How to lawfully terminate an employee in Australia, a step-by-step guide

You have decided to end someone's employment. What now?

The decision to dismiss an employee is rarely sudden. It usually follows months of underperformance that has not improved, an investigation into misconduct, or a restructure that has removed a role. Whatever the reason, the decision itself is only the start. From the moment you act on it, the Fair Work Act 2009 (Cth) and any applicable award or agreement set out steps you must follow, and the Fair Work Commission will scrutinise how you took them if the dismissal is later challenged.

Done properly, the process ends with something you can defend: written notice or payment in lieu, final entitlements paid correctly, and a paper trail showing the employee was told the reason for the decision and given a chance to respond. That record matters more than almost anything else. A dismissal can be fair on the merits and still be found harsh, unjust or unreasonable because the process was skipped.

Two assumptions trip employers up before they start. The first is that terminating someone is a single meeting and a letter. It is not: the work that protects you happens in the weeks before, in warnings, meetings and written records. The second is that probation, or the label "redundancy", removes your obligations. Neither does. Employees on probation are still entitled to minimum notice, and the Commission tests whether a redundancy is genuine rather than accepting the label.

Before you start: the prerequisites

Assemble these six things before you take any step towards termination:

• A valid reason and the evidence for it: Dismissals rest on conduct, capacity (performance or illness) or operational requirements. Gather dates, conversations, warnings, emails and investigation notes now, because the first factor the Commission must consider under s 387(a) of the Fair Work Act is whether there was a valid reason.
• The contract, award or agreement and your policies: These can set out warning procedures, consultation obligations for redundancy, notice periods and garden leave rights. A step you skip because you did not read them can undo an otherwise valid dismissal.
• Service and age details: Minimum notice is calculated on continuous service, with an extra week for employees over 45 with at least two years' service. Redundancy pay also runs off continuous service, so get the dates right before you commit to figures.
• Your small business status: A business employing fewer than 15 people (counting regular casuals) is a small business employer. That status changes the minimum employment period for unfair dismissal, brings the Small Business Fair Dismissal Code into play, and can remove redundancy pay obligations.
• A record of the process so far: For a performance dismissal you should already have warnings, a performance improvement plan and meeting notes. For misconduct you should have an investigation file. If neither exists, the process has effectively already gone wrong.
• A decision-maker and support person arrangements: Decide who will run the meetings and hold the evidence, and expect the employee to bring a support person. Under the Small Business Fair Dismissal Code that person cannot be a lawyer acting in a professional capacity, but in other cases they can be anyone the employee chooses.

The termination process, step by step

Confirm the reason and assemble the evidence

Start with a reason the law recognises. For performance, the employee must have known the expectations and been given a real chance to improve. For misconduct, you must have investigated before deciding. For redundancy, the job itself, not the person, must have disappeared. Write key dates and conversations down as they happen, not after the fact. Where conduct is in question, a show cause letter asking the employee to explain why their employment should not be terminated is standard practice and gives you a documented response to weigh.

Check the contract, award and policies before anything else

Read the documents that govern the employment before you take a single step. What you are looking for:

• warning or disciplinary procedures that must be followed before dismissal
• notice periods that are longer than the minimum under the National Employment Standards
• consultation obligations that apply before a redundancy
• clauses on summary dismissal, garden leave and payment in lieu of notice
• post-employment obligations such as confidentiality and restraints that survive termination

An award or enterprise agreement can also impose a consultation process that, if skipped, stops a redundancy from being genuine under s 389 of the Fair Work Act.

Run a fair process and give the employee a genuine chance to respond

Procedural fairness is where most dismissals are won or lost. In practice it means:

• putting the concerns and the possible outcomes in writing
• giving the employee reasonable time and a genuine opportunity to respond, and actually considering the response before deciding
• allowing a support person at any meeting where dismissal is discussed
• for performance issues, allowing a reasonable improvement period with support and clear expectations where that is appropriate
• for misconduct, running a fair investigation before reaching a view

These mirror the factors in s 387 of the Fair Work Act: whether the person was notified of the reason, given an opportunity to respond, refused a support person, and, for performance, warned beforehand. Where serious allegations are being investigated, standing the employee down without pay is only available in the narrow circumstances set out in s 524: industrial action, a machinery breakdown or a stoppage the employer could not reasonably be held responsible for. It is not a general tool for suspending someone while you investigate.

Give written notice, or payment in lieu

Under s 117 of the Fair Work Act you must give written notice of the day of termination, and either let the employee work out the minimum notice period or pay it out in lieu at their full rate of pay for the hours they would have worked. The minimum notice under the National Employment Standards is:

Add one week if the employee is over 45 and has completed at least two years' service. An award, agreement or contract can require more notice, but never less.

You can have the employee work the notice, place them on garden leave if the contract allows it, or pay in lieu so the employment ends immediately. Payment in lieu must cover what the employee would have earned working the notice, including loadings, allowances and other separately identifiable amounts, not just base salary.

The notice rules do not apply to everyone. Under s 123 of the Fair Work Act they do not cover casual employees, employees dismissed for serious misconduct, or employees engaged for a specified period or task. The Fair Work Ombudsman's guidance on dismissal makes clear that casuals are not entitled to written notice, though it is still best practice to confirm the end of the engagement in writing.

Treat serious misconduct as its own track

Serious misconduct means deliberately behaving in a way that is inconsistent with continuing the employment. The Fair Work Ombudsman lists theft, fraud, assault or sexual harassment, conduct causing serious and imminent risk to another person's health, jeopardising the profits of the business, and refusing to follow a lawful and reasonable instruction as examples. Where serious misconduct is established, no notice or payment in lieu is required. You must still pay wages for time worked and accrued annual leave, and you must still be able to show the investigation and decision-making were fair.

For small businesses, the Small Business Fair Dismissal Code allows summary dismissal without notice or warning where the employer believed on reasonable grounds that the conduct was serious enough to justify immediate dismissal. The code gives theft, fraud, violence and serious breaches of occupational health and safety procedures as examples.

Calculate and pay the final entitlements

Final pay is the step where errors are most common, because different components are treated differently:

• wages for time worked up to the last day
• accrued but untaken annual leave, which under s 90 of the Fair Work Act must be paid out at the base rate on termination
• redundancy pay, if the dismissal is a genuine redundancy and the employee has at least 12 months' service
• long service leave, where a state or territory scheme requires a payout on termination
• any other amounts the award, agreement or contract requires, such as time off in lieu

Redundancy pay under s 119 of the Fair Work Act runs from 4 weeks' pay after 12 months' service up to 16 weeks at nine to ten years, with the table stepping back down to 12 weeks at ten years or more. Small business employers are excluded from redundancy pay, as are employees with less than 12 months' service, under s 121.

Apply PAYG withholding correctly, and check the superannuation treatment of each component before you pay. The rules here are in transition: the ATO's ruling on ordinary time earnings was withdrawn from 1 July 2026 as Australia moves to payday super, so the treatment of termination payments is worth confirming against current ATO guidance or with your payroll adviser. Check the award or agreement for when final pay must be paid, as many set a deadline.

Prepare the exit paperwork

Have these documents prepared before the exit meeting so nothing is left to the last minute:

• a termination letter confirming the decision, the effective date, the notice arrangements and the reason, particularly where performance or conduct is in issue
• a final payslip with a clear breakdown of amounts paid and leave balances cashed out
• an employment separation certificate, completed when the employee or Services Australia asks for one so income support can be assessed
• if you are dismissing 15 or more employees for economic, technological or structural reasons, written notice to Services Australia before the dismissals take effect, as s 530 of the Fair Work Act requires

Run the exit meeting and wind down access

Keep the meeting short, clear and professional. Explain what happens next: when final pay will be made, how company property will be returned, and when system access will stop. Answer reasonable questions without negotiating the decision. Arrange the return of devices, keys and access cards, and reconfirm any ongoing confidentiality, intellectual property and restraint obligations in the contract. Maintain confidentiality about the departure, both for the employee and for the business.

Where people get held up

Four mistakes account for most dismissals that fail on review:

• Terminating before the employee can respond: The Commission's first questions under s 387 are whether the person was notified of the reason and given a chance to respond. Employers who skip this step lose cases they would otherwise win.
• Using "redundancy" as a label: The Commission tests whether the job genuinely no longer needs to be done, whether consultation obligations were met, and whether redeployment within the business or an associated entity was reasonable. A dismissal called redundancy that fails these tests is an unfair dismissal.
• Getting notice wrong: Assuming probation removes the notice entitlement, or paying out notice at base rate instead of the full rate, are both common and both costly. Casuals are the opposite trap: no NES notice is required, but a long-term regular casual can still bring an unfair dismissal claim.
• Assuming the file closes after the exit meeting: Unfair dismissal applications must be lodged within 21 days of the dismissal, and general protections claims have their own 21-day window. Claims can arrive weeks after you thought the matter was finished.

The claims that can follow a dismissal

Two separate avenues sit behind every dismissal, and they have different rules.

Unfair dismissal is available to employees who have completed the minimum employment period, six months, or twelve months for a small business employer, and who are covered by an award or enterprise agreement or earn below the high income threshold. The Commission will consider the factors in s 387 of the Fair Work Act to decide whether the dismissal was harsh, unjust or unreasonable, and a dismissal consistent with the Small Business Fair Dismissal Code is not unfair. Applications must be made within 21 days under s 394, and remedies are reinstatement or compensation capped at the lower of 26 weeks' remuneration or half the high income threshold under s 392.

General protections are separate and broader. Under s 340 of the Fair Work Act an employer must not take adverse action against an employee because they have or exercise a workplace right, such as making a complaint, requesting leave, or asking about casual conversion. Dismissal for a prohibited reason, including discrimination on a protected attribute under s 351, can carry penalties and compensation. Unlike unfair dismissal there is no minimum employment period, so a new starter can bring a claim, and the application must be made within 21 days under s 366.

Where professional help is usually required

Employment lawyers earn their keep before the decision, not after the claim lands. A practitioner will stress-test your proposed dismissal against the s 387 factors and identify gaps in the process while they can still be fixed. They will draft show cause letters, termination letters and any separation agreement, advise on serious misconduct investigations and whether stand down is available, and run the consultation and redeployment analysis for a redundancy. If a claim does arrive, the 21-day windows are unforgiving and a lawyer's first job is usually to get the matter into the Commission's conciliation process and negotiate a resolution before it becomes a hearing.

What decides whether a termination holds up

The factor that determines whether a dismissal survives scrutiny is the record of the process, and specifically whether you can show the employee was told the reason and given a genuine opportunity to respond before you decided. Correct notice, accurate final pay and a well-run exit meeting all matter, but none of them rescue a dismissal where the employee was never put on notice of the problem and never heard. That is the step most often skipped, and it is the first thing the Commission looks for.

The rest of the process is mechanical once that foundation exists: confirm a valid reason and evidence it, check the contract, award and policies, give written notice or payment in lieu in the right amount, pay final entitlements correctly, and keep the paperwork so the decision can be defended. Run the process fairly and document it, and you have done what the law asks of you. Where the situation is contentious, whether serious misconduct, medical capacity or a long-serving employee, take advice before acting rather than after the claim arrives.