Terminating employment in Australia: how to get the process right

The correct process for terminating a worker’s employment in Australia will depend heavily on why you’re ending the relationship. Different scenarios - poor performance, misconduct, redundancy etc. - are all treated differently in the eyes of Australian employment law, so getting the process right is key.

It’s not legal to fire an employee on-the-spot in Australia, unless the misconduct is so serious you must remove the person from the business immediately. Ending employment without a valid reason or taking steps to investigate and resolve the problem first could leave you exposed to unfair dismissal or general protections claims, which can also be costly to resolve. They could also result in the Fair Work Commission (FWC) ordering you to pay damages to the employee, or even to reinstate them.

If you are considering terminating a worker’s employment, the first step is to do your homework and make sure you’re well prepared.

This post breaks down key information about termination and Australian employment law to help you understand your obligations and navigate the choppy waters of terminating an employment contract.

The keys to termination of employment in Australia: what you need to do no matter what

Regardless of the reason for termination, making sure you check these 5 boxes will help ensure you stay on the right side of the Fair Work Act and minimise your exposure to risk.

1. Have a valid reason for your decision, e.g. consistently poor performance, repeated misconduct, genuine redundancy.

2. Investigate issues when they arise and address them using proper performance management or disciplinary procedure.

3. Always follow fair and reasonable process and document it as you go.

4. Once you intend to terminate employment, you need to:

   1. Inform the employee in writing.

   2. Allow them an opportunity to respond.

   3. Consider their response before making a final decision.

5. Refer to the relevant modern award or registered agreement and the employee’s employment contract and follow all the required steps in ending their employment, e.g. minimum notice period (or payment in lieu of notice), final payments, redundancy pay (if applicable).

Also remember that ending employment isn’t always as obvious as informing the person they no longer have a job. A worker could be considered dismissed if you:

• Give them no choice but to quit (also known as forced resignation).

• Act as though they were fired, e.g. by not giving them any more shifts.

• Demote or transfer them to a role that pays less, has a different location, or different duties or working conditions.

When is it acceptable to fire someone in Australia?

You can acceptably dismiss an employee when you have a valid reason for doing so and you have been fair and reasonable throughout the process.

You cannot fire a worker for discriminatory or prohibited reasons (e.g. because of their race, sex, age, religion, disability, pregnancy, being away from work because of sickness or injury) or without proper notice (except in the case of proven serious misconduct).

Termination must be fair and reasonable

The Fair Work Act requires that termination process must not be harsh, unjust or unreasonable. This means you must have a genuine reason and be able to clearly demonstrate the reason for dismissing an employee. Valid reasons may include:

• Repeated misconduct - When an employee’s behaviour is repeatedly out of line with expectations and all efforts to improve the conduct (through the formal disciplinary process) have failed.

• Serious misconduct - When a single instance of misconduct is so bad it is a serious risk to health & safety, the business’ reputation or profits, or is inconsistent with continuing the person’s employment, e.g. theft, fraud, assault, sexual harassment.

• Continued poor performance - When all attempts to remedy an employee’s underperformance in the job (through performance management) have failed.

• Commercial reasons (redundancy) - when you genuinely do not need an employee to perform a role because of changes in the business’ operational requirements. You must also explore all avenues to redeploy the employee before terminating employment.

Whatever the reason for termination, you must be committed to fair process, which includes advising the employee of any allegations, giving them a reasonable opportunity to respond, and keeping an open enough mind to consider the employee’s response before determining an appropriate outcome, which may include termination.

Tailor your response to the level of severity

Before doing anything to address alleged conduct or performance concerns, you need to consider how serious the employee’s breaches are and then choose an appropriate response.

We always recommend separating performance concerns from misconduct, so you can handle it in the correct way.

In the first instance of misconduct, you may not need to take disciplinary action and instead address the matter using informal counselling. Similarly with less-serious performance issues, coaching may well be the best initial response.

Communication is key and informal management approaches should serve to let the employee know their behaviour or performance is unacceptable and needs to improve. You can then work with the person to understand what is going on and put measures in place to obtain the desired improvement.

However, if you have already tried informal approaches and there has been no improvement in the employee’s conduct or performance, then formal responses are essential.

The disciplinary process for responding to misconduct

The disciplinary process in Australia involves 3 main steps:

1. Formally notifying the employee of what has allegedly occurred - present your concerns in writing, what the potential outcome of the alleged conduct could be (e.g. a written warning or dismissal), and invite them to provide a response (typically within 24 to 48 hours).

2. Employee’s response meeting - give the employee an opportunity to give their side of the story for you to consider along with all the other information at hand (allow the employee to bring a support person with them if they wish).

3. Confirm the decision and inform the employee. Disciplinary outcomes may include:

   1. Written warning.

   2. Final written warning.

   3. Termination.

   4. Informal response, such as a reprimand.

   5. No action.

The appropriate outcome will largely be determined by considering the seriousness of the misconduct. For example, the Fair Work Regulations define serious misconduct and in such an instance, you may have reasonable grounds to terminate the employee without notice.

However, for matters that are less serious, it may be appropriate to consider other factors, such as the employee’s tenure, history, and whether they had been given advance notice that the conduct was inappropriate, such as through a policy.

Read our article on the disciplinary process for more detail.

Formal performance management

If you have tried more informal methods to correct employee underperformance without success, formal performance management tools, such as Performance Improvement Plans (PIPs), are the next step.

PIPs provide a structured process to improve poor performance, where you consult with the employee, agree on specific and realistic goals, and how achievement will be assessed. You should identify any training or assistance they may need, reasonable timeframes, and schedule follow-up meetings. It is also essential the person understands the potential consequences of not improving, e.g. a formal warning.

If the worker does not show the desired improvement at the end of the PIP, you could consider running consecutive PIPs and/or issue formal written warnings.

Dismissal with notice or pay in lieu of notice

This should generally be reserved for serious breaches of the employment contract or in circumstances where an employee refuses or is unable to modify their behaviour.

In instances other than serious misconduct, when you notify an employee of their termination, you will either provide them notice of the termination date or decide to pay the employee in lieu of them working the notice period.

You should consult the employee’s contract, the National Employment Standards (NES), or the relevant modern award to determine how much notice is required. Notice is based on the length of continuous service and the NES (and most modern awards) provide these minimum notice periods:

• 1 year or less of continuous service - 1 week minimum notice.

• More than 1 year but not more than 3 years continuous service - 2 weeks’ minimum notice.

• More than 3 years but not more than 5 years continuous service - 3 weeks’ minimum notice.

• More than 5 years continuous service - 4 weeks’ minimum notice.

Of course, any notification of termination should be in writing.

Summary dismissal

If serious misconduct is substantiated after an investigation/disciplinary process, then you can summarily dismiss the employee, meaning that the employee may be dismissed without notice or pay in lieu of notice (you must still pay them any outstanding entitlements, e.g. payment for time worked, accrued annual leave, long service leave).

Your first step should always be to look into the matter thoroughly and to identify what impact the misconduct had on the business. For example, the definition of serious misconduct is wilful and deliberate behaviour that is inconsistent with the continuation of the employment contract, or which causes serious and imminent risk to the reputation, viability or profitability of the business, or health and safety of a person. However, it’s not always clear whether the alleged conduct meets this threshold.

You should also consider suspending the employee from work while you investigate the matter and conduct the disciplinary process.

Ensure that the employee is aware that the alleged behaviour is considered serious misconduct and that they understand the ramifications of the conduct.

Remember, if the employee lodges an unfair dismissal claim, the onus shifts to the employer, and you will have to be able to prove fair and reasonable justification for your actions.

We recommend you get expert advice before taking any action.

How MyHR can help with employee termination

At MyHR, we’ve seen our share of errors in dismissal and termination procedures, whether by miscalculation, haste, or lack of knowledge of the correct procedure.

It is relatively cheap and easy for employees to lodge unfair dismissal and general protections claims (over 44,000 cases were lodged with the FWC in 2024-25), but they can be really time-consuming and expensive for an employer to defend. That’s why it pays to do your homework when terminating employment to ensure you stay on the right side of the Fair Work Act.

Aside from the obvious legal risks, firing employees without due process can do serious damage to your company culture and reputation, which will affect employee morale and cohesion, and can make it harder to recruit and keep talented people.

If you are considering terminating a worker’s employment and you need advice or are unsure of the correct procedure, get in touch with the employment experts at MyHR.