The lawful termination process in Australia, a step-by-step guide

You have made the call. The employee's performance has not improved despite months of support, or the conduct is serious enough that you cannot keep them on, or a restructure means the role no longer exists. Ending the employment is now a legal process with a fixed shape, and the way you run it over the coming days and weeks will determine whether it ends cleanly or in a Fair Work Commission application.

Done properly, the process leaves you with a documented reason, a fair hearing for the employee, correct notice and final pay, a termination letter and a clean handover of property and access. Many owners assume that paying out the notice period or having a probation clause makes a dismissal safe. It does not. There is no at-will employment in Australia: the reason and the process are both tested, and the Fair Work Act 2009 (Cth) (the Act) sets the minimum standards that apply to almost every dismissal.

Before you begin: what you need in place

Termination is one of those processes where the groundwork determines the outcome, so assemble these before you send a single letter:

• The reason: a genuine, evidence-backed reason that fits one of the recognised categories: conduct, capacity or performance, or redundancy.
• The instruments: the employment contract, any modern award or enterprise agreement covering the employee, and your workplace policies, so you know the notice period, consultation obligations and disciplinary steps you have committed to.
• The records: start date, continuous service, leave balances and pay history, because notice, redundancy pay and final pay are all calculated from them.
• The eligibility picture: how long the employee has been employed, whether you employ fewer than 15 staff, and whether an award or agreement covers the role, because these decide which protections apply.
• The evidence: performance reviews, warnings, improvement plans, witness statements or system logs that support the reason.
• A decision on who runs the process: one manager to handle the investigation and meetings, and early legal advice for high-risk exits such as senior roles or disputed conduct.

The items that trip employers up are usually the award and the eligibility picture. Many small businesses do not realise an award covers the employee, and many assume a probation period or a casual label removes protection. Both assumptions are wrong, and both tend to surface only after the dismissal.

The steps to a lawful termination

The law does not prescribe a single script, but the Fair Work Commission tests every dismissal against the same sequence: a valid reason, notice of the problem, a real chance to respond, a genuine decision and correct pay. Work through the steps in that order.

Establish the valid reason and gather the evidence

A lawful dismissal starts with a reason you can articulate and back with records. The recognised categories are conduct (theft, harassment, serious or repeated breaches of policy), capacity or performance (the employee cannot perform the inherent requirements of the role, or performance is unsatisfactory after reasonable support), and redundancy (the role is genuinely no longer required). Under s 385 of the Act, a dismissal is unfair if it was harsh, unjust or unreasonable, and the reason is where that assessment begins. If the reason is really "I don't like working with them", stop and reconsider, because that is the fact pattern that produces unfair dismissal and general protections claims.

For performance and capacity, gather the reviews, warnings and improvement plans. For misconduct, collect witness statements, system logs and any other material before you raise the issue, so you can put the full picture to the employee rather than drip-feed it.

Check the contract, award and agreement

Before any allegation is put, read the instruments that govern the employment. The contract tells you the notice period, any probation terms and any post-employment restraints. The award or enterprise agreement may impose more: consultation obligations before redundancy, specific disciplinary procedures, or a higher notice entitlement. Your own policies matter too, because a policy you promised to follow becomes part of the process the Commission will expect you to have followed.

Work out who is protected

Not every dismissal is reviewable, and knowing where the employee sits sets your risk level. Under s 383 of the Act, an employee must complete a minimum employment period before they can bring an unfair dismissal claim: six months for most employers, rising to 12 months if you are a small business employer with fewer than 15 employees. If you are a small business, a dismissal that is consistent with the Small Business Fair Dismissal Code (s 388 of the Act) is not an unfair dismissal, so the code's steps become your process. Employees above the high income threshold set each year by the Commission are excluded from unfair dismissal protection unless an award or agreement covers them. Casuals can claim unfair dismissal in some circumstances, generally where their engagement was regular and systematic with a reasonable expectation of continuing work, and every employee is protected from adverse action, including dismissal, because they exercised a workplace right such as making a complaint or taking leave (ss 340 to 342 of the Act).

None of this changes the fair process you should run. It changes how much rides on getting it right.

Put the case to the employee and take the response

Procedural fairness is the step employers most often rush, and it is the step the Commission scrutinises hardest. In writing, tell the employee what the concerns are, give them the evidence, and give them a reasonable time to respond, in writing or at a meeting, with a support person if they ask for one. Then genuinely consider the response before you decide. For performance issues, this step should not be a surprise: the employee should already have had clear expectations, support, time to improve and warnings that their job was at risk.

If you are investigating serious misconduct, you may suspend the employee while the investigation runs, but suspension is normally on full pay. Standing an employee down without pay is a much narrower power: s 524 of the Act allows it only where the employee cannot usefully be employed because of industrial action, a machinery breakdown or a work stoppage that is not your responsibility. Suspicion of misconduct is not on that list, so do not use stand down as an investigation tool.

Decide the outcome and the exit type

Once the response is in and considered, decide the outcome: termination, a final warning, or redeployment if the role is redundant. If the decision is termination, choose how the employment ends. The default is notice, either worked or paid out. Payment in lieu of notice is common where you want the employee off the premises immediately. Garden leave, where the employee stays employed but does not work out the notice period, suits exits where you want to protect client relationships. Summary dismissal without notice is reserved for serious misconduct, and the conduct has to meet a high threshold, so it should only ever follow a proper investigation and a fair opportunity to respond. For negotiated exits, a separation agreement with a deed of release can settle entitlements and claims in exchange for confidentiality, return of property and agreed restraints.

Give notice or pay in lieu

Under s 117 of the Act you must give written notice of the day of termination, and the gap between notice and the last day must be at least the minimum period set out in the Act: one week for up to one year of continuous service, two weeks for one to three years, three weeks for three to five years, and four weeks for five years or more, increasing by one week if the employee is over 45 and has at least two years of service. Your contract or award may require more, and the longer period applies. If you pay in lieu, the payment must be at least what the employee would have earned had they worked the notice period. Notice can never be skipped to avoid the process: for almost all employees, it is a legal floor, not a courtesy.

Meet with the employee and confirm in writing

Deliver the decision in person where you can. Keep the meeting professional and brief: state the reason, confirm the last day, explain the entitlements being paid, ask for company property and outline what happens next. Allow a support person if requested. Follow up the same day with a termination letter that records the reason, the process you followed, the notice or payment in lieu, the final pay details and the logistics of returning property and access. The letter is not just a courtesy: it is the document a Commission member will read first if the dismissal is challenged.

Pay final entitlements correctly and on time

Final pay must include everything the employee is owed: wages up to the last day, accrued but untaken annual leave (which the Act requires you to pay out under s 90(2)), any leave loading the award or agreement requires, long service leave under state or territory law once the qualifying period is met, and notice or redundancy pay. Commission and bonus amounts are payable if the contract says so. Deadlines for final pay vary between states and territories, and some awards and agreements impose their own timing, so check what applies to you; the safest course is to pay on the last day or within days of it.

Deductions from final pay are tightly restricted. Under ss 323 and 324 of the Act, an amount can only be deducted if the employee authorises it in writing and it is principally for their benefit, or if it is authorised under an agreement, award or law. You cannot withhold pay because a laptop or a company phone has not come back. Treat property recovery as a separate step, not a bargaining chip.

If the role is redundant, follow the genuine redundancy path

Redundancy is not an easier exit, it is a different one. Under s 389 of the Act, a dismissal is a genuine redundancy only if the employer no longer requires the job to be performed by anyone because of changes in operational requirements, the employer has complied with any award or enterprise agreement obligation to consult, and it would not have been reasonable to redeploy the employee within the business or an associated entity. If those elements are missing, the dismissal is not a genuine redundancy and can be challenged as unfair, no matter what the letter says.

Redundancy pay under the National Employment Standards starts at four weeks for one to two years of service and rises with service, up to 16 weeks for nine to ten years. It is not payable where the employee has less than 12 months of continuous service, and small business employers are exempt (s 121 of the Act), though you must still consult and consider redeployment to make the redundancy genuine. The Fair Work Commission can also reduce redundancy pay where you have obtained other acceptable employment for the employee or genuinely cannot pay (s 120 of the Act), but that requires an application, not a self-help discount.

Close out property, access and records

The final step is administrative, and it matters more than it looks. Recover company property, revoke system and building access, and update your registers. Provide the final payslip, and if the employee plans to claim income support, expect to complete a Services Australia separation certificate; a certificate of employment should be provided if asked. Then keep the file. An unfair dismissal application must be lodged within 21 days of the dismissal taking effect (s 394 of the Act), so your record of the reason, the process and the payments will be tested almost immediately, and general protections claims run on a similarly short clock.

Where the process commonly comes unstuck

The same mistakes recur across dismissal claims, and each one is avoidable:

• Treating probation as a free pass: a probation clause does not stop the clock on the minimum employment period, and it does not remove the need for a valid reason and a fair hearing. Avoid this by using probation for what it is: a period of documented, regular feedback, not a dismissal shortcut.
• Standing the employee down without pay on suspicion: s 524 of the Act limits unpaid stand down to industrial action, machinery breakdowns and work stoppages outside your control. Avoid this by suspending on pay while the investigation runs, and never presenting suspension as a penalty.
• Withholding final pay until the laptop comes back: deductions need written authorisation and must be principally for the employee's benefit. Avoid this by chasing property through the letter and the handover checklist, not through the payslip.
• Dressing a personality clash up as redundancy: s 389 requires the role to be genuinely no longer required, with consultation and redeployment considered. Avoid this by only using redundancy where the operational change is real and documentable.

When a lawyer should be in the room

Most straightforward exits can be run by a capable manager with the right templates. Engage a lawyer before the process starts where the stakes are higher: senior roles, long service, disputed misconduct, employees near the unfair dismissal thresholds, or any situation where you suspect the employee will claim the real reason was a workplace right they exercised. A lawyer will review the reason and the evidence, tell you which regime applies, and draft the show cause letter, termination letter or separation agreement so that every step creates a defensible record. For redundancies, a lawyer can structure the consultation and assess whether redeployment is genuinely available across the business and associated entities. If an application does land at the Fair Work Commission, the 21-day unfair dismissal clock and the general protections regime make it important to get advice early, because the difference between a negotiated settlement and a defended hearing is usually measured in the first weeks.

The reason and the record decide the outcome

The single thing that determines whether a termination survives is not the letterhead or the wording of the notice, it is the record of a fair process: a valid reason you can articulate and evidence, the concerns put to the employee in writing, their response genuinely considered, and the outcome confirmed in writing with pay calculated correctly. The 21-day window for an unfair dismissal application means that record is tested almost immediately, before the emotion has faded and while the gaps in the file are still obvious.

The process, in short, is this: check the contract, award and policies before you start; work out who is protected and which regime applies; put the case in writing and genuinely consider the response; give the correct notice or payment in lieu; pay all final entitlements on time without unauthorised deductions; follow the genuine redundancy path where the role, not the person, is the problem; and keep the file. Do that, and you have done everything the law requires of you. Where the situation is high-risk or the evidence is thin, take the file to a lawyer before you act, because advice bought before the dismissal is far cheaper than a remedy ordered after it.