The decision to terminate an employee – or many employees – can often be the most difficult choice a business owner or manager will ever have to make.
Termination of employment is a delicate process filled with many emotions. In almost every situation, an employee does not welcome the idea of losing their job. Their reaction can be unpredictable, from shock, accepting the decision, and grief, to being verbally or physically abusive.
Therefore, it’s essential business owners and employers understand employee entitlements and employer obligations set out in the Fair Work Act 2009.
Reasons for Employment Termination
There are many reasons why termination of employment may be necessary. However, in each case it must be justifiable given the facts.
Reasons for terminating employment can include:
Misconduct – when an employee’s behaviour is out of line with company policy, is against the terms of an employment agreement, or is unlawful.
Poor performance – due to factors such as lack of skill, care, diligence, or quality.
Capacity – an employee’s lack of ability to fulfil the requirements of their role.
Redundancy – when a business decides they no longer need an employee’s job to be done by anyone, the employer becomes insolvent, bankrupt, or acquired by another business. BrightHR’s Redundancy Navigator can help you through this process.
When considering if a dismissal is unfair, the Fair Work Commission will assess whether it is “harsh, unjust or unreasonable”. These classifications will depend on the circumstances of each case.
In most cases, it is accepted that an employer must follow a fair process prior to terminating an employee. This will include reasons for the proposed dismissal and an opportunity for the employee to respond. This is because the reason for the dismissal and the process adopted deciding to dismiss will be considered in determining whether a dismissal was fair.
In addition, employers should provide employees with written notification that their employment has been terminated.
Terminating Employment Contracts
An employment contract is a written agreement between an employer and the employee. It sets out enforceable terms and conditions that govern the employment relationship.
The Fair Work Act provides minimum conditions and entitlements for employees in the National Employment Standards, and industrial instruments such as Modern Awards, or Registered Agreements. An Employment Contract must provide for at least these minimum conditions but can set out additional requirements regarding termination processes that should be considered.
However, any disputes concerning an employment contract are generally enforceable under contract law, rather than through the Fair Work Commission. This means if an employer breaches the termination clauses in the employment contract when terminating an employee, they could lodge a claim in contract law as well in employment law for unfair dismissal under the Fair Work Act, depending on the circumstances.
Employment Termination Notice
As outlined in the National Employment Standards, an employer must provide an employee with written notice of the day of termination. Employees are required to be given (or paid in lieu) the minimum amounts of notice set out in the NES or relevant industrial instrument.
Below are the minimum notice periods required to be given and their corresponding periods of employment.
| Period Of Continuous Employment | Minimum Notice Period |
| Less than 1 year | 1 week |
| 1-3 years | 2 weeks |
| 3-5 years | 3 weeks |
| Over 5 years | 4 weeks |
Despite the above there are two scenarios where different periods of notice may apply.
If an industrial instrument covering the employee or contract of employment specifies a longer notice period for termination, then the specified notice period applies.
The other is if an employee is over the age of 45 and has worked for at least two years on the day you give them notice, they are entitled to an extra week’s notice.
No Notice Period
While the National Employment Standards outline compulsory notice periods for employees being terminated, there are scenarios in which a notice period is not necessary. Notice is not required to terminate:
Casual employees.
Employees employed for a fixed period (other than apprentices).
Employees doing seasonal work or daily hire employees working in the building and construction or meat industries.
A termination notice period is not necessary if the employee is being dismissed for serious misconduct such as theft, fraud, assault, or refusing to carry out a lawful and reasonable instruction that is part of the job.
Even though you do not have to give notice of termination or pay in lieu of the notice period, in these circumstances, you do have make sure the process is fair, and to pay out all outstanding entitlements. This could include payment for time worked or annual leave, though not always long service leave, depending on the State or Territory and applicable circumstances.
As an employer, you should also know that if an employee thinks that they have been unfairly dismissed, or if they feel that their dismissal was not handled fairly, they can lodge an application for unfair dismissal remedy.
Payment in Lieu of Notice Period
This option allows an employer to terminate an employee immediately. To do this the employer must pay the employee the same amount they would have earned if they had worked the full notice period.
It must include the employee’s entire pay for normal work hours. It also includes extra pay for allowances, overtime, penalty rates, and any other separate amounts the employee should have received.
This helps an employee transition fairly by offering them financial security for a period of time while they seek new employment opportunities. It also enables employers to quickly manage their workforce.
Final Pay
The employer should pay out any wages owing, and any unused annual leave, as well as notice (if applicable) as part of the employee’s final pay, but there may be additional entitlements that need to be paid, for example long service leave or redundancy pay. This is referred to as ‘final pay’.
An award, employment contract, enterprise agreement or other registered agreements can specify when final pay must be paid. If it does not, best practice is for an employee to be paid within seven days of their employment ending or the next scheduled pay day.
Employsure’s advisers can help you navigate the process of ending someone’s employment. For peace of mind, call our Support Line now on 1300 651 415.