Termination of Employment

Employees come and go, and with that there are different types of termination of employment contracts with varying processes and employee rights.

As an employer, you should endeavour to understand the differences between these to ensure you are always acting in accordance with Australian employment law.

What is the termination of employment?

Termination of employment is when an employee’s contract is brought to an end. This can be done in several ways, including resignation, dismissal, or redundancy.

You can make an employee redundant, which means you no longer require their services — or there isn’t enough work to justify their role. You may also dismiss an employee due to gross misconduct or behavioural issue.

You can separate the types of termination into two categories:

• Voluntary: Retirement, resignation etc.

• Involuntary: Dismissed, made redundant etc.

Dismissal vs termination of employment

Dismissal is a type of termination of employment, so not all terminations have to be a dismissal. There are different types of dismissal, such as being ‘laid off’ or ‘fired.’

A termination is any kind of ending to a contract of employment, voluntary or otherwise. Dismissal is always a termination. But it’s not the same the other way around.

The method of termination will determine whether the employee may wish to start a tribunal claim or not. For example, a voluntary retirement is less likely to be challenged by the employee.

However, with dismissals, there can be some hurdles and potential illegal termination of employment claims.

Does an employer have to give written notice of termination of employment?

There are no statutory requirements as to the form of the notice of termination, only that you give it and communicate it to the employee.

The contract will usually outline the process and if this is the case, it must be followed to be a fair process.

The minimum period of notice for terminating employment can vary depending on the staff member.

Their contract will outline the minimum period for termination, and it will increase with the employee’s length of service.

How much notice do you have to give?

If you dismiss someone without giving full notice, you could be guilty of wrongful dismissal.

Under Australian employment law, the following notice periods apply:

• Less than 1 year: 1 week's notice.

• More than 1 year, up to 3 years: 2 weeks' notice.

• More than 3 years, up to 5 years: 3 weeks' notice.

• More than 5 years: 4 weeks' notice.

Employee rights to appeal termination of employment

Employees all have the statutory right to appeal against all disciplinary and grievance decisions that they consider wrong or unfair.

There are two ways an employee might challenge their dismissal:

• Appealing through your appeal process

• Making a claim to an employment tribunal

Medical termination of employment

In NSW, employers can't terminate an employee solely due to illness or injury if the absence is less than 3 months consecutively or less than 3 months in total over 12 months, or if the employee is still on paid sick leave. However, termination may be lawful if the employee cannot perform the inherent requirements of their job and no reasonable adjustments can be made. 

Namely, you may only dismiss an employee fairly for one of five reasons.

These are:

• Misconduct

• Redundancy

• Illegality

• Capability

• Other substantial reasons

However, dismissing staff due to sickness is possible, depending on their capability. You must ensure that the reason the employee is being dismissed is because of the incapability of that staff member to perform tasks.

You’ll also have to show that you’ve given them fair opportunities to improve. It’s important to have a procedure in place to avoid claims of discrimination or unfair dismissal.

It should always be a last resort. You must first ensure that you’ve considered all reasonable adjustments such as flexible working hours, remote working or issuing alternative responsibilities.

Termination of employment during maternity leave

While employers can terminate employment during maternity leave, they must ensure the termination is not discriminatory and follows proper procedures, including providing notice or payment in lieu of notice.

When doing this, the usual rules of dismissal must apply. It cannot relate to the pregnancy, concerns over returning to work, maternity leave or any sicknesses associated with pregnancy. A dismissal relating to any of these issues will be seen as unfair dismissal.

Unlike women on maternity leave, pregnant women who have not yet started maternity leave have no special protection in a redundancy situation.

However, the redundancy selection criteria must not take into accountconsider reasons connected to pregnancy (including pregnancy-related illness) or maternity leave.

Similarly, it is not unlawful to dismiss an employee on maternity leave, adoption or shared parental leave. As long as the dismissal is not due to any related reasons, it is not an automatic unfair dismissal for pregnancy or maternity discrimination.

Termination of employment due to dishonesty

There can be grounds for dismissal based on insubordination, gross misconduct or a breakdown of the employment relationship. One example is dishonesty.

This comes in many forms, ranging from stealing cash or goods to falsification of records such as expenses, application forms or accident reports.

There are also dishonesty offences of stealing confidential information, stealing electronic data or databases, deliberately downloading malware and perpetrating or assisting in the perpetration of cyber-attacks.

These should be clearly stated as examples of gross misconduct and listed in the disciplinary procedure.

Termination of employment before the end of the probation period

Most employment contracts will have a probationary period at the beginning of their employment.

In Australia, an employer can terminate an employee during a probationary period, often without needing a valid reason, as long as the probationary period is shorter than the minimum employment period (6 months for businesses with 15+ employees, 12 months for smaller businesses). 

However, employers must still act fairly and reasonably, provide written notice, and ensure they are not acting unlawfully (e.g., due to discrimination). 

Recommended procedure

• In writing, invite the employee to a probationary review meeting where you’ll discuss issues relating to their performance.

• In the letter, inform them you’re considering terminating their contract.

• Offer evidence that supports your concerns and give them the opportunity to respond.

• Decide on appropriate action. Before terminating the contract of employment, consider extending the probation period.

Communicate the outcome to the staff member with a written statement.

Taking the stress out of termination with BrightHR

Termination of a contract can be difficult and confusing. BrightHR is here to ensure you follow all the right procedures. And our employment relations advisers are on hand to help 24/7.

For access to BrightBase, our document library filled with over 350 templates and guides for any circumstance you may find yourself in as an employer — including termination of an employee — book a product demo or call us on 1 300 029 198.