When an Australian business ends a permanent employee's employment, the Fair Work Act 2009 (Cth) (the Act) requires the employer to give written notice of the day of termination and either let the employee work out a minimum notice period or pay them in lieu. Notice mistakes are among the most common wage and entitlement disputes that reach the Fair Work Ombudsman (FWO), and getting them wrong can mean penalties, back-pay orders and unfair dismissal claims.
This guide sets out the notice obligations that apply to a small or medium business under the National Employment Standards (NES): who must receive notice and how much, how payment in lieu works, what employees owe you when they resign, how redundancy and roster changes interact with notice, and the practical steps that keep a termination compliant.
Who must give notice, and when the duty triggers
The notice obligation applies to national system employers, which covers most private businesses in Australia, including companies, sole traders and partnerships. It triggers whenever the business terminates the employment of a permanent employee, whether full-time or part-time.
The Fair Work Act states that an employer must not terminate employment unless it has given the employee written notice of the day of the termination, and that day cannot be before the day the notice is given (s 117(1) of the Act). The FWO explains that notice may be delivered in person, left at the employee's last known address, sent by pre-paid post, or sent electronically if the employee agrees. In practice, the written notice should also record what happens during the notice period: duties, return of company property, and any confidentiality or post-employment obligations.
The NES is a floor, not a ceiling. A modern award, enterprise agreement or employment contract can require a longer notice period, but none can provide less than the NES minimum. Probation does not change this. The FWO confirms that an employee dismissed during a probation period is still entitled to notice, or payment in lieu, based on their length of service.
Who does not need notice
Under s 123 of the Act, the notice rules do not apply to certain employees:
- Casual employees: no notice of termination is required under the NES, although it is best practice to confirm the end of the engagement in writing.
- Fixed-term and seasonal employees: employees employed for a specified period, a specified task or a season, such as a fixed-term contract or a seasonal fruit picker.
- Serious misconduct: employees dismissed for conduct such as theft, fraud, assault or sexual harassment, or conduct creating a serious and imminent risk to health. No notice or payment in lieu is required, but all outstanding entitlements, including wages for time worked and accrued annual leave, must still be paid.
- Trainees: employees other than apprentices whose employment is limited to the duration of a training arrangement.
- Daily hire workers: daily hire employees in the building and construction and meat industries, and some seasonal weekly hire meat industry employees, who may be covered instead by award notice provisions.
For everyone else, the obligation to give written notice, or pay in lieu, applies to every termination of a permanent employee.
The minimum notice periods under the NES
The minimum notice period is worked out from the employee's period of continuous service at the end of the day the notice is given (s 117(3)):
| Period of continuous service | Minimum notice |
|---|---|
| 1 year or less | 1 week |
| More than 1 year, up to 3 years | 2 weeks |
| More than 3 years, up to 5 years | 3 weeks |
| More than 5 years | 4 weeks |
Add one extra week if the employee is over 45 years old and has completed at least 2 years of continuous service. Continuous service is the length of time the employee has been employed by the business; it includes authorised unpaid leave such as unpaid parental leave, it does not include unauthorised absences, and periods worked as a casual generally do not count toward notice. The notice period starts the day after the notice is given and runs until the last day of employment.
A worked example: an employee with 4 years and 2 months of continuous service is entitled to 3 weeks' notice. A 50-year-old employee with 3 years of service is entitled to 4 weeks (3 weeks plus the extra week for age). An award, agreement or contract may push either figure higher, and the FWO publishes a Notice and Redundancy Calculator you can use to check the periods before you commit to a termination date.
Payment in lieu of notice
Instead of having the employee work out the notice period, you can end the employment immediately and make a payment in lieu. The payment must be at least the amount the employer would have been liable to pay at the employee's full rate of pay for the hours the employee would have worked until the end of the minimum notice period (s 117(2)(b)).
Full rate of pay is broader than base salary. The FWO includes in it incentive-based payments and bonuses, loadings, monetary allowances, overtime, penalty rates and any other separately identifiable amounts. A common error is to pay in lieu at the base rate and short-change the employee on loadings or penalties they would have earned during the period.
When you pay in lieu, employment ends on the day the payment is made and the employee stops accruing leave and other entitlements from that point. Confirm the arrangement in writing, including the termination date and how the amount was calculated. Some contracts include a garden leave clause that allows you to direct an employee not to attend work during a worked notice period while paying their normal wages; that option only exists if the contract provides for it.
Notice when an employee resigns
The NES does not set a minimum notice period for resignations. The obligation runs the other way: an employee gives notice according to their employment contract or the applicable award or enterprise agreement. The FWO notes that casual employees do not have to give notice when they resign, and employees not covered by an award or agreement only have to give notice if their contract requires it; where the contract is silent, reasonable notice may be required.
If an employee resigns without giving the required notice, an award or enterprise agreement may allow you to withhold part of their pay. Most awards allow a deduction of up to one week's wages where the employee is 18 or over, has not given the required notice under the award and the deduction is not unreasonable. You can only deduct from wages owed under the award, not from leave entitlements or over-award payments, and any deduction must comply with s 324 of the Act. Section 324 permits deductions only where they are authorised in writing by the employee and are principally for the employee's benefit, or are authorised by an enterprise agreement, a modern award, a Fair Work Commission order or a law. A clear contract clause that states the resignation notice and the consequences of giving less will make these situations easier to administer.
Notice in special situations
Redundancy
Making a position redundant does not remove the notice obligation. Notice, or payment in lieu, is still required and is separate from any redundancy pay entitlement. Under s 119 and s 121 of the Act, redundancy pay applies only where the employee has at least 12 months of continuous service, and it does not apply where the employer is a small business. A small business employer is one that employs fewer than 15 employees, counting associated entities as one. If you are planning a restructure, check the consultation obligations in the applicable award or agreement early, and separate redundancy pay, notice and accrued entitlements when you calculate the final pay.
Serious misconduct
Dismissal for serious misconduct is one of the few situations where no notice or payment in lieu is required. The FWO's examples of serious misconduct include theft, fraud, assault or sexual harassment, causing serious and imminent risk to the health of another person, and refusing to follow a lawful and reasonable instruction. No notice is needed, but the process still matters: put the allegations to the employee, allow them to respond, and document the findings and the decision. Outstanding entitlements must still be paid.
Leave during the notice period
An employee who is unfit for work can take paid personal or carer's leave during a notice period if they give notice of the leave as soon as possible and provide evidence when asked, such as a medical certificate. You cannot force an employee to take annual leave as part of their notice period; annual leave during notice happens only by agreement. Public holidays that fall inside the notice period do not extend it.
Notice for roster and shift changes
Notice is not only about ending employment. Many modern awards set minimum notice periods for roster changes and shift cancellations, and minimum engagement periods for casuals, so short-notice changes can trigger extra payments. The obligations vary award by award. Confirm the rules in the award that covers your staff before a manager changes a roster or cancels a shift at short notice, and apply the same process consistently. Where possible, give more notice than the minimum to avoid minimum-engagement or penalty-rate traps.
What happens if you get notice wrong
Contraventions of the notice rules are civil remedy provisions. The FWO can investigate, issue compliance notices and take court proceedings, and the courts can order penalties and require any shortfall in pay to be made good. The maximum penalty is 60 penalty units per contravention for an individual and five times that for a company, rising to 600 penalty units for a serious contravention. With the Commonwealth penalty unit now set at $330 under s 4AA of the Crimes Act 1914 (Cth), the maximum exposure is around $19,800 for an individual and $99,000 for a company per contravention, and up to $990,000 for a company for a serious contravention.
Separately, an employee who considers a dismissal unfair can apply to the Fair Work Commission within 21 days of the dismissal taking effect. Eligibility requires a minimum employment period of 6 months, or 12 months where the employer is a small business, and remedies can include reinstatement or compensation. Skipping notice does not by itself make a dismissal unfair, but a rushed termination often comes with other procedural gaps, such as no opportunity to respond, that do.
A compliance checklist for notice
Before you terminate an employee, work through each of the following items:
- Know your instrument: identify the modern award or enterprise agreement for each role when you hire and keep a note in the personnel file. Check its notice, consultation and roster rules before any termination.
- Contract terms: set notice periods, payment in lieu and garden leave clauses in employment contracts, never below the NES minimums, and keep version control over templates.
- Get the dates right: give written notice stating the termination date, and count the service band correctly before committing to a date. The notice period runs from the day after notice is given.
- Pay in lieu properly: pay at the full rate, including loadings, allowances and penalty rates the employee would have earned, and confirm the calculation in writing.
- Separate final pay elements: set out ordinary wages, payment in lieu, annual leave, redundancy pay and any lawful deductions separately in the final pay.
- Train managers: short-notice roster changes can trigger penalties, so make sure managers know the minimum engagement and notice rules in your awards.
- Keep records: document the notice given, the process followed and the basis for any deduction from final pay.
When to get legal advice
An employment lawyer can identify the correct award coverage, draft contracts and termination letters, work through redundancy consultation and the small business thresholds, and respond if the FWO or the Fair Work Commission becomes involved. If a termination is contested, or involves a restructure, long-term illness or capacity issues, advice early in the process is far cheaper than defending a claim later. Most employment firms, including Artificer Legal, will scope the situation in an initial conversation so you know where you stand before you act.
Where notice compliance usually goes wrong
The duty that most often trips employers up is not the length of the notice period, but the mechanics around it. Notice must be in writing and must state the day of termination, and that day cannot be earlier than the day the notice is given. The minimum period is measured from the day after notice, and payment in lieu must be at the full rate, not base salary, and it stops accruals immediately. Work through the service band, the termination date and the payment components before you communicate the decision. That short preparation is what keeps a dismissal cheap and compliant, and it is exactly where a review of the contract and award, or a conversation with an employment lawyer, pays for itself.