Parting ways with employees.


1st February, 2018

Ending employment

What you need to know about ending employment in the time it takes to weed your front garden.

Weeding the garden is never fun, and neither is firing people, but they’re both jobs that need to be done.

In the time it takes to put your gloves on and pull the weeds out, we’ll take you through legal obligations you have when staff leave, the difference between termination and redundancy and how to put together a termination letter.

That’s about seven minutes reading time.

While some of your staff will stay with your business for the long run, inevitably there will come a day when they want or need to leave – or you ask them to.

When it comes to ending employment, there are many legal rights and responsibilities for both the employer and employee to satisfy before the two parties part ways. What these are will be influenced by the reason employment is ending.

Procedures when staff leave

When it comes to ending employment, usually it will be due to an employee’s decision to move on from the business. They might have found a role that is a better fit for them in another company, or they’re undertaking a lifestyle change, like moving cities or having a career break.

If an employee decides to end their employment period, they must give you written warning. Their notice period should be outlined in their contract. For full-time employees, that’s usually a month in advance. This should give you enough time to find someone to replace them.

Terminating employment

Terminating staff is never a pleasant thing to do, but it’s usually necessary and unavoidable.

There are three common reasons for terminating staff, which you can read about here.

If you decide that you need to let a staff member go, be aware that you must take workers’ rights laws that protect employees into account.

It’s important to follow the laws surrounding dismissal, notice and final pay. There are laws about whether the termination of the employment was unlawful or unfair, what entitlements an employee is owed at the end of their employment, and what must be done when an employee is dismissed because of redundancy.

Termination vs redundancy

There’s a big difference between termination and redundancy.

Termination usually means the employee was not able to perform as required by their contract. As an employer, you must give them clear and fair warning about the fact that they’re underperforming, as well as provide support to get them up to standard.

Termination can also occur if the employee has committed a crime against the business, such as stealing or compromising sensitive information.

Redundancy, however, occurs when a position in the business no longer exists. This can occur for many reasons, including innovation in technology that means that certain positions have become automated, or during a restructure or merger.

The reason for terminating employment will mean that the business has different obligations when it comes to letting employees go.

Fair work rights and obligations

When it comes to terminating employment, an employer must not terminate an employee’s contract unless they give the employee written notice. This is known as the notice period. This must state the last day of employment.

The amount of notice depends on the age of the employee, how long they have been employed by the business and the notice period outlined in their contract.

An employer can either let the employee work through their notice period, or pay it out to them (also known as pay in lieu of notice).

When it comes to redundancy, businesses are generally legally obliged to pay a redundancy package to employees they are making redundant.

What this package looks like will depend on how long the employee has been with the business for, as well as the size of their remuneration package. Businesses may also be legally obliged to help the employee find a new job.

You can find out more about your legal obligations when it comes to terminating staff from the Fair Work Ombudsman. This is the governmental department that helps employers and employees understand their rights and responsibilities when it comes to workplace laws.

Termination letter

As formal notice of dismissal or redundancy is required by law, a termination letter is one of the most important elements when it comes to terminating staff.

There are many elements you should include in a termination letter, which you can read more about here.

Top 3 takeaways

  • There are many workers’ rights that need to be considered when it comes to ending employment. These are affected by the reason for ending employment.
  • There is a difference between termination and redundancy. Termination is usually due to the underperformance or misdeed of an employee, while redundancy occurs because the employee’s position no longer exists or the business is undergoing a structural change.
  • You must provide employees with a formal termination letter that gives a clear reason for their dismissal. It must also state their final day of work.

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