As an employer, there comes a time when your workers will think about the possibility of retiring. It’s important to know your rights and responsibilities when your employees near retirement to make sure you comply with any legal requirements.

Can I ask my employee to retire?

Under the Fair Work Act 2009 (Cth), you cannot dismiss your employees because they are getting too old. This behaviour amounts to discrimination and compulsory retirement. It includes when you have persuaded an employee to retire, or treated them in such a way that it forces them to retire. Your employee could then have an unfair dismissal claim against you.

If you feel that your employee just can’t perform their required duties anymore because of their age, you would need to go about their dismissal in the usual way that you would handle any employee with performance issues. Conducting a performance review for all of your employees on a regular basis is a good way to assess the capabilities of all of your employees and can help you determine who is still able to meet the expectations of the job. This way, age is not the issue at hand.

It may also be sensible to create a retirement policy. This could consist of a pre-retirement contract or a phased retirement plan with the employee that meets the requirements of any relevant award, enterprise agreement or employment contract. Your employee can then reduce the number of working days, do job-sharing, engage in mentoring a new worker and have other flexible working arrangements. The employee would need to enter these types of programs voluntarily and would need to make sure not to contravene any unfair dismissal laws or equal opportunity requirements.

What happens when they ask to retire?

So, your employee has asked to retire or begin a phased retirement plan – what happens next? As their employer, there are some financial considerations you will need to take into account to help them exit the workforce appropriately.

As with other employees that leave, you need to make any final PAYG withholding payments, send a payment summary to the employee, retain their TFN declaration and any necessary records. You will also need to make sure that you pay out their leave entitlements and superannuation contributions correctly.

An employee that is looking to retire because they have reached retirement age and will be eligible for a pension is not automatically eligible for any additional entitlements. Most awards or enterprise agreements do not provide for extra benefits on retirement. However, this will depend on the award or contract your employee is covered by. If your employee, having worked for your business for over ten years, is eligible for long service leave, they will be entitled to payment of the accrued leave, regardless of why they are leaving the workplace.


An employee retiring is a big step for both your business and their future. Knowing your requirements as an employer when the issue first arises is essential to ensure a smooth transition and amicable exit from your employment.

LegalVision can provide you with advice on how best to deal with a near retiring employee. Feel free to call us on 1300 544 755.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Bianca Reynolds
Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at

View Privacy Policy