- in Australia
Getting the employee termination process in Australia wrong can cost your business significantly. Unfair dismissal claims lodged with the Fair Work Commission averaged $10,500 in compensation in 2024, not counting legal fees or reputational damage. Here's how to terminate an employee legally whilst protecting your organisation from claims.
Key Requirements:
- Establish a valid reason (performance, conduct, redundancy, or capacity)
- Follow procedural fairness – provide warnings and opportunity to respond
- Meet notice period requirements in Australia based on length of service
- Document every step of the process thoroughly
- Comply with Fair Work Act 2009 and relevant awards or enterprise agreements
- Pay all final entitlements within the required timeframes
Understanding the Employee Termination Process in Australia
The Fair Work Act 2009 governs employment terminations across most of Australia. Under this framework, employers must have a valid reason for dismissal and follow a fair process. The Fair Work Commission can order reinstatement or compensation if dismissal procedures for employers in NSW and other states aren't followed correctly.
Small businesses (fewer than 15 employees) have some different requirements, including the Small Business Fair Dismissal Code, but must still demonstrate procedural fairness.
Valid Reasons for Termination
Employers can lawfully terminate employment for:
- Performance issues – consistently failing to meet reasonable job expectations despite coaching.
- Misconduct – breaching company policy, code of conduct, or employment contract terms.
- Serious misconduct – theft, fraud, assault, or wilful refusal of lawful instructions (allows immediate dismissal without notice).
- Redundancy – the role is genuinely no longer required due to operational changes.
- Capacity – inability to perform inherent job requirements (health, qualifications).
Notice Period Requirements in Australia
Notice period requirements in Australia under the National Employment Standards are:
- Less than 1 year service: 1 week
- 1-3 years service: 2 weeks
- 3-5 years service: 3 weeks
- Over 5 years of service: 4 weeks
- Employees over 45 with 2+ years service: add 1 extra week
Your modern award or employment contract may require longer notice periods. Employers can provide payment in lieu of notice instead of requiring the employee to work through the notice period.
Procedural Fairness: How to Terminate an Employee Legally
Following dismissal procedures for employers in NSW and nationally means demonstrating procedural fairness at every stage. Here's the step-by-step approach:
Step 1: Document Performance or Conduct Issues
Keep detailed records of incidents, dates, witnesses, and any previous warnings given. Documentation is your primary defence against unfair dismissal claims.
Step 2: Provide Clear Warnings
For performance or minor misconduct, issue written warnings that clearly state:
- The specific problem
- Expected standards
- Timeframe for improvement
- Consequences if improvement doesn't occur
Allow the employee to have a support person present during warning meetings.
Step 3: Give Opportunity to Respond
Before making a final decision to dismiss, you must:
- Clearly explain the reasons for the proposed termination
- Provide any evidence or documentation
- Allow the employee to respond to allegations
- Consider their response genuinely before deciding
This is required even for serious misconduct – investigate thoroughly before dismissing.
Step 4: Make the Decision
Only proceed with termination if you've:
- Followed your documented policies
- Consider the employee's response
- Determined that the reason is valid and substantiated
- Confirmed that no alternative action is appropriate
Step 5: Conduct the Termination Meeting
- Meet in person with a witness present (HR representative or senior manager)
- Be direct but respectful about the decision
- Confirm the effective date and notice arrangements
- Outline final pay, leave entitlements, and return of company property
- Provide a written termination letter
The Redundancy Process for Employers
The redundancy process employers must follow is more complex. A redundancy is only genuine if:
- The job is truly no longer required
- You've consulted with the affected employee
- You've explored redeployment to other suitable roles
Redundancy pay under the National Employment Standards ranges from 4 weeks (1 year service) up to 16 weeks (9+ years service), though small businesses (under 15 employees) may be exempt.
If you're making 15 or more employees redundant, you must notify Services Australia before dismissals occur.
Need help navigating complex termination scenarios? Watkins Tapsell's employment lawyers in Sydney have guided hundreds of employers through compliant termination processes. We'll review your documentation, advise on procedural fairness, and help you avoid costly unfair dismissal claims. Contact us for a consultation.
Reducing Your Risk
The employee termination process in Australia requires precision. Employers who take shortcuts face Fair Work Commission claims within 21 days of dismissal. Three areas frequently trip up employers:
Documentation gaps
Missing performance reviews or undated warnings undermine your defence. Our guide covers critical mistakes HR managers make when terminating employees.
Restructuring complexities
Redundancies during business restructures require careful handling of consultation obligations and genuine redundancy tests. See our series on restructuring and employment law (including restructuring and employment law part 2 and restructuring and employment law part 3) for detailed guidance.
Procedural shortcuts
Skipping the opportunity to respond or rushing investigations creates unfair dismissal exposure, even with valid reasons.
Need Legal Advice on Your Termination Process?
Getting termination procedures right protects both your business and maintains workplace culture. When you follow the correct employee termination process in Australia, employees who've genuinely underperformed or breached conduct standards are less likely to pursue claims – because the process itself demonstrates fairness. For complex situations involving senior employees, contested performance issues, or business restructures, get qualified legal advice before proceeding.
Contact Watkins Tapsell to discuss your specific termination scenario with experienced employment law solicitors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
