How to write and issue a termination letter in Australia

The decision is made. A role is being cut, a performance problem has not improved, or conduct has crossed a line, and you have resolved to end an employee's employment. Before anyone in the business signs anything, you need a termination letter that is clear, factual and accurate, and a process around it that can stand up to scrutiny if the dismissal is ever challenged.

What you end up with is a short written notice that confirms the decision, the effective date, how notice is being handled and what happens next, plus a paper trail showing the process that produced it. A common assumption is that the letter itself makes a termination lawful. It does not. Under the Fair Work system, what makes a dismissal defensible is the process that went before the letter, and the letter is largely evidence that the process happened.

Before you start: what to have in place

A termination letter is written at the end of a process, not the start. Before drafting, tick off these prerequisites:

• The employment contract: for the employee, plus any modern award or enterprise agreement that applies to the role. These set the notice period, any payment in lieu clause, garden leave rights and consultation obligations.
• A settled reason for the termination: the records that support it, including warnings, performance notes, investigation findings, or the documented operational change behind a redundancy.
• A fair process already completed: for performance or conduct, that means the employee was told of the concerns, given a chance to respond with a support person if they asked, and the response was genuinely considered before the decision.
• A notice decision: how much notice applies under the National Employment Standards (NES), whether it will be worked, paid out, or skipped entirely for serious misconduct.
• A final pay calculation: wages to the last day, accrued annual leave, and any redundancy pay the employee is entitled to.
• A signatory: with the authority to issue the letter under the contract or the business's delegation rules.

The prerequisites that actually trip businesses up are the award consultation obligations and the warning records, because both are easy to assume existed and hard to reconstruct after the event. If a redundancy letter goes out without the consultation that the award requires, the redundancy may not be genuine in law.

The steps to a compliant termination letter

Check the contract and the award or agreement that applies

Start by pulling the employee's contract and working out which industrial instrument covers the role. The NES set a floor, but your contract or award can do better, and you must follow the higher standard. Look specifically for:

• the notice period and whether the contract allows payment in lieu of notice
• a garden leave clause that lets you direct the employee to stay away during notice while remaining employed and paid
• any consultation clause in the award or enterprise agreement, which for redundancies is a legal requirement, not a courtesy
• post-employment obligations such as confidentiality and restraints, which the letter should remind the employee of

Getting this step wrong flows into everything else. Notice periods and consultation steps are the two areas where termination letters most often state something the business cannot actually deliver.

Settle the reason and gather the evidence

Every termination letter names a reason, and that reason needs records behind it. For performance issues, that means written expectations, feedback and warnings showing the employee was told what was required and given a chance to improve. For misconduct, it means investigation notes and the employee's responses. For redundancy, it means the operational change that meant the job no longer needed to be done by anyone, and the redeployment options that were considered.

If the reason cannot be stated briefly and factually from documents you already hold, pause. A termination letter is not the place to discover that the reason is vague.

Run the fair process before you write anything

The Fair Work Commission will find a dismissal unfair if it was harsh, unjust or unreasonable, and in deciding that it must consider the factors in s 387 of the Fair Work Act 2009 (Cth): whether there was a valid reason related to capacity or conduct, whether the employee was notified of that reason, whether they were given an opportunity to respond, whether a support person was unreasonably refused, and, for poor performance, whether the employee was warned before dismissal.

For a redundancy, the same idea is expressed in s 389 of the Fair Work Act 2009 (Cth). A dismissal is only a genuine redundancy if the job was no longer required due to changes in operational requirements, the consultation obligation in any applicable award or agreement was complied with, and it would not have been reasonable to redeploy the employee elsewhere in the business or an associated entity. Skip consultation or overlook an obvious redeployment option and the redundancy defence fails, leaving the dismissal open to challenge as unfair.

Small businesses with fewer than 15 employees have their own path: if a dismissal is consistent with the Small Business Fair Dismissal Code, it cannot be an unfair dismissal. The code still requires a valid reason and, for conduct issues, a reasonable investigation and an opportunity to respond.

Decide how notice will work

Notice is a legal entitlement under s 117 of the Fair Work Act 2009 (Cth). The minimum period depends on continuous service: one week for a year or less, two weeks for more than one year up to three years, three weeks for more than three years up to five years, and four weeks for more than five years. An employee over 45 with at least two years of service gets one additional week.

You can direct the employee to work out the notice period, or pay it out. Payment in lieu of notice must be at least the amount the employee would have earned at their full rate of pay for the notice period, which includes loadings, allowances and penalties they would have received, not just base pay.

Notice is not required at all for serious misconduct such as theft, fraud, sexual harassment or assault, and the NES notice rules also do not apply to casual employees, employees on fixed-term or seasonal arrangements, and some others. The Fair Work Ombudsman's notice of termination and redundancy pay fact sheet sets out who is excluded. A summary dismissal for serious misconduct still requires a reasonable investigation and a fair chance for the employee to respond before you act.

If the contract allows it, garden leave is another option: the employee stays employed and paid during the notice period but is directed to stay away from work, protecting clients and confidential information.

Draft the letter

With the process done and notice decided, the letter itself is straightforward. Include:

• Employee details: full name, position and location.
• The decision and effective date: that employment is terminated and the day it takes effect.
• The reason: a concise, factual statement. For performance, refer to the discussions and warnings. For redundancy, refer to the operational change and the consultation that occurred. For misconduct, refer to the conduct and the investigation.
• Notice or payment in lieu: whether notice will be worked, or the payment in lieu amount and when it will be paid.
• Final pay: the components the employee will receive, such as wages to the last day and accrued annual leave.
• Property and access: what to return, by when, and when system access ceases.
• Ongoing obligations: confidentiality, return of confidential information and any restraints under the contract continue after employment ends.
• Contact point: who the employee can ask questions of, and any support available such as an employee assistance program.

Keep the tone respectful and the content factual. Avoid emotive language, speculation about the employee's motives, and any claim you cannot back with a record. If the letter is later tendered in the Fair Work Commission, it will be read as the business's own account of what happened and why.

Deliver the letter

The Fair Work Act 2009 requires written notice of the day of termination, and the notice cannot specify a termination day before the notice is given. The best practice is to tell the employee in person first, then hand over the letter and follow up with an email copy. The Fair Work Ombudsman confirms written notice can be given electronically, for example by email, if the employee consents to electronic communication and the notice is readily accessible to them.

A meeting is also the moment to confirm logistics: when property must be returned, when access is cut off, and who the employee should contact with questions. Keep the meeting short, calm and on the facts of the letter.

Calculate and pay final entitlements

Final pay generally includes wages up to the termination date and payment for any accrued but untaken annual leave, which s 90 of the Fair Work Act 2009 (Cth) requires the employer to pay out when employment ends. Long service leave is governed by state and territory law, so check the rules in your jurisdiction. Redundancy pay, where it applies, follows the table in s 119 of the Fair Work Act 2009 (Cth): from four weeks' pay for between one and two years of service, rising to 16 weeks for nine to ten years, with 12 weeks for ten years or more.

Not every redundant employee gets redundancy pay. Under s 121 of the Fair Work Act 2009 (Cth), it is not payable to employees with less than 12 months of continuous service or to employees of a small business, meaning an employer with fewer than 15 employees at the time notice is given. An award or enterprise agreement may provide more.

Itemise the components and the calculation basis in the letter or in a separate breakdown. Underpaying notice, annual leave or redundancy pay is one of the most common ways a defensible dismissal turns into a claim against the business.

Close out access, property and post-employment obligations

The final step is administrative. Collect company property such as devices, keys, cards and documents by the agreed date, disable system access on the final day, and confirm the employee's ongoing confidentiality and restraint obligations in writing. Internally, reassign the employee's responsibilities so the business keeps operating. Each of these steps should be recorded, because they form part of the same paper trail as the letter.

Where businesses get held up

Even when the rest of the process is sound, four mistakes recur in practice:

• Skipping redundancy consultation: the award or agreement requires it, and without it the redundancy is not genuine under s 389. Consult before the letter, and reference the consultation in the letter.
• Writing vague or emotive reasons: reasons like "not a good fit" invite challenge. State the facts you can support with records.
• Getting notice and leave calculations wrong: the 45-plus extra week of notice and the annual leave payout are commonly missed, and both are easy to verify before the letter goes out.
• Not recording the process: if there is no record that the employee was warned, heard and given a chance to respond, the Fair Work Commission has little reason to believe it happened.

When to bring in a lawyer

A lawyer is worth engaging before the letter in the situations where the stakes are highest: allegations of serious misconduct, any risk of discrimination or adverse action claims, dismissals related to illness or injury, redundancies in a business with consultation obligations, and senior employees with restraints, incentives or long service. A practitioner will review the contract and award, assess the dismissal against the s 387 factors and the genuine redundancy test, advise on whether the evidence supports the reason, draft or review the letter and final pay breakdown, and, where the parties agree to separate, put together a settlement agreement or deed of release that closes off future claims.

What decides whether your termination holds up

If the dismissal is ever challenged, the Fair Work Commission will not ask whether the letter was politely worded. It will ask whether there was a valid reason and whether the employee was given notice of it, a chance to respond and, for performance, a warning, and it will weigh the records that prove those things. The letter is your summary of a process that should already be finished and documented before you write a word.

In short: check the contract and award, settle the reason on the evidence, run a fair process, work out notice and final pay correctly, draft a factual letter, deliver it in person, and close out access and property. Get the process right and the letter writes itself; get it wrong and no letter can save the dismissal from being found unfair.