Termination is one of the most complicated areas of workplace relations, and possibly one of the hardest parts of being an employer. Australian legislation has strict guidelines regarding what must happen in the event of a termination, in a specific order, within specific timeframes, and getting these wrong can be very costly for a business.
Every situation will be slightly different depending on the size of the business, the length of time the person has been employed there for, and the Modern Award they are covered under. The information covered here is of a general nature only. We strongly recommend you contact us first on 1800 577 515 for information specific to your circumstances
What is termination of employment?
Termination refers to any situation where a person’s job with a business ends. This can be for a number of reasons, including their resignation, being fired, made redundant, or the business itself declaring bankruptcy or liquidation.
Regardless of the reasons behind an employment termination, you as an employer must fulfil your legal obligations to your employee, including the appropriate time period for notice and their pay entitlements.
What are the steps in a termination?
In order to end a period of employment, you must tell the employee in writing, stating the date for their final day of work. The minimum amount of notice you need to provide depends on how long the employee has been working with you for (a good reminder about the importance of keeping accurate records). If for any reason you can’t find the employee, you can send a letter to their last known address.
Generally speaking, unless your employee’s Modern Award or employment agreement states otherwise, the amount of notice you’ll need to give is as follows. Please note, any employment contract, award or agreement can dictate you give more notice than this, but never less.
|Period of continuous service||Minimum notice period|
|A year or less||1 week|
|Between 1 and 3 years||2 weeks|
|Between 3 and 5 years||3 weeks|
|Over 5 years||4 weeks|
As well as this, if your employee is over 45 years old and has worked for you for more than two years they are entitled to an extra week’s notice as well.
Are there exceptions to this?
Yes. Notice periods don’t apply in these situations:
- Casual employees
- People employed for a specific period of time or task (eg. a fixed term contract)
- Seasonal workers (eg, fruit pickers)
- People who are fired because of serious misconduct (eg. engaging in theft, fraud or assault)
- When there’s a training arrangement and a person is employed for a set period of time or for the length of the training arrangement (other than an apprentice)
- People on daily hire working in the building and construction or meat industry
- People on weekly hire working in connection with the meat industry, and whose termination depends on seasonal factors.
Can notice be paid out instead of worked?
Generally speaking, yes. You as an employer can decide whether to let the employee stay employed through their notice period, pay them what they would have been owed for work during that time (also known as pay in lieu of notice), or give a combination of the two. Once again, every situation is different, and it’s worth talking to Assurance HR for specific advice regarding this.
If the employer pays out the notice, the amount paid to the employee must equal the full amount the employee would have been paid if they had worked until the end of the notice period. This includes:
- incentive-based payments and bonuses
- monetary allowances
- penalty rates
- any other separately identifiable amounts.
If the employer pays out the notice period, the employee’s employment ends on the date that payment in lieu of notice is made. The employee doesn’t stay employed during the notice period (or continue to accrue entitlements, such as annual leave). If the employer doesn’t pay out any part of the notice period, the employee stays employed for the notice period. Employment can’t end on a date earlier than the day the notice is given.
What if I get it wrong?
One of the main areas that businesses get in trouble with in the areas of termination is regarding reasons for dismissal. Generally speaking, the main reasons for terminating someone’s employment are:
- Capacity: The employee lacks the ability, or is incapable, of completing the job
- Performance: The employee’s performance is below what is required for the job, or they are not meeting the standards outlined in their employment contract.
- Misconduct: The employee’s behaviour is below workplace standards, or they take part in serious misconduct.
- Redundancy: The job which the employee was previously completing is no longer necessary for the business, or technology has made their role unnecessary
Unlawful termination, on the other hand, is when an employee is dismissed by their employer for one or more of the following reasons:
- A person’s race, colour, sex, sexual orientation, age, mental or physical disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin (some exceptions apply, such as where it’s based on the inherent requirements of the job)
- Temporary absence from work because of illness or injury
- Trade union membership or non-membership or participation in industrial activities
- Being absent from work during maternity leave or other parental leave
- Temporary absence from work to engage in a voluntary emergency management activity
- Exercising or planning to exercise a workplace right by making a complaint or inquiry in relation to your employment, or participating in proceedings against an employer. Generally, employees are protected from unlawful termination under the General Protections provisions of the Fair Work Act 2009. However, all employees are protected from unlawful termination.
If an employee feels they have been dismissed on one of these grounds they have a right to take their case to the Fair Work Commission. It’s important to be aware that an employer can be liable to a penalty of up to $66,600 per contravention if they have not complied with their obligations under relevant Commonwealth workplace laws.
What is unfair dismissal?
Unfair dismissal is when an employee is dismissed from their job in a harsh, unjust or unreasonable manner. The Fair Work Commission may consider an employee has been unfairly dismissed if:
- The person was dismissed
- The dismissal was harsh, unjust or unreasonable
- The dismissal was not a case of genuine redundancy
- The employee worked for a small business and the dismissal was not done according to the Small Business Fair Dismissal Code
What is harsh, unjust or unreasonable?
The Fair Work Commission will decide if a dismissal is harsh, unjust or unreasonable, and they consider all of the following circumstances:
- Was there a valid reason for the dismissal related to the employee’s capacity or conduct
- Was the employee notified of that reason and given an opportunity to respond
- If the employer didn’t allow the employee to have a support person present at any discussions about the dismissal, was that unreasonable
- Whether the employee had been previously warned that their performance was unsatisfactory
- If the size of the business, or lack of dedicated human resource management specialists or expertise impacted on the procedures that the employer followed when they dismissed the employee, and
- Any other matters that the FWC considers relevant.
What about redundancy?
A redundancy is when an employer decides they either no longer need an employee’s job to be done by anyone, or the business becomes insolvent or bankrupt, and terminates all employment. The job itself, not the employee, becomes redundant. Redundancy often happens in the following situations:
- A business introduces new technology (eg. the job it can be done by a machine)
- Work slows down due to lower sales or production
- A business closes down completely, or relocates interstate or overseas
- The business restructures or significantly reorganises the way they do things.
It is crucially important that a redundancy isn’t a cover for not addressing poor performance by an employee.
A situation heard by the Fair Work Commission highlighted this well: https://assurancehr.com.au/genuine-redundancy-or-not-addressing-the-issue-the-importance-of-doing-things-right/.
Ultimately, it’s important to get proper HR advice before beginning the process of a termination.
Working through these steps is part of why Assurance HR exists.
We can help you draft termination letters if needed.
We can also advise you on what letters needs to contain.
Most of all we can help you know what to do at each step.
Please get in touch if you need to terminate an employee to discuss how we might be able to help.