Termination of Employment in Australia | An Employer’s Guide

Author: Megan Adams, Progressive Legal

One of the hardest parts of owning a business is managing employees and the occasional employment termination that must happen. Termination can be one of two things, where an employee resigns or where an employee is dismissed. 

On this page, we will discuss what an employer needs to be aware of when dismissing an employee. 

Commonwealth workplace obligations for a termination of employment agreement

As discussed on other pages, an employer must not terminate an employee’s employment in ways that are unfair, harsh, unlawful or in violation of general protections provisions. 

Employers should consult the industrial instruments that are relevant to the employee’s position and the employee’s contract to determine how long the employees notice period is. 

Employee can be asked to work through their notice. Or you can offer to pay the notice as payment in lieu of notice. That is, unless the conduct warrants instant dismissal.  

Employee Entitlements at the End of Their Employment Period 

After termination of employment, the employer should be sure to pay: 

• any outstanding wages for time that the employee has worked;  
• any payment in lieu of notice (if applicable); 
• any accrued annual leave and long service leave entitlements (long service leave entitlements vary significantly between States and industries so please be sure to check your relevant state legislation as well as industrial instruments to determine if you must pay this and how much you have to pay); 
• anytime in lieu of overtime that the employee has accrued that taken; and  
• any redundancy pay if the employee (if applicable). 

Many employers have questions about what to do if an employee still owes them money at the end of their employment. This may happen where an employer has paid for an employee to take a class or receive a certification and the employee has agreed to pay the employer back or would stay for a certain period of time.

The answer to this question is highly fact-specific.  If you are concerned about this, you should speak to an experienced employment lawyer before terminating the employee’s employment in order to protect yourself. 

Failure to pay out entitlements upon termination of employment can result in an employee making a claim to the Fair Work Ombudsman.  The Fair Work Ombudsman can investigate and take action against employers who are not paying employees their full entitlements. 

Redundancy and Termination of Employment

A redundancy is what happens when an employer determines that they no longer need an employee’s job be performed at all. This can happen for instance when the employer restructures, becomes insolvent, or changes its business plan.

The important thing to know about redundancy is that person employee is not made redundant, their position is made redundant. 

Employers who employ more than 15 employees may have to pay redundancy or severance payments under the National Employment Standards.

This applies where an employee has been employed for at least 12 months, is a permanent employee, and the amount payable varies based on how long the employee has been with the employer as well as the employee’s age and any applicable industrial instrument provisions. 

For more guidance on redundancy visit our page here or make an enquiry below to get in touch with our employment law team.

What are best practises when terminating employees?

If you need to terminate an employee, it is important that you have this conversation with them and make them aware that their job is at risk. This is best done in a meeting and also in writing provided at the meeting. 

Other best practises include: 

• providing 24 hours notice ; 
• giving the employee a statement in writing about the potential risk to their job; 
• giving the employee an opportunity to respond; and  
• allowing the employee to have a support person present. 

If an employer is going to terminate an employee’s employment, then it is best practise to give the employee written notice of the last day of their employment.  

It is important to keep accurate records of these meetings.  If an employee files an application with the Fair Work Commision, you will need proof that a dismissal was reasonable.  

An employee may also seek their employee records in the future and you as an employer have an obligation to provide them with these records. 

One thing to be aware of is that small businesses in Australia have different rules for dismissal than bigger businesses. A small business is a business that has less than 15 employees. If you are a small business employer, the Fair Work commissioned will deem a dismissal to be fair if you follow the small business fair dismissal code and checklist here. 

The Key Takeaway

Terminating an employee’s employment is one of the hardest parts of running a business. Not only is it stressful, time consuming and expensive, it is also technical and full of potential legal pitfalls.

If you need help preparing for a potential termination please make an enquiry below or call us on 1800 820 083 to speak to one of our experienced employment lawyers. 

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