When terminating an employee, it’s important to bear in mind that the termination needs to be lawful and in compliance with relevant state and territory laws. Any employee who feels they were unfairly terminated can take legal action against you or your organisation, which can be costly for your company and tarnish your reputation.

As an employer, you need to:

• have a valid reason for termination
• make sure the termination is lawful and doesn’t breach an employee’s contract of employment
• ensure the termination doesn’t breach any legislation, such as the general protections or unfair dismissal provisions of the Fair Work Act, any federal or state discrimination laws, or equal opportunity legislation
• comply with any obligations or requirements contained in any awards or enterprise agreements that the employee is covered by.

One of the best ways to protect your business is to consider termination issues and include them in the employee’s employment contract. It’s also beneficial to have clear written policies and procedures that cover employee behaviour and a code of conduct for the workplace. Relevant policies and procedures could include workplace safety, dress codes, harassment, attendance, use of company resources and property, and your organisation’s employee termination procedure.

The Fair Work Act requires employers to provide written notice for termination of employment. This means employers need to inform employees of their termination in writing, and include a brief summary of reasons why the termination occurred. If the termination or dismissal is a result of events or actions, it’s best practice to keep records of these in case you need to prove the termination was lawful.

On top of this, whether an employee resigns or retires, it’s essential you have written confirmation of this either through an email or a physical resignation letter. In a case where an employee can’t or won’t confirm their resignation in writing, you should confirm their resignation or retirement in an employer-issued letter so you have proof to protect your organisation in case any issues arise down the line.

The Fair Work Act requires employers to provide a minimum amount of notice in the event of a termination. Minimum notice periods are calculated based on an employee’s period of service and their age. Minimum notice periods are between one and five weeks.

If there’s a case where your employee’s contract, award or enterprise agreement requires you to give more notice than the minimum amount required by the Fair Work Act, you need to adhere to the longer notice period. The reason for the dismissal and the employment type can also determine the notice period. For example, there’s generally no set notice period for casual employment unless an award or enterprise agreement states otherwise.

Lastly, if there’s no information in an employee’s contract around notice periods or termination, then ‘reasonable notice’ may need to be given. This can be vague and vary from case-to-case, so if you’re unsure, it’s best to seek legal advice so the employee termination is compliant.

As an employer, it’s likely you have a lot of questions around final pay such as:

• When do I need to pay the termination pay?
• Can I withhold pay after termination?
• What needs to be calculated in the termination pay?

In line with the Fair Work Act, employers need to pay an employee for all work performed, as well as any entitlements they may be owed, such as annual leave, long service leave, or superannuation. Any accrued entitlements that are payable on termination (e.g. annual leave or long service leave) should also be paid.   

If, on the other hand, an employee resigns without giving the correct amount of notice, an employer has the right to withhold pay in line with the terms of an employee’s award or employment contract. In this case, it’s best to consult state and federal legislation and speak to a legal adviser, to determine exactly what pay you need to provide your employee after termination.

According to state and federal legislation, employers need to keep records of an employee’s employment, payroll, and termination for seven years after an employee’s termination. Employees should also be provided with a detailed statement of their termination entitlements, including calculations for each entitlement and any tax deductions. You will also need to provide a Statement of Service if the employee requests it.

In some cases of employee termination, you may also need to notify other external agencies such as Centrelink or Worker’s Compensation insurers.

Employers should prepare a checklist to ensure everything is returned after termination of employment. There are tools to assist organisations with this step such as HR Advance’s Property Return Checklist.