When you terminate staff for any reason, whether it’s for poor performance, poor attendance or having a bad attitude, it’s absolutely essential to have a clear and detailed policy. Whether you’re firing an employee or making them redundant, employers must follow the processes stipulated by the Fair Work Act to avoid an unfair dismissal or unlawful termination claim. This is the only sure way you will manage the termination process correctly and be assured of being legally compliant.

Termination can be a complex and stressful process and may involve dismissal, resignation or redundancy, and as an employer you should understand its obligations under the employee’s employment contract, award and law. As termination is a significant decision that carries legal risks and can take a significant amount of time, resources and effort, it is recommended that you seek legal advice if there is anything you are unsure of.

What considerations and processes should your policy include?

  • Consider termination issues before the employee starts work. Carefully draft the employment contract referring to the termination of employment provisions. At the very least state the agreed period of notice by each party.

  • Have clear, unambiguous written policies covering a wide range of relevant workplace issues. These include probation periods, conduct in the workplace, workplace safety, sexual harassment, dress requirements, use of email, use of employer’s property, attendance/timekeeping termination procedures.

  • Ensure these policies flag any misconduct that would be a serious breach of the employment contract. For example, this could include theft, poor performance, or insubordination.

How to terminate an employee: indicate the consequences of a breach

  • Ensure termination is lawful. It should not be in breach of contract, equal opportunity, discrimination or other legislation, and in compliance with any award or agreement that covers the employee. 

  • Ensure there is a valid reason for the termination. This is important because an employee who feels the termination was not in accordance with his or her contract or legislative protections can take legal action. For example, they can apply for an order for unfair dismissal or sue for breach of contract.

  • Ensure you are familiar with the provisions of the legislation that cover your employees.

  • Ensure the date and reasons for termination are clear to both parties. 

  • Ensure that whoever initiates the termination (employer or employee) does so in writing.

  • Comply with notice periods required by legislation, awards, or contract (whichever is the most generous). This applies to both you, as the employer, and the employee. For example, a resigning employee must give the required period of notice and a dismissed or retrenched employee must receive at least the minimum notice period required by law, or payment in lieu of notice (if the award or agreement permits).

  • Provide employees with final payment, including payment of their accrued entitlements. This may include payment for untaken annual and long service leave if required by legislation.

  • Meet all documentation requirements. This includes things such as keeping payroll records, providing statements of termination entitlements and calculations, and certificates of service.

  • Collect any employer property issued to the employee before the employee leaves. This includes things such as vehicles, mobile phones, credit cards, business cards, uniforms, product samples, security cards, etc.

  • Get things in writing. If an employee resigns or retires, ask them to confirm it in writing. If the employee cannot or will not confirm in writing, issue a letter confirming that you accept the verbal resignation.

If you dismiss an employee, you must issue a letter confirming the dismissal. It is also best practice if you briefly explain the reasons for the termination in writing. If there are events that led up to the dismissal, keep records of them as well.

The Fair Work Act requires employers to set out in writing the actual date of termination of employment.

Important words of advice

Don’t:

  • mischaracterise an employee issue

  • take the attitude the employee is guilty before finalising inquiries

  • act in a deceptive manner when advising the employee to attend a meeting to discuss the allegations.

Do:

  • allow the employee to have a support person present when being interviewed.

The Fair Work Ombudsman provides advice to both employers and employees on dismissal procedures and entitlements.

Where employment is covered by state industrial relations legislation (for example if your business is not incorporated), State Departments of Employment, Industrial Relations or similar titles can provide advice on dismissal procedures and entitlements. Unfair dismissal and unlawful termination can be a costly endeavour for employees and employers. To prevent any unfair dismissal claims, employers must be compliant with legislation when terminating an employee.