Terminating employment: what you need to know

The employment relationship can end due to resignation, redundancy or dismissal. In any case, it’s vital you go about things in the right way.

Employment termination can be a difficult and emotional time for all parties.

Before, during and after the process it’s important to keep in mind these general guidelines, especially if you are dismissing an employee.

Is there a valid reason for termination?

Sound reasons include:

  • Redundancy: when the work no longer needs to be done due to changes in the business or technology.
  • Summary dismissal without notice: when there has been serious misconduct, such as violence, theft, fraud, intoxication or other serious breach of workplace policies.
  • Poor performance: when an employee has been advised of such and taken through a fair process.

Do you have a fair process for employee performance management and dismissal?

A fair process does not mean ‘three strikes’ anymore. It does mean:

  • You have followed your internal policy and procedure or workplace agreement.
  • The employee is advised, preferably in writing, of the specific issue.
  • You are clear in your communication that the poor performance can lead to dismissal if there’s no improvement.
  • The employee is given a chance to understand and respond to your view of the issue.
  • You and the employee agree on the changes that need to be made and when you will review their performance again.
  • They have the opportunity and time to improve their performance, with support such as training if required.
  • You have allowed them to bring a support person to any meetings.
  • If dismissal is the ultimate outcome, you have given the right amount of notice, as specified in their Award, workplace agreement or employment contract, or payment in lieu of notice.

For small businesses, the Small Business Fair Dismissal Code provides guidance and a checklist to follow for a fair process.

Redundancy is a separate issue with special rules, as set out by the Fair Work Ombudsman.

A guide to dismissal in New Zealand can be found here.

Have you documented everything?

It’s important to keep written records of the following:

  • Evidence of underperformance or other reason for dismissal.
  • Minutes of all meetings concerning the issue, including when they occurred and who attended.
  • Agreed performance improvements and review dates.
  • Letters of termination and associated documentation.

Could the termination be unlawful?

Under Australian workplace laws it’s unlawful to dismiss someone for a range of reasons that could be viewed as discriminatory.

These are set out in the General Workplace Protections for most employees.

Have you paid the correct entitlements in full on termination?

On dismissal, the employee’s entitlements include:

  • Pay in lieu of notice, if they are not required to work out their notice period, at the employee’s full rate of pay including allowances, loadings and penalty rates.
  • Any outstanding wages, commissions or other remuneration.
  • Any accrued annual leave and pro-rata long service leave.

In the case of redundancy, there may also be severance pay entitlements.

Some extra tips that will make the process better for all:

  • Stay calm and show leadership.
  • Don’t delay acting on a performance or conduct issue.
  • Be prepared for meetings and know exactly what you want to say.
  • There should be no surprises for the employee.
  • Mind your language — don’t patronise and don’t waffle; definitely don’t shout or swear.
  • Treat the employee as kindly as possible and offer support, such as outplacement services, if you can.
  • Be clear about deadlines, including the termination date, and security requirements such as return of keys and changing of passwords.

There are specific rules related to each type of employment termination for most employers and employees in Australia.

To find out in detail the requirements and how to avoid an unfair dismissal claim when terminating staff, visit the Fair Work Ombudsman website where you will find a range of resources, including guides, checklists and template documents.