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End of Employment

General Guidelines

Sound reasoning to the dismissal is vital for employers to ensure a minimal risk of unfairness claims from employees. There are four key areas in which the release of an employee can occur with proper reasoning:

  • Capacity – if an employee lacks the ability, or capacity to complete the job
  • Performance* – unsatisfactory employee performance
  • Misconduct* – failing to adhere to workplace standards, or if the employee is involved in serious misconduct
  • Redundancy – if the job the employee is completing is no longer necessary for the business, or technological change has made their role unnecessary. For a redundancy to be genuine, an employer must follow the consultation requirements (if a Modern Award or enterprise agreement applies) and have considered reasonable redeployment opportunities

*If an employee is to be dismissed on grounds related to performance and conduct, they must be allowed to be heard before dismissal, rectify their behaviour, and must have been given a warning before the discharge.

Failing to base a termination on the above areas could result in an unfair dismissal claim. However, there are some exceptions, such as whether an employee has been involved in severe, repeated or gross misconduct.

An employee's final termination pay should be paid within seven days and include:

  1. Any outstanding salary up to the termination date
  2. Accrued but untaken annual leave or if applicable, long service leave entitlements
  3. Payment in respect of the employee's notice period (if it is being paid in lieu)
  4. Any redundancy payment if the employee's employment terminated on account of redundancy

Employers can ask employees to sign a declaration that releases them from obligations related to their dismissal as long as they have made full payment to the above.

Procedure guidelines

Employers must ensure to follow the correct and fair procedure when terminating an employee, following specific rules:

  1. Have a valid reason for the dismissal related to the employee's capacity or conduct
  2. Notify the employee of the reason in writing
  3. Allow the employee to respond
  4. Respect the employee's request to be accompanied by a support person for any discussion relating to the dismissal
  5. In the case of unsatisfactory performance, warn the employee about performance concerns and allow them to improve or rectify the problem.
    • Rectifying the problem might involve the employer providing additional training and ensuring the employee clearly understands their job expectations.

Termination of the employment must be consistent with the terms of any employment contract and the requirements of any Modern Award/enterprise agreement that applies to the relevant employee. Failure to do so can result in claims for breach of contract or breach of the industrial instrument. Potential remedies include reinstatement and compensation. Penalties and other remedial orders can be made for violations of general protections laws.

 

Unfair Dismissal

Eligibility for unfair dismissal

An employee may be eligible for a remedy under the national unfair dismissal laws if they have:

  • Depending on the size of the business, they have the minimum six or 12 months employment and, either:
    • Earned less than the high-income threshold (which is currently $153,600)
    • Were covered by a Modern Award or enterprise agreement

If an employee is not eligible to bring an unfair dismissal claim against the employer, provided the reason is lawful (e.g. not discriminatory or in breach of some other law), the procedure for terminating those employees are more straightforward.

Employee protections

Employees who have been employed for six months (12 months for businesses with less than 15 employees) are protected from terminations of employment that are harsh, unjust, unreasonable or that don't follow the correct grievance procedure. If the employee claims being unfairly dismissed, the employer will have to provide evidence of compliance with the termination procedure.

Employees are also protected from being dismissed in the following cases:

  • Exercising, or not exercising a workplace right. Workplace rights include:
    • Making complaints or inquiries to the employer or an external body
    • The ability to initiate legal proceedings
    • Rights and benefits under employment and industrial relations legislation or Modern Awards and enterprise agreements
  • Protected attributes included under anti-discrimination
  • Industrial activities

Redundancy Procedure

Redundancy Pay

Employees working with the business for at least one year are entitled to redundancy pay according to their length of service. Redundancy pay is in addition to an employee's notice period.

Redundancy pay does not apply if the company employs fewer than 15 employees.

  • 1-2 years: 4 weeks' pay.
  • 2-3 years: 6 weeks' pay.
  • 3-4 years: 7 weeks' pay.
  • 4-5 years: 8 weeks' pay.
  • 5-6 years: 10 weeks' pay.
  • 6-7 years: 11 weeks' pay.
  • 7-8 years: 13 weeks' pay.
  • 8-9 years: 14 weeks' pay.
  • 9-10 years: 16 weeks' pay.
  • 10+ years: 12 weeks' pay*.

* There is a reduction in redundancy pay from 16 weeks to 12 weeks for employees with at least 10 years continuous service.

Redundancy pay is not payable in the following circumstances:

  • The employer has less than 15 employees
  • The employment is terminated due to serious misconduct
  • The employee is employed for a specified period
  • Modern Award industry-specific redundancy scheme applies
  • An enterprise agreement redundancy scheme applies

 

Resignation Procedure

Employees who want to resign from their job must inform their employer in writing. The notice period starts when the employee sends their notice and must be respected unless the employer elects to make a payment in lieu or brings the employment to an end sooner. The required amount of notice that is usually outlined in the employment contract is between one and four weeks.

An employee can take annual leave during a notice period if the employer agrees to it, but an employer cannot force an employee to take leave as part of the notice period.

The employee's resignation letter should be stored in the employee's personnel file, with this file remaining private and confidential. Generally, no one can access them other than the employee, their employer, and relevant payroll staff. If requested by the employee, or the former employee to whom the record relates or the Fair Work Ombudsman, employers must make copies of these records available.

 

Other End of Employment Terms

Notice period

Both employers and employees must respect the notice period when terminating the employment, except in cases of serious misconduct. Employees may be paid in lieu of notice.

  • Employees with less than 1 year of service - 1 week's notice.
  • Employees with more than 1 but less than 3 years of service - 2 weeks' notice.
  • Employees with more than 3 but less than 5 years of service - 3 weeks' notice.
  • Employees with more than 5 years of service - 4 weeks' notice.

Employees who are 45+ and have been with the company for two years or more are entitled to either an extra week's notice or the equivalent pay.

While the above limitations are statutory, often employment contracts will include longer notice periods.

Particularly for senior executives, that notice may extend as far as 9 to 12 months.

Unemployment funds

Unemployment payment can be claimed by people between the age of 22 and retirement age who are Australian citizens, holders of permanent residency visa and new residents who have resided in the country for 104 weeks and meet the criteria, which imposes limits on income and assets.

To be eligible for the unemployment benefit, the individual must have lost their job and demonstrate that they are actively looking for work or be sick or injured and unable to do their usual work. Payment amount depends on each person's circumstances, and vary between $510 and $793 per fortnight.

Until 31 December 2020, there is also an additional Coronavirus supplement at a rate of $250 per fortnight.

This page was last updated on 27th January, 2021. If you have questions about this page, send us an email.