternative role for the employee within the business: similar responsibilities and duties, the same salary, almost identical working hours, and less travel time. The only genuine difference was an expectation of attendance outside standard weekday hours around once a month, compensated by a day off the following week. He declined it and took a role elsewhere. 

The Commission accepted the employer had obtained other acceptable employment — reluctance to work occasional weekends was not enough to make an otherwise comparable role unacceptable. But the reduction was not to zero. The employee had accrued substantial non-transferable entitlements, and his employment ended less than three months before he would have become eligible for pro rata long service leave. The redundancy pay was reduced to an amount equivalent to that long service leave entitlement. 

Where the employee’s objections failed. An employee whose role was made redundant was offered an alternative position. She declined, citing the impact on work–life balance, incompatibility with her extracurricular sporting commitments and associated post-graduate study, a requirement to attend on site during standard hours, and the possibility she would need to revisit her qualifications. The Commission found that travel, the currency of her qualifications and a reduction in working from home were not sufficiently significant to detract from the fact that the new role was objectively acceptable employment. 

The lesson in both is the same: the test looks at the role, not the employee’s preferences — but the Commission retains a broad discretion about how far to reduce, and personal financial consequences still matter. 

What does the law say — and how must it be applied? 

1. First, the consultation gate — and there is no small business discount

A dismissal is only a genuine redundancy under section 389 if all three limbs are satisfied, and the second is that the employer has complied with any obligation in an applicable modern award or enterprise agreement to consult about the redundancy. Note where that duty comes from: the consultation obligation sits in the award or agreement, not in the Fair Work Act itself — so the first step in any restructure is to identify the specific consultation clause that covers each affected employee. 

Almost every modern award contains one, triggered once the employer has made a definite decision to introduce a major change likely to have a significant effect on employees. Making a role redundant plainly meets that threshold. 

In Orientile Pty Ltd v Zhang [2026] FWCFB 162, handed down on 7 July 2026, a Full Bench confirmed just how strictly this is applied. 

The facts were unremarkable, which is precisely what makes the decision useful. A small business importing and selling tiles employed nine people, including three sales representatives. One of them had been there around 15 years, almost since the business began. On 28 February 2025 the owner called him into a meeting, told him that slow sales meant the business could no longer afford three sales representatives, and ended his employment that day. The rest of the conversation was about his termination payments. He handed back the company car keys and went home. 

Nobody disputed that the business was under genuine financial pressure. The Storage Services and Wholesale Award 2020 applied, and it contained a consultation obligation. There had been no consultation. 

At first instance, Deputy President Slevin found the dismissal was not a genuine redundancy — it was only necessary to determine whether the employer had complied with the award consultation obligation — and that the dismissal was unfair. Compensation of $31,652.93 was ordered, reflecting a four-week period during which a proper consultation process could have taken place with all three sales representatives, together with an additional amount reflecting the employer’s failure to consult and its failure to make efforts to mitigate the adverse impacts of its decision. 

The Full Bench upheld that outcome and made four points employers should take seriously: 

• There is no small business exemption and no reduced standard. The obligations of an employer with nine staff are the obligations of an employer with 900. 
• Compliance must be complete. There is no discretion to treat partial or substantially-there compliance as good enough. Technical non-compliance means the obligation is not met — and an employer that has not met it cannot rely on the genuine redundancy defence. 
• “It would have made no difference” is not an answer. The employer argued the outcome would have been the same regardless. The Full Bench rejected that: it does not answer the loss of the employee’s consultation rights. 
• Consultation means a genuine opportunity to influence the decision before it is final — not a briefing after the fact, and not a conversation that moves straight to the size of the payout. 

The Commission also observed that it would have required little, if any, effort to consult the three sales representatives before acting, and that making a single position redundant does not remove the obligation — in a small business, removing one role is a significant change, both for the person dismissed and for the career prospects of those who remain. 

One further detail is worth sitting with. Because the employer had fewer than 15 employees, the dismissed employee had no entitlement to redundancy pay under the National Employment Standards. The business owed nothing under section 119 and still paid more than $31,000, because it skipped a four-week consultation that would have cost it almost nothing. 

2. Who is entitled to redundancy pay

Under section 119 of the Fair Work Act 2009 (Cth), an employee is entitled to redundancy pay where three conditions are met: 

• at least one year of continuous service; 
• covered by the national workplace relations system; and 
• the employer employs at least 15 people. 

The statutory scale is: 

Period of continuous service	Redundancy pay
At least 1 year but less than 2 years	4 weeks
At least 2 years but less than 3 years	6 weeks
At least 3 years but less than 4 years	7 weeks
At least 4 years but less than 5 years	8 weeks
At least 5 years but less than 6 years	10 weeks
At least 6 years but less than 7 years	11 weeks
At least 7 years but less than 8 years	13 weeks
At least 8 years but less than 9 years	14 weeks
At least 9 years but less than 10 years	16 weeks
At least 10 years	12 weeks

 

The drop at ten years is not a typographical error — it reflects the point at which long service leave entitlements crystallise. Awards and enterprise agreements can provide more, and often do, so always check the applicable instrument. 

3. When redundancy pay can be reduced

Under section 120, an employer may apply to the Commission to reduce the amount of redundancy pay where the employer: 

• obtains other acceptable employment for the employee; or 
• cannot pay the amount. 

The Commission exercises a broad discretion as to the extent of any reduction — including, in an appropriate case, to nil. 

Two words carry most of the weight. 

“Obtains.” The employer must have been instrumental in procuring the alternative employment. Passively telling an employee that other roles exist, or that they are welcome to apply, is generally not enough. The employer needs to be a strong moving force in securing the position. 

“Acceptable.” This is where employers most often misunderstand the test. 

4. The “other acceptable employment” test

The principles that have emerged are: 

• The test is objective. It does not mean the employment must be acceptable to the employee. 
• The alternative need not be identical employment. 
• The employee must meaningfully cooperate with the employer in exploring or considering alternative positions. 
• Entitlement to redundancy pay may be at risk if the employee refuses a role that is objectively acceptable. 
• Acceptance of alternative employment by one employee does not necessarily make that employment acceptable for all — the assessment is individual. 
• Employment may be acceptable even where there is some detrimental alteration to the terms and conditions. 

The factors commonly weighed include: rate of pay; hours of work; work location; seniority; fringe benefits; workload; job security; continuity of service; accrual of benefits; probationary periods; carer’s responsibilities; and family circumstances. 

The recent decisions show where the line sits. Additional travel, the need to revisit the currency of qualifications, a reduction in working from home, and a reluctance to work occasional weekends have each been held insufficient to make an otherwise comparable role unacceptable. But personal consequences with a hard financial edge — such as the loss of accrued, non-transferable entitlements, or termination shortly before pro rata long service leave eligibility — have influenced the extent of the reduction, even where acceptable employment was found. 

5. Redeployment is a different question

Do not conflate the two. Redeployment goes to whether the dismissal was a genuine redundancy at all under section 389, and following the High Court’s decision in Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29 it reaches beyond existing vacancies to work being performed by contractors, requiring some reorganisation or rearrangement to be considered. Section 120 operates afterwards, assuming the redundancy is genuine, and asks whether the payment should be reduced. 

An employer that runs a thorough redeployment analysis will often be well placed on both, because the same evidence — what roles and work were considered, what was offered, and what the employee said — serves each question. 

What are the risks and pain points for employers? 

The recurring problems we see in redundancy processes are predictable: 

• Miscalculating redundancy pay, particularly where an award or enterprise agreement is more generous than the statutory scale, or where continuous service has been miscounted. 
• Failing to follow the consultation process in the applicable award or enterprise agreement — a separate limb of genuine redundancy in its own right, now confirmed to require complete compliance with no allowance for business size, and no defence in saying the outcome would have been the same. 
• Consulting after the decision is made. A meeting that announces the redundancy and moves to the payout is not consultation. The employee must have a real chance to influence the decision while it is still open. 
• Assuming a single redundancy doesn’t trigger the obligation. Making one role redundant in a small business is a major change, and the duty applies. 
• Readvertising the position too soon after the dismissal, which undermines the claim that the role was no longer required. 
• Failing to consider redeployment at associated entities, which are broader than related bodies corporate under the Corporations Act. 
• Unrealistic redeployment offers — roles the employee plainly cannot perform, or which exist only on paper, offered to build a defence rather than to keep someone employed. 
• Using redundancy to exit poor performers. This is the most dangerous of all. If the real reason is performance, the redundancy is not genuine, and you have swapped a manageable performance process for an unfair dismissal claim and possible adverse action exposure. 
• Ignoring the employee’s circumstances, particularly where non-transferable entitlements or imminent long service leave eligibility are in play. 
• Failing to keep records of consultations, offers and employee responses — the exact evidence a section 120 application depends on. 
• Applying under section 120 without the groundwork, and losing an application you brought yourself. 

Our top six tips: what every employer should do 

1. Be the moving force, and document that you were. If you want to rely on having “obtained” other acceptable employment, you have to do more than mention that roles exist. Make introductions, arrange the interview, advocate for the employee, secure the offer. Keep the emails. The difference between an employer who obtained a role and one who pointed at a vacancies list is usually visible in the correspondence. 
2. Compare the roles objectively, on the factors that matter. Before you decide whether to apply under section 120, build a side-by-side comparison: pay, hours, location, seniority, benefits, workload, job security, continuity of service, accrual of benefits, any probationary period, and the employee’s carer or family circumstances. If the alternative is genuinely comparable, personal preference will not usually defeat it. If it is materially worse on several of these, do not spend the money on an application.
3. Ask about non-transferable entitlements and long service leave before you finalise. Acceptable employment does not automatically mean a reduction to zero. Where an employee will lose accrued entitlements that do not transfer, or is close to pro rata long service leave eligibility, expect that to shape the outcome — and consider whether resolving it directly is cheaper and better than litigating it. 
4. Find the consultation clause first, and consult before the decision is final — whatever your size. Identify the specific clause in the modern award or enterprise agreement covering each affected employee, then build your timeline backwards from the intended end date so there is real room to consult. Tell affected employees what is proposed and why, give them the relevant information, genuinely invite and consider their ideas for avoiding or reducing the impact, and only then decide. Do this even where the business case is obvious, even where only one role is affected, and even if you employ nine people — complete compliance is required, and being small is not a discount. 
5. Keep the redundancy about the role, and keep the record contemporaneous. Ensure the redundancy is based on the role no longer being required, not on the person performing it, and be able to evidence the operational or financial basis for the decision. Be careful where selection has been driven by who is the weakest performer — that is a performance question wearing a redundancy label. Record the options considered, the offers made, the employee’s responses and your reasoning — at the time, not reconstructed afterwards. 
6. Invite meaningful cooperation, in writing. The employee is expected to engage meaningfully in exploring alternatives. Ask them, in writing, what they would consider — location, hours, classification, retraining — and record their answer. If they engage, you may find a genuine redeployment. If they decline to engage at all, that is relevant to whether they refused objectively acceptable employment.

Frequently asked questions 

We’re a small business — do the consultation rules apply to us? 

Yes, in full. In Orientile Pty Ltd v Zhang [2026] FWCFB 162 a Full Bench confirmed there is no small business exemption and no reduced standard: an employer with nine staff carries the same consultation obligations as a large one. Compliance must also be complete — there is no discretion to accept partial compliance as sufficient. 

Where does the consultation obligation actually come from? 

From the applicable modern award or enterprise agreement, not from the Fair Work Act itself. Section 389 makes compliance with that instrument-based obligation one of the three limbs of a genuine redundancy. So the first step in any restructure is identifying the specific consultation clause covering each affected employee. 

We only made one position redundant. Does that trigger consultation? 

Generally yes. The Commission has confirmed that removing a single position — particularly in a small business — is a significant change, affecting both the person dismissed and the prospects of those who remain. Check the wording of your award or agreement, but do not assume a single redundancy is outside it. 

What if consultation would not have changed the outcome? 

That is not a defence. The Full Bench in Orientile expressly rejected the argument that the same result would have followed anyway, holding it was no answer to the loss of the employee’s consultation rights. 

What does genuine consultation actually require? 

Telling affected employees what is proposed and why, providing the relevant information, giving them a real opportunity to respond and to suggest ways of avoiding or reducing the impact, and genuinely considering what they say — all before the decision is final. A meeting that announces the redundancy and moves on to the payout is not consultation. 

We employ fewer than 15 people, so we owe no redundancy pay. Are we safe? 

No — and this is the sharpest lesson from Orientile. The employer there had nine staff and owed no redundancy pay under the National Employment Standards, but skipped consultation, lost the genuine redundancy defence, and was ordered to pay compensation of $31,652.93. Being exempt from redundancy pay is not being exempt from an unfair dismissal claim. 

Who has to pay redundancy pay? 

Employers in the national system with at least 15 employees, to employees with at least one year of continuous service. Awards and enterprise agreements may provide more generous entitlements, and some contain their own redundancy schemes, so always check the applicable instrument. 

Why does redundancy pay drop from 16 weeks to 12 weeks at ten years’ service? 

It is a deliberate feature of section 119, reflecting the point at which long service leave entitlements arise. It is not an error in the table. 

Can we reduce redundancy pay if we find the employee another job? 

You can apply to the Fair Work Commission to reduce it, where you have obtained other acceptable employment for the employee. The reduction is not automatic — you must apply, and the Commission has a broad discretion about the amount. 

What does “obtains” mean? 

That the employer was instrumental in procuring the employment. Merely telling an employee about vacancies, or inviting them to apply, is generally not enough. You need to be a strong moving force in securing the role. 

Does the alternative job have to be the same as the old one? 

No. It does not have to be identical, and some detrimental alteration to terms and conditions is permissible. What matters is whether, weighing pay, hours, location, seniority, benefits, workload, security, continuity and the employee’s circumstances, the role is objectively acceptable. 

What if the employee simply doesn’t want the new role? 

The test is objective, not subjective. Reluctance to work occasional weekends, additional travel, reduced working from home, and the inconvenience of refreshing qualifications have each been held insufficient to make a comparable role unacceptable. That said, the Commission still weighs genuine carer responsibilities and family circumstances. 

Does the employee have to cooperate with us? 

Yes, meaningfully. An employee is expected to engage with the employer in exploring or considering alternative positions, and a refusal to engage at all can put their entitlement at risk. 

If we obtain acceptable employment, is the redundancy pay reduced to nil? 

Not necessarily. The Commission’s discretion is broad, and personal financial consequences influence the outcome. In one recent matter the employer succeeded on acceptable employment but the reduction was limited to preserve an amount equivalent to a long service leave entitlement the employee narrowly missed. 

Can we apply under section 120 because we cannot afford to pay? 

Yes — inability to pay is the second limb. But you will need to prove your financial position with documents, not assertions, and the application should be made before the payment falls due. 

Is section 120 the same as the redeployment question? 

No. Redeployment goes to whether the dismissal was a genuine redundancy at all under section 389, which after the High Court’s decision in the Helensburgh Coal matter can extend to work being performed by contractors. Section 120 operates afterwards and asks whether the redundancy pay should be reduced. 

Can we use redundancy to move on a poor performer? 

No. If the real reason is performance, the redundancy is not genuine, the deeming protection falls away, and you face an unfair dismissal claim — with an added adverse action risk if the employee has exercised a workplace right. Manage performance as performance. 

How Harrisons can help 

Redundancy is where a cost-saving decision most often becomes an expensive one: a miscalculated payment, a consultation obligation missed, a redeployment analysis never documented, or a section 120 application brought without the evidence to support it. 

And as Orientile shows, the exposure does not scale down with your headcount. A nine-person business that owed no redundancy pay at all still paid more than $31,000 — for want of a four-week conversation. 

We help Australian employers — SME business owners, Queensland local government councils, and community and not-for-profit organisations — run redundancies that hold up: 

• Identify your consultation obligations in the applicable award or agreement and run a compliant, properly timed consultation process — whatever the size of your business. 
• Calculate entitlements correctly against the National Employment Standards and any applicable award or enterprise agreement. 
• Run and document a rigorous redeployment and alternative employment process, including contractor and labour-hire work. 
• Assess and prepare section 120 applications — and tell you honestly when one is not worth bringing. 
• Pressure-test your restructure plan before you act, so problems surface while they are still fixable. 

Make the change you need without paying twice for it. Get in touch with our team today and start with a redundancy process and entitlements review before you restructure. 

This article provides general information for Australian employers and is not legal advice. Entitlements vary with your awards, enterprise agreements and contracts, and how the law applies depends on your specific circumstances. For advice tailored to your organisation, contact Harrisons.