Redundancy during voluntary administration occurs when an employee’s role is no longer required as the business restructures or reduces costs. While employees may be entitled to redundancy pay based on service, actual payment depends on available funds or, if unpaid, may be claimed later through the Fair Entitlements Guarantee (FEG).
On This Page
- Introduction
- How Redundancy Works During Voluntary Administration
- Important Points to Remember
- Next Steps
- FAQs
Introduction
Voluntary administration can create immediate uncertainty for employees, especially where redundancy is involved. Roles may be cut quickly, and payments are not always straightforward. Understanding your position early can make a huge difference.
This blog explains how redundancy works during voluntary administration and what actions you should take if you’re affected.
How Redundancy Works During Voluntary Administration
When a company enters voluntary administration, redundancies may be implemented if roles are no longer required to keep the business operating. The following table explains how redundancy works under voluntary administration:
| Category | Policy and Details |
| Decision Maker | The Administrator is responsible for all redundancy decisions. |
| Timeline | Roles can be made redundant immediately, which results in the firing of employees. |
| Eligibility & Pay | Employees are entitled to pay based on length of service and specific awards or contracts. |
| Funding Status | Actual payment is strictly dependent on the availability of funds. |
| Unpaid Claims | If the company lacks funds, the redundancy amount becomes a claim in the administration. |
| Payment Priority | Redundancy claims are prioritised above unsecured debts, but are still subject to fund availability. |
Important Points to Remember
- Employees are paid in a specific legal order, meaning wages and leave must be fully settled before any funds are allocated to redundancy pay.
- If you are let go immediately, you may be entitled to payment instead of working your notice period. This is a lump sum that covers the wages you would have earned if you had stayed on for those final weeks.
- Businesses with fewer than 15 staff members are often legally exempt from paying redundancy, which may limit your claim to unpaid wages and leave.
- If a new owner buys the business and offers you a similar role, your service history usually transfers to them instead of triggering a redundancy payment.
- Even during administration, the law requires a “genuine redundancy,” meaning the administrator should still consult with you and look for other available roles within the business.
- FEG payments are not uncapped; they are based on a maximum weekly wage), so high-income earners may not have their full salary replaced.
- Directors and their relatives are usually classified as “excluded employees” and have strictly capped priority claims.
- The Fair Entitlements Guarantee (FEG) only becomes available if the company officially enters liquidation and does not cover unpaid superannuation or earnings above a specific salary cap.
- You must be an Australian citizen or hold a specific permanent or special category visa to be eligible for government assistance through the FEG scheme.
Next Steps
Understanding how redundancy works during voluntary administration is critical. If your role has been made redundant, the next step is to:
- Confirm that your role has been made redundant
- Calculate your redundancy entitlement
- Check what has been paid (and what hasn’t)
- Clarify the company’s status
- Lodge a Proof of Debt (POD) if redundancy is unpaid
- Check your residency and visa status to confirm eligibility for the FEG scheme.
- Request a Separation Certificate from the administrator immediately to assist with any necessary Centrelink claims.
- Assess your eligibility for FEG (if liquidation occurs)
- Keep all documentation organised
- Follow up with the administrator if needed
Acting early helps ensure your redundancy entitlement is properly recorded and reduces the risk of delays or missed claims.
If you are unsure about your entitlement or whether the redundancy is valid, seeking legal advice can help you assess your position and take appropriate action.
At Halo Advisory, we work with the director. Financial expert Greg Bartels offers a no-obligation, confidential conversation to help you understand where you stand, what risks exist, and what options are realistically available before deadlines reduce control. Get in touch today.
FAQs
Can I challenge a redundancy made during voluntary administration?
Yes. A redundancy must still be “genuine,” even during voluntary administration. This means your role must no longer be required, and reasonable steps (such as consultation or redeployment) should have been considered where possible.
If the process was not followed correctly, you may be able to lodge an unfair dismissal claim or dispute the decision. Seeking legal advice early is recommended, as strict time limits apply.
Am I entitled to redundancy if I was a casual employee?
In most cases, casual employees are not entitled to redundancy pay. However, exceptions may apply if your employment was regular and systematic, or if your contract or award provides for redundancy entitlements.
It’s important to review your employment agreement and speak with the administrator to confirm your position.
Does length of service always guarantee redundancy pay?
No. Length of service determines how much redundancy you may be entitled to, but it does not guarantee payment.
Actual payment depends on whether the company has sufficient funds. If it does not, you may need to rely on the Fair Entitlements Guarantee (FEG), which applies caps and eligibility criteria.
More on this: Fair Entitlements Guarantee – Department of Employment and Workplace Relations, Australian Government
Can redundancy be avoided if the business is sold?
Yes. If the business is sold and the new owner offers you ongoing employment on substantially similar terms, redundancy may not be triggered.
In these cases, your service may transfer to the new employer, which can affect your entitlement to redundancy pay. It’s important to clarify whether your prior service is recognised.
For more information, read Employee entitlements on a transfer of business – Fair Work Ombudsman
Will I be taxed on redundancy payments?
Yes. Redundancy payments are generally subject to tax, but concessional tax treatment may apply to genuine redundancy payments up to certain limits.
The exact tax outcome depends on how the payment is classified and your individual circumstances. You may wish to seek tax advice for clarity.
Read more: Genuine redundancy payments | Australian Taxation Office
What if I disagree with the amount of redundancy calculated?
You should first raise the issue directly with the administrator and request a breakdown of how the amount was calculated.
If the issue is not resolved, you may be able to lodge a formal dispute or seek legal advice. Supporting documents such as contracts, payslips, and award details will be important in resolving discrepancies.
Can I claim redundancy if I resign during voluntary administration?
Generally, no. Redundancy is typically only payable when your employment is terminated by the employer.
However, if you can demonstrate that your resignation was effectively forced (for example, due to significant changes to your role or conditions), you may be able to argue constructive dismissal. This can be complex and may require legal advice.
