Dismissing an employee lawfully in Australia, a step-by-step process

When Dismissal Becomes Necessary

You have made the call. An employee is not meeting the standard, has behaved in a way you cannot accept, or the role they fill no longer needs to be done, and you have decided the employment has to end. That decision puts you inside one of the most legally supervised moments in Australian workplace law, because the Fair Work Commission can review a dismissal and order compensation or reinstatement even where your reason was genuine.

When the process below is followed, you end up with something specific: a defensible dismissal. That means a written termination letter that states the reason and effective date, final pay that meets every entitlement, and a paper trail of evidence, warnings and meetings that shows the decision was considered rather than rushed. One thing readers commonly assume is that a fair reason is enough on its own. It is not. The Commission asks how the dismissal was carried out as much as why it happened, and a valid reason backed by a broken process can still be found harsh, unjust or unreasonable. It is also a common assumption that paying out notice in lieu of notice makes a dismissal safe. It only satisfies the notice obligation; it does nothing to fix a decision made without warning or a chance to respond.

Before You Start: The Prerequisites

Work through this checklist before any meeting about termination. Each item changes the steps you take next.

• The employment contract and applicable award: Review the contract for notice periods, probation terms, disciplinary processes and any clause about immediate dismissal. Then confirm whether a modern award or enterprise agreement applies, because awards and agreements commonly add consultation obligations, warning requirements and notice rules that sit on top of the statutory minimums.
• The employee's unfair dismissal protection status: Under s 383 of the Fair Work Act 2009 (Cth) (the Act), an employee is protected from unfair dismissal after a minimum employment period of six months, or twelve months if you are a small business employer. Protection also requires that a modern award or enterprise agreement covers the employee or that their earnings are below the high income threshold, per s 382. If they are not yet protected, unfair dismissal is off the table, but general protections, discrimination and contract claims are not.
• Your headcount and small business status: A small business employer employs fewer than 15 employees, counting casuals who work on a regular and systematic basis, and associated entities are counted together under s 23. This matters twice: it sets the twelve-month period above, and it decides whether the Small Business Fair Dismissal Code applies. A dismissal consistent with the Code is not unfair under s 385 and s 388, which makes it a strong defence when it applies.
• The real reason for the dismissal: Performance, misconduct, serious misconduct and redundancy each trigger a different process. Write the reason down and pressure-test it. If the true driver is performance but you label it redundancy, the label will not survive scrutiny and the misstep adds risk rather than removing it.
• The evidence: Dates, examples of the issue, emails, policy breaches, witness accounts and any previous warnings. If the evidence is not there yet, the first step of the process is to create it through proper management, not to proceed regardless.
• A scan for prohibited reasons: Check whether the employee has recently taken sick leave, made a complaint, raised a safety concern, requested flexible work or engaged in union activity. Where any of these sit behind the dismissal, a general protections claim under s 340 of the Act is possible, and the reverse onus in s 361 means you may have to prove your reason was not prohibited.

The headcount calculation trips up more small businesses than any other prerequisite, because owners forget that regular casuals count and that a business hovering at 14 or 15 employees can change status between one dismissal and the next. Confirm the number on the day of dismissal, not from memory.

The Dismissal Process, Step by Step

The Act does not prescribe a single rigid sequence, but the steps below track the criteria in s 387 that the Commission actually applies when deciding whether a dismissal was harsh, unjust or unreasonable: whether there was a valid reason, whether the employee was notified of it, whether they had a chance to respond, whether they could bring a support person, and, for performance dismissals, whether they were warned beforehand.

Step 1: Gather the Evidence Before Any Meeting

Collect and organise everything that supports the decision before you speak to the employee. At this stage you are building the file the Commission would read if the dismissal is challenged.

• Examples of performance issues with dates and outcomes, such as missed deadlines or customer complaints
• The specific policy breached, what happened, and when
• Witness accounts, where relevant
• Previous warnings, coaching notes and meeting records

If the evidence is thin, slow down. A dismissal without a supporting file is a dismissal that depends on your word later, and the Commission will treat an undocumented history of problems with caution.

Step 2: Investigate Serious Allegations and Decide Whether to Stand Down

Serious allegations such as theft, fraud, violence or a major safety breach need a prompt, fair investigation before any outcome is decided. Interview the employee, give them the specifics of the allegation, and consider their version before you conclude anything.

A separate question is whether the employee stays in the workplace while you investigate. Standing an employee down is not automatically available just because there is an allegation. Section 524 of the Act permits stand down without pay only in narrow circumstances, such as industrial action, a machinery breakdown or a stoppage the employer cannot reasonably be held responsible for. Misconduct allegations are not on that list. Many employers therefore place the employee on paid leave while they investigate, or check whether the contract or an enterprise agreement provides a stand down right. Treat unpaid stand down for an investigation as high risk without advice.

Step 3: Raise the Issue and Give the Employee a Chance to Respond

Procedural fairness is the heart of a defensible dismissal. In practical terms it means:

• Telling the employee clearly what the concerns are and what facts support them
• Giving them a reasonable opportunity to respond, usually in a meeting they can bring a support person to
• Genuinely considering their response before making a final decision

For serious performance or conduct matters, a show cause letter that sets out the concerns and asks the employee to explain why their employment should continue creates a clear paper trail and a fair opportunity to respond. Whatever form it takes, the chance to respond must be real. A meeting held as a formality, where the decision is already made, is one of the most common reasons the Commission finds a dismissal unfair.

Step 4: Run a Genuine Improvement Process for Performance Issues

Performance dismissals fail most often because the employer cannot show the employee was ever told what good looked like or given a real chance to get there. Before dismissing for performance, be able to show that you:

• Explained the standard of performance required
• Provided training, tools or support where reasonable
• Gave a reasonable timeframe to improve
• Held follow-up meetings and recorded them
• Warned that dismissal was a possible outcome if improvement did not come

This does not need to be elaborate, but it does need to be genuine and documented. A performance plan that is never followed up, or warnings delivered informally with no record, will not protect the decision.

Step 5: Decide the Outcome and Communicate It in Writing

Weigh the evidence and the employee's response, then decide. The options range from no action where an allegation is not substantiated, through coaching, formal warnings and a final warning, to dismissal with notice or summary dismissal for serious misconduct. Communicate the decision in writing. The termination letter should cover:

• The reason for the dismissal, stated briefly and factually
• The effective date of termination
• The notice period, or confirmation that notice is being paid out
• Final pay details, including accrued annual leave
• Return of company property and any handover requirements

Keep the letter professional and consistent with the reasons you have documented along the way. If the letter raises a reason that never appeared in the warnings or the show cause process, that inconsistency will be used against you.

Step 6: Pay Notice, Final Pay and Any Redundancy Pay Correctly

Under s 117 of the Act you must give written notice of the day of termination, and the period between notice and termination must be at least the minimum set by the Act, unless you pay in lieu. The minimum notice grows with length of service, up to five weeks for long-serving employees, and a modern award or enterprise agreement can require more. The final pay must include accrued but untaken annual leave and any other amounts the award or contract requires.

If the dismissal is a redundancy, s 119 of the Act requires redundancy pay of between four and sixteen weeks' pay depending on length of service, and a small business employer is generally exempt from that obligation. Redundancy also needs to be genuine under s 389: the job must no longer be required to be done by anyone because of changes in operational requirements, any award or agreement consultation obligation must be met, and redeployment must not have been reasonable in the circumstances. Getting the money right matters because many dismissal disputes that start as process complaints end up as claims about unpaid entitlements.

Where the Process Usually Stalls

The pitfalls below account for most dismissals that end up before the Commission, so it is worth checking each one before you act.

• Summary dismissal too early: Immediate dismissal is reserved for serious misconduct as defined in the Fair Work Regulations 2009 (Cth), such as theft, fraud, assault or a serious safety breach. Jumping straight there for conduct that merely frustrated you, without investigating or letting the employee respond, is the fastest route to an unfair dismissal finding.
• Notice paid without checking the source: Relying on a standard notice rule you have always used, when the contract, award and the Act each have their own requirements, produces underpayment claims. Check all three before you calculate.
• Calling a performance problem a redundancy: If the real driver is conduct or capability, s 389's genuine redundancy test will not be met, and the dismissal can be found unfair with redundancy pay still owed.
• Dismissing shortly after a workplace right was exercised: A dismissal days after a complaint or a request for flexible work invites a general protections claim, and s 361 shifts the burden so you must prove the dismissal was not for the prohibited reason.

Where a Lawyer Steps In

A lawyer's role in a dismissal is mostly about assessing risk before you act and getting the paperwork right. Before termination, a lawyer will check whether the employee is protected from unfair dismissal under s 382, whether the Small Business Fair Dismissal Code applies to your headcount, and whether anything in the employee's recent history creates general protections exposure. They will review or draft the show cause letter and termination letter so the reasons stated match the evidence, advise on whether conduct meets the serious misconduct threshold, and, for redundancies, run the consultation and redeployment analysis that s 389 requires. After termination, they can review the final pay calculation and, if an application lands, respond to it within the 21-day window the Commission allows for unfair dismissal applications under s 394, where the maximum compensation order is capped at the lesser of 26 weeks' pay or half the high income threshold under s 392.

The Paper Trail Is What the Commission Reads

The single thing that determines whether a dismissal survives is the documented fair process that sits behind it. The Commission cannot reconstruct what happened in your office; it reads the file. A file that shows evidence gathered before the decision, the employee notified of the reason and given a genuine chance to respond, warnings for performance issues, and a termination letter consistent with it all, is the strongest defence available to you. A file that is empty, or that contradicts the stated reason, is why compensation orders get made even when the employer was probably right about the underlying problem.

The key points to hold onto are these. Check the employee's protection status, your headcount and the applicable award before you start. Match the process to the reason: warnings and an improvement period for performance, an investigation and a chance to respond for misconduct, and a genuine redundancy analysis where the role has disappeared. Document every meeting and warning, pay notice and final pay against the contract, the award and the Act, and pause for advice before summary dismissal, redundancy or any dismissal that follows a workplace complaint or sick leave.