Ending an employment relationship is never easy. Whether it’s due to performance issues, redundancy, or serious misconduct, termination is one of the most sensitive aspects of managing a workforce. In Australia, getting this process right is a legal obligation. Equally as important is how the impacted parties are treated and how the company represents itself during and after the termination.

This practical guide will walk you through the key elements of termination of employment in Australia, helping you act with confidence, fairness, and compliance.

Setting the Foundation: Why Termination Needs a Thoughtful Approach

Termination isn’t just a matter of handing someone their final pay. Done poorly, it can lead to reputational damage, toxic workplace culture, or costly legal claims. Done well, it shows professionalism, strengthens your company culture, and protects your team.

Employers are required to meet certain obligations under the Fair Work Act 2009. These include providing adequate notice, ensuring lawful grounds for dismissal, and following a fair process. Beyond legal compliance, taking a considered approach to termination helps you maintain trust, morale, and operational integrity.

When and Why Termination Happens

Termination can occur for many reasons. It’s important to understand the legal distinctions between them, as each comes with different requirements.

Underperformance

When an employee consistently fails to meet reasonable performance expectations, despite support and clear communication, termination may be justified – provided the process has been fair and well documented.

Misconduct

Misconduct involves breaches of policy or behavioural standards – such as lateness, rudeness, or minor breaches of procedure. These typically require a warning process before termination.

Serious Misconduct

This includes theft, fraud, assault, or a serious breach of safety protocols. In these cases, termination without notice may be lawful, but the employer must still follow a fair process.

Redundancy

Redundancy occurs when a role is no longer required due to operational changes. Genuine redundancies involve obligations around consultation and potential redeployment, as well as redundancy pay (in most cases).

End of Contract

When a fixed-term contract ends, the employment concludes automatically, provided the contract was lawful and the terms were clear.

Resignation or Mutual Agreement

Employees may resign, or both parties may agree to end the employment amicably. Even in these situations, employers must issue final pay and other entitlements correctly.

Your Legal Obligations as an Employer

Employers must meet specific obligations when ending employment. These aren’t just formalities – they are enforceable requirements.

Notice Periods

In most cases, an employer cannot dismiss an employee without providing written notice specifying their final day of employment. The employer may choose to have the employee work through their notice period or compensate them for it, known as pay in lieu of notice.

The required notice period varies based on factors such as the employee’s age, type of employment, and length of continuous service with the employer.

Final Pay

When an employment relationship ends, an employee’s final pay should include:

• Any unpaid wages or other outstanding remuneration
• Payment in lieu of notice, if applicable
• Accrued annual leave and long service leave entitlements
• Any unused time off in place of overtime
• Redundancy pay, if the employee is eligible and has been made redundant

If an employee has taken leave in advance but hasn’t accrued enough to cover it before their employment ends, the employer may deduct the remaining amount from their final pay.

It must be paid promptly, generally within seven days.

Redundancy Pay

In cases of genuine redundancy (and where the business has more than 15 employees), redundancy pay may apply. This is calculated based on years of continuous service.

Record-Keeping

Employers are required to maintain records of employment, termination documents, and payments. Accurate records are critical in the event of disputes.

Awards and Enterprise Agreements

Some employees are covered by awards or enterprise agreements, which may specify additional entitlements or obligations during termination.

Avoiding Unfair Dismissal Claims

Unfair dismissal claims can be costly, time-consuming, and damaging to your brand. The best protection is prevention.

What is Unfair Dismissal?

A dismissal is considered unfair if it was harsh, unjust, or unreasonable – or if it wasn’t a genuine redundancy. Eligibility criteria also apply, such as minimum employment periods and employer size.

Common Pitfalls

Employers often run into trouble when they:

• Fail to give the employee a chance to respond
• Don’t provide adequate warnings
• Lack documentation
• Terminate without following internal procedures

The Role of the Fair Work Commission

Employees can lodge a claim with the Fair Work Commission within 21 days of dismissal. If found in breach, employers may be ordered to pay compensation or reinstate the employee.

Best Practice Termination Process: Step-by-Step

Clear, consistent processes reduce stress and risk for everyone involved.

Step 1: Identify the Reason and Gather Documentation

Be clear about the reason for termination and gather all relevant documents, such as performance records, warnings, or incident reports.

Step 2: Conduct a Fair Process

This means informing the employee of concerns, allowing them to respond, and genuinely considering their explanation. For misconduct, a formal investigation may be required.

Step 3: Communicate the Decision Clearly and Respectfully

Hold a private meeting to inform the employee of the outcome. Provide written confirmation of the decision and any entitlements.

Step 4: Finalise Employment

Process the final pay, issue a statement of service or separation certificate if requested, and manage the handover.

Step 5: Support the Business Post-Termination

Notify the team sensitively, redistribute responsibilities, and assess any workplace impact.

Case Study: A Smarter Way to Manage Termination

One of our clients – a national retail chain – faced the need to dismiss a long-standing employee due to repeated misconduct. Network PD supported the business through every step: documenting behaviour patterns, conducting performance meetings, and preparing termination letters. Beyond the formal processes, Network PD provided direct coaching for the responsible manager and created a holistic communications plan to support the transition. As a result, the client avoided any legal fallout and was able to reinforce team values around accountability and respect.

How Network PD Can Support You

Termination doesn’t have to be a minefield. Network PD offers:

• HR advice tailored to your situation
• Legally compliant documentation and templates
• Assistance during performance or misconduct processes
• On-call support during sensitive conversations

Whether you’re managing one employee or one hundred, our consultants are here to help you get it right.

Final Thoughts

Terminating employment is never pleasant – but it doesn’t have to be painful. With the right approach, you can handle it fairly, legally, and professionally. Remember: your actions during a termination say just as much about your company as your onboarding process.

Need expert HR advice? Contact Network PD to ensure your next step is the right one.