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Dismissing an employee can be a difficult thing to do. Not only can it lead to animosity between you and your former employee, but you also run the risk of unlawfully terminating your employee’s employment. Since an unlawful termination can land you in legal trouble, it would be wise to consider:

  • the notice periods associated with lawful termination;
  • any outstanding payments you must make to your outgoing employee; and
  • fair dismissal procedures.

By avoiding the mistakes associated with these three areas, you can ensure that dismissing your employee runs as smoothly as possible.

Notice Periods

In most instances, you cannot terminate an employee’s employment unless you have given your employee notice of the day of their termination. A lawful notice period begins the day after you tell your employee their employment has ended and ends on their last day of employment. Of course, a failure to give proper notice of termination can result in various penalties.

With the exception of serious misconduct, Australian employment law provides the minimum notice period you must provide when terminating employment regardless of the reason for dismissal. The table below details the minimum notice periods.

Period of Continuous Service Minimum Notice Period
1 year or less  1 week
More than 1 year but less than 3 years 2 weeks
More than 3 years but less than 5 years 3 weeks
More than 5 years 4 weeks

You should note that if your employee is 45 years old and has completed at least 2 years of continuous services with your business, you must add an additional week to the notice period. Additionally, continuous service does not include periods of casual employment.

In addition, you can give your employee notice of their termination by:

  • delivering the message to them personally;
  • sending it to your employee’s last known address; or
  • sending it electronically by email or text message if your employee agrees.

Ultimately, if you are unsure about how much notice to give your employee, you should seek legal advice to avoid facing penalties.

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Outstanding Payments

Once you provide a minimum period of notice for termination, you can either:

  • let your employee work until the notice period ends;
  • pay them out until the notice period ends; or
  • allow a combination of the two.

If you decide to pay out your employee rather than allow them to work until the end of the notice period, this is called ‘payment in lieu of notice’. In this instance, you must pay them the full amount you would have been liable to pay had their employment continued until the end of the notice period.

In addition to payment in lieu of notice, you may have obligations to make further termination payments. These payments can include any outstanding wages and leave entitlements, such as accrued annual leave. 

Similar to notice periods, a failure to make adequate termination payments puts you at risk of several penalties. To avoid this, you should clarify what termination payments you must make to ensure the dismissal runs as smoothly as possible.

Fair Dismissal Procedures

Perhaps the biggest mistake you want to avoid as an employer is an unfair dismissal. The Fair Work Commission considers a dismissal unfair if it was ‘harsh, unjust or unreasonable’. What is considered harsh, unjust or unreasonable will largely depend on the circumstances, such as where you:

  • dismiss an employee without a valid reason;
  • dismiss an employee based on reasons unrelated to their performance;
  • fail to give adequate notice of your dismissal; and
  • fail to give your employee the opportunity to respond to your reasons for dismissing them.

Employees are eligible to file a complaint with the Fair Work Commission if:

  • they worked for more than 12 months in your small business of fewer than 15 employees or worked for more than 6 months for your business with more than 15 employees; and
  • are covered by an award or earnt less than the applicable threshold (from 1 July 2021, this is $158,500).

To avoid wrongfully terminating your employee’s employment, you should have a valid reason for dismissing your employee. Additionally, you should also follow a fair process in reaching your decision to terminate your employee, such as:

  • investigating allegations of misconduct;
  • giving your employee fair warning either personally or in writing of their misconduct;
  • hosting disciplinary meetings with your employee;
  • allowing your employee to respond to the allegations made against them;
  • ensuring your employee can bring a support person to disciplinary meetings if necessary; and
  • above all, ensuring that the outcome of your meeting is not predetermined.

In any event, it would be wise to seek the advice of a lawyer to ensure that you follow fair dismissal procedures. Doing so can help clarify issues regarding the dismissal and minimise any animosity that could arise.

Key Takeaways

When it comes to dismissing an employee, you should ensure that you:

  • provide the minimum notice period for termination;
  • make any required termination payments; and
  • follow fair dismissal procedures to avoid facing serious penalties.

If you need advice on dismissing an employee, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is payment in lieu of notice?

Payment in lieu of notice is where you decide to pay out your employee after giving them notice of termination. Payment in lieu of notice is the amount you would have been liable to pay had your employee continued to work until the end of the notice period.

What is unlawful termination?

Unlawful termination can occur if you dismiss an employee based on one or more prohibited reasons, such as their race, sexual preference or marital status.

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