Two managers using laptop discussing how to terminate an employee

Managing people

How to manage employee termination

Know your rights as an employer – learn how to terminate an employee by staying within your obligations, reducing the risk of an unfair dismissal claim.

Termination of employment is the voluntary or involuntary act of bringing a contract of employment to an end. It may be:

handled by giving proper notice (resignation of employee, dismissal or retrenchment by the employer)
summarily due to the employee’s misconduct by frustration, repudiation or abandonment of employment by an employee.

Termination can be carried out by either the employer or the employee, but is subject to minimum obligations imposed by the Fair Work Act and where relevant, the applicable industrial instrument.

As an employer or manager, you’re responsible for giving your employees their correct entitlements. It’s important to familiarise yourself with the Fair Work Act and understand your rights and obligations, especially if you're firing an employee – to minimise the risk of an unfair dismissal claim.

When can an employee be terminated?

An employment contract – for a fixed-term, or for the completion of a certain task or project, ends automatically at the end of the period, or on completion of the task or project.

Either party may terminate a contract of employment by giving the minimum notice period of termination. The period of notice may be subject to the National Employment Standards (in the case of notice by the employer to the employee), the applicable modern award or enterprise agreement, or the employee’s contract of employment.

A party may terminate a contract of employment in some circumstances if the other party breaches the contract of employment. Not every breach of contract will justify the termination of that contract.

This term is defined in the Fair Work Regulations 2009 to mean:

wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment, such as harassment or insubordination
conduct that causes the serious and imminent risk to the health and safety of a person, or the reputation, viability or profitability of the employer’s business
theft
fraud
assault
the employee being intoxicated (alcohol or drugs, other than prescribed drugs) at work
the employee is refusing to carry out a lawful and reasonable instruction that is consistent with the employee’s contract of employment.

Section 123 of the Fair Work Act excludes an employee whose employment was terminated because of serious misconduct from the minimum notice period requirements of the Act.

General Protections and Adverse Action

‘General protections’ are designed to provide protection of workplace rights, freedom of association, workplace discrimination and relief for persons who have been discriminated against, victimised, or have experienced other unfair treatment.

As an employer, you must not take 'adverse action' against an employee because they have a workplace right, exercised a workplace right or propose to exercise a workplace right.

Adverse action includes:

dismissing the employee
injuring employee
altering the position of the employee
discriminating against the employee.

Unfair dismissal

An employee who is seeking a remedy to unlawful termination of their employment – where the reason for termination does not fall under the general protections stream – may be able to claim under the unfair dismissal stream.

The unfair dismissal provisions of the Fair Work Act are based on the notion of a ‘fair go all round’ and are intended to prevent dismissals that:

are ‘harsh, unjust or unreasonable’
do not comply with the Small Business Fair Dismissal Code (in the case of an employer who employs fewer than 15 employees)