Terminating an employee’s employment, particularly on the grounds of poor performance, can expose businesses to legal, operational and reputational risk if not handled carefully.
In Australia, employees may challenge a dismissal under the unfair dismissal provisions of the Fair Work Act 2009 (Cth), as well as through general protections, discrimination or contractual claims. Even where a termination is ultimately lawful, poorly managed processes can result in significant time, cost and disruption to the business.
While it is not possible to eliminate termination risk entirely, following a fair, well‑documented and proportionate process can significantly reduce the likelihood of adverse outcomes.
Managing termination risk: a practical checklist
The checklist below reflects established Fair Work Commission principles and is intended as general guidance. Each situation should be assessed on its own facts.
1. Communicate performance expectations: Ensure you can demonstrate the employee has been made aware of the expectations and standards required (via an up-to-date position description, regular performance reviews, specific and documented conversations about what is required, for example).
2. Identify and document performance shortfalls: Ensure there is evidence the employee has been made aware of shortfalls on at least a couple of occasions (via previous performance review discussions, verbal warnings evidenced by diary notes, plus at least one written warning).
3. Provide reasonable support and opportunity to improve: Ensure you can demonstrate the employee has been offered reasonable support to achieve the expected standard of performance (e.g. time and reasonable access to training if needed), and that they have been given an opportunity to explain any other issues that might be temporarily impacting performance. A reasonable period of time needs to be made available for the employee to achieve the standard required
4. Conduct fair and well‑prepared performance meetings: Once you get to the point of having formal meetings with the employee regarding their performance, give them adequate written notice (the minimum notice period is 24 hours), and ensure they are aware that the meeting is to discuss performance issues. If termination is a possibility, offer them the opportunity to bring an observer (note: lawyers acting in a professional capacity are specifically excluded from this role). It is generally wise for the employer to also have an observer in attendance.
5. Avoid pre-determining the outcome: When discussing performance issues it’s important to not be seen to pre-empt the outcome. Discuss the issues, seek an explanation, and, if the explanation is not sufficient, formulate and issue a formal warning after the meeting.
6. Issue clear and detailed formal warnings: Formal warnings should include details of the standards to be achieved, any support that has been or will be made available, other relevant issues discussed, the date on which performance will be again reviewed and the possible consequences of not achieving the required standard (up to and including termination of employment if indeed this is a possibility). The employee should also be provided with a further opportunity to formally respond to the issues raised. The precise details of standards to be achieved could be documented in a performance improvement plan or similar.
7. Record acknowledgement of documentation: Have the employee sign as having received and understood the relevant documents (they don’t have to agree with your assessment, just acknowledge their receipt and understanding). If they refuse to sign, make a note to this effect on the documentation.
8. Manage the termination carefully: If the matter does proceed to termination, ensure the reasons for the termination are clear, the termination is confirmed in writing, and there is adequate notice of termination.Businesses may be able to ‘shortcut’ the above process in certain cases such as in the event of serious misconduct such as harassment or theft or where an employee is to be terminated early on in their employment (i.e. during probation).
Key takeaway for employers
Clear expectations, documented support, genuine consultation and proportional responses are central to managing termination risk. Inconsistent, rushed or reactive decisions are far more likely to result in claims, regardless of whether the underlying performance concerns are valid.
Need some guidance on the termination process?
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