Workplace Relations
Termination Process: Lawful Steps for Ending Employment
Terminating an employee is one of the highest-risk actions an employer can take. Whether the termination is for performance, conduct, redundancy, or other reasons, following the correct process is essential to avoid unfair dismissal claims and general protections complaints.
What the Law Says
The Fair Work Act 2009 sets out key termination requirements:
- Section 117 — Minimum notice periods of 1-5 weeks based on service (plus 1 week for employees over 45 with 2+ years).
- Section 123 — Final pay (including outstanding wages, accrued annual leave, and any notice in lieu) must be paid within 7 days of termination.
- Section 387 — The FWC considers whether the termination was harsh, unjust, or unreasonable.
- Section 385 — Unfair dismissal eligibility requirements.
What Employers Must Do
Ensure you have a valid reason
The reason must relate to the employees capacity (ability to do the job) or conduct (behaviour). Document the reason thoroughly.
Follow the correct process
Provide written allegations, allow a response with a support person, genuinely consider the response, and document every step.
Calculate notice and final pay correctly
Provide the correct notice period (or payment in lieu) and ensure final pay includes all outstanding entitlements.
Prepare a termination letter
Document the reasons, effective date, notice arrangements, final pay details, post-employment obligations, and return of property.
Conduct an exit process
Recover company property, disable system access, and handle the transition professionally and respectfully.
Keep all documentation
Retain all termination-related documents for at least 7 years.
Common Mistakes and How to Avoid Them
Mistake: Rushing the process
Fix: Take the time to follow proper procedures. A rushed termination almost always leads to claims.
Mistake: Not calculating final pay correctly
Fix: Incorrect final pay is a breach of the Fair Work Act. Include all wages, accrued leave, notice in lieu, and any other entitlements.
Mistake: Terminating during protected periods
Fix: Dismissing employees during periods of illness, injury, pregnancy, or while exercising a workplace right creates significant legal risk.
Mistake: Not returning the employees personal property
Fix: Ensure employees can collect personal belongings. Withholding property can escalate conflict unnecessarily.
Penalties and Consequences
An unfair dismissal finding can result in compensation of up to 26 weeks pay, reinstatement orders, legal costs, and reputational damage. Underpayment of final entitlements attracts additional penalties of up to $93,900 (individual) or $469,500 (company).
When to Get Professional Help
Jordan Firme Business Consultants provides pre-termination advice, manages the termination process, and represents employers in FWC proceedings when claims arise.
Frequently Asked Questions
Under the NES: 1 week (up to 1 year of service), 2 weeks (1-3 years), 3 weeks (3-5 years), 4 weeks (5+ years). Employees over 45 with 2+ years of service receive an additional week. Check your award or agreement for potentially longer notice periods.
Best practice is to pay on the employees last day. The Fair Work Act requires payment within 7 days of termination or at the next regular payday, whichever is sooner.
Summary (immediate) dismissal is only appropriate for serious misconduct such as theft, fraud, assault, serious safety breaches, or being intoxicated at work. Even then, you should investigate and give the employee an opportunity to respond before making a final decision.
Outstanding wages for hours worked, accrued but untaken annual leave (including leave loading where applicable), notice in lieu of notice period, and any other entitlements under the award, agreement, or contract (such as bonuses or commissions).
There is no legal obligation to provide a reference. If you do provide one, it must be accurate and not misleading. Many employers opt to confirm dates of employment and position only.
Planning to Terminate an Employee?
Get expert advice before you act. Our HR consultants ensure your termination process is legally sound.
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