How Ending Employment Works Under the Fair Work Act 2009

Every employment relationship ends eventually, and in Australia the end is regulated in detail. The Fair Work Act 2009 (Cth) (the Act) sets out the national minimum standards that apply when employment is terminated, covering how much notice an employer must give, what must be paid out, and when a dismissal can be challenged. The rules exist for a reason: they stop employers from ending employment arbitrarily, and they give employees a pathway to challenge a termination they consider unfair or unlawful.

The Act applies to most private-sector employers and employees in the national workplace relations system, which covers the vast majority of Australian businesses. On top of the Act, an employment contract, modern award or enterprise agreement can impose extra requirements, such as longer notice periods or an obligation to consult before making changes. This guide walks through how the scheme operates: who is involved, the routes employment can end, the notice and payment obligations, and the claims that can follow if the process goes wrong.

The players when employment ends

Termination is not just an interaction between an employer and an employee. Several institutions sit around the relationship, and each has a role:

The employer: decides whether to end the employment, must follow the process the Act and any award, agreement or contract require, and must pay what is owed.
The employee: can resign by giving the notice their contract or award requires, and can challenge a dismissal they consider unfair or unlawful.
The Fair Work Commission (FWC): the tribunal that hears unfair dismissal applications and general protections disputes, decides whether a dismissal was harsh, unjust or unreasonable, and can order reinstatement or compensation.
The Fair Work Ombudsman (FWO): the regulator that investigates breaches of the Act's minimum standards, including unpaid notice, final pay and redundancy entitlements, and can take employers to court for penalties.
The courts: impose civil penalties for contraventions such as unlawful termination and adverse action, which the FWO or an affected employee can pursue.

The size of the business matters throughout. An employer with fewer than 15 employees (counting casuals employed on a regular and systematic basis) is a small business employer under the Act, and different rules apply to them, including a longer qualifying period for unfair dismissal claims and an exemption from redundancy pay.

The ways employment comes to an end

The Act's protections are triggered by dismissal, which is termination at the employer's initiative. There are four common routes, and each triggers different obligations:

Resignation: the employee ends the relationship. Their notice obligations come from the contract or applicable award or agreement, not from the Act's notice rules.
Dismissal for performance, conduct or capacity: the employer ends the relationship for a reason related to how the employee performs or behaves. This is the route that most often attracts unfair dismissal claims, because it requires both a valid reason and a fair process.
Summary dismissal for serious misconduct: the employer ends the relationship immediately, without notice, because of conduct such as theft, fraud, assault or a serious safety breach. No notice is required, but the employer still needs to establish the facts and give the employee a chance to respond before deciding.
Redundancy: the employer no longer requires the job to be done by anyone because of changes in operational requirements. This is treated differently from other dismissals, and is examined separately below.

Whatever the route, the Act's obligations around notice, final pay and record keeping apply, and the employer carries the risk if the process is rushed or skipped.

Notice: the minimum periods and payment in lieu

Section 117 of the Act requires an employer to give written notice of the day of termination, which cannot be a date before the notice is given. The notice period depends on how long the employee has worked for the employer:

Not more than 1 year of service: 1 week
More than 1 year but not more than 3 years: 2 weeks
More than 3 years but not more than 5 years: 3 weeks
More than 5 years: 4 weeks

An employee who is over 45 and has completed at least 2 years of continuous service gets one extra week on top of those periods. Periods of casual employment do not count towards continuous service for these purposes.

Instead of working out the notice period, an employer can pay the employee in lieu of notice, at the full rate of pay for the hours they would have worked during the notice period. This is a common choice when an employer wants the employment to end immediately, but the contract should allow it and the payment must be calculated correctly, including any superannuation implications.

The notice rules do not apply where the dismissal is for serious misconduct, and the Act excludes certain categories of employees, such as casual employees, from these protections. When an employee resigns instead, section 117 does not apply: the notice they must give is set by their contract or the applicable award or agreement. If an employer wants to deduct from final wages because an employee did not give enough notice, the deduction must be permitted by the relevant instrument and comply with section 324 of the Act, which only allows deductions that are authorised in writing and principally for the employee's benefit, or authorised by an enterprise agreement, modern award, FWC order or law. A contract term that allows a deduction mainly for the employer's benefit can be void under section 326 if it is unreasonable.

Final pay: what must be paid on the way out

When employment ends, the employer must pay everything that is owed. That starts with wages up to the last day worked, but it rarely stops there:

Annual leave: any accrued and untaken paid annual leave must be paid out on termination, at the rate that would have applied had the employee taken the leave.
Long service leave: where the employee has qualifying service, long service leave entitlements under the relevant state or territory legislation must also be paid out.
Redundancy pay: if the termination is a genuine redundancy, redundancy pay is usually required.

Under section 119 of the Act, redundancy pay is calculated on the employee's base rate of pay for their ordinary hours and scales with continuous service: 4 weeks for at least 1 year of service, 6 weeks for 2 years, 7 weeks for 3 years, 8 weeks for 4 years, 10 weeks for 5 years, 11 weeks for 6 years, 13 weeks for 7 years, 14 weeks for 8 years, 16 weeks for 9 years, and 12 weeks for 10 years or more.

Two important exclusions apply. First, an employee with less than 12 months of continuous service is not entitled to redundancy pay. Second, a small business employer is exempt from the redundancy pay obligation entirely. The FWC can also reduce redundancy pay if the employer has obtained other acceptable employment for the employee, or genuinely cannot pay.

Unfair dismissal: eligibility, the test and the 21-day clock

A dismissed employee can apply to the FWC for an unfair dismissal remedy, but only if they are protected from unfair dismissal. Under section 382 of the Act, an employee is protected if they have completed the minimum employment period and either a modern award or enterprise agreement covers them, or their annual earnings are below the high income threshold, which is $183,100 for the 2025-26 financial year, up from $175,000 the year before.

The minimum employment period is 6 months for most employers, but 12 months where the employer is a small business employer. This is why probation periods are common: a new employee simply does not have access to unfair dismissal protection until they complete the qualifying period. That does not mean anything goes during probation, because protection from unlawful termination and adverse action applies from day one.

Section 385 of the Act says a dismissal is unfair if it was harsh, unjust or unreasonable, and was not a genuine redundancy and not consistent with the Small Business Fair Dismissal Code. In deciding whether a dismissal was harsh, unjust or unreasonable, the FWC must consider the factors in section 387, including whether there was a valid reason related to the employee's capacity or conduct, whether the employee was notified of that reason and given an opportunity to respond, whether they were unreasonably refused a support person, whether they were warned about unsatisfactory performance, and the size of the employer's enterprise and its access to human resources expertise.

Timing is critical. Under section 394, an unfair dismissal application must be lodged within 21 days of the dismissal taking effect, and the FWC will only extend that period in exceptional circumstances. If the claim succeeds, the FWC can order reinstatement, or compensation capped at the lesser of 26 weeks of the employee's remuneration or half the high income threshold.

Unlawful termination and adverse action: the reason matters

Unfair dismissal is about process and fairness. Unlawful termination and adverse action are about the reason for the decision, and they are a separate risk. Under section 340 of the Act, an employer must not take adverse action against an employee because the employee has a workplace right, has exercised one, or proposes to exercise one. Workplace rights include things like taking sick leave, making a complaint or inquiry about their employment, and being a member of, or representing, a union.

Section 351 goes further and prohibits adverse action because of protected attributes such as race, sex, age, pregnancy, disability, marital status or family responsibilities. These claims do not depend on how long the employee has worked or how much they earn, which makes them a live risk even during probation. Crucially, section 361 reverses the onus of proof: if an employee alleges the dismissal happened for a prohibited reason, it is presumed that it did, unless the employer proves otherwise. That presumption is why contemporaneous records of the genuine reasons for a decision are so important.

The practical consequence is that performance and conduct issues must be handled separately from protected attributes and activities. If an employee who has just complained about their pay is dismissed, the employer will need to prove the dismissal was about performance, not the complaint, and an award of penalties and compensation is possible if they cannot.

Genuine redundancy: what makes it defensible

Redundancy is the one dismissal route that can be immune from unfair dismissal, but only if it meets the test for a genuine redundancy in section 389 of the Act. A dismissal is a genuine redundancy if the employer no longer requires the job to be performed by anyone, because of changes in the operational requirements of the enterprise, and the employer has complied with any obligation in the applicable modern award or enterprise agreement to consult about the redundancy.

The consultation obligation is a common point of failure. Most modern awards and enterprise agreements require the employer to notify affected employees of major workplace change, discuss the change and any measures to avoid or reduce its effects, and consider feedback before final decisions are made. Skipping that step can convert what looks like a redundancy into an unfair dismissal.

The second point of failure is redeployment. Under section 389, a dismissal is not a genuine redundancy if it would have been reasonable for the employee to be redeployed within the employer's enterprise or the enterprise of an associated entity, including into a different role, location or set of hours. If the FWC finds the dismissal was not a genuine redundancy, the ordinary unfair dismissal remedies, including reinstatement or compensation, are available.

Where terminations commonly go wrong

Most disputes trace back to a handful of recurring mistakes:

No written notice: Section 117 requires written notice of the day of termination. Verbal terminations create immediate evidentiary problems if the date or the reason is disputed.
Missing the 21-day window: An employee who wants to challenge a dismissal must act quickly, and employers should expect applications within weeks, not months.
Treating a redundancy as a performance dismissal: If the job still needs to be done by someone, it is not a redundancy, and dismissing for performance without warnings and an opportunity to respond invites an unfair dismissal claim.
Assuming casuals and probationers have no rights: Casual employees and employees in their first six months may be unable to claim unfair dismissal, but they can still bring adverse action claims, and casuals with regular, systematic work can accumulate service that counts for other purposes.
Ignoring the Small Business Fair Dismissal Code: Small business employers who follow the Code's steps for dismissal have a strong defence, but those who dismiss without a genuine reason or a fair process can still face claims.
Sparse records: The reverse onus in adverse action claims and the FWC's focus on process in unfair dismissal claims both mean that file notes, warnings and meeting records are the employer's main defence.

Where a lawyer fits in

A lawyer adds the most value before the decision is made, not after a claim lands. That means reviewing the contract and applicable award before issuing notice, checking consultation obligations before a restructure, drafting the termination letter so it records the genuine reason, and stress-testing whether the process would survive scrutiny under section 387. When a claim is made, a lawyer can manage the FWC's conciliation process, advise on the strength of the case and the compensation exposure, and negotiate a settlement that avoids the cost and publicity of a hearing.

Getting advice early is usually far cheaper than defending an unfair dismissal or adverse action claim, where the potential outcomes include reinstatement, compensation and penalties. A short conversation before you issue the notice can identify the steps that make a dismissal defensible, or the alternative route that avoids the risk entirely.

The genuine reason and a fair process

Every dismissal decision comes down to the same pair of questions: is there a genuine reason, and can you prove the process was fair? The reason has to be real and the process has to be documented, and the two are judged together by the FWC. The cost of getting it wrong is not just the compensation order, it is the time, distraction and reputational damage of a claim. If you are facing a difficult termination, a restructure or a performance issue that is heading towards dismissal, that is the point to take the documents to a lawyer and test the process before the employment ends, because once the notice is given, the 21-day clock starts and the options narrow quickly.