Employee termination procedure in Australia: A guide to dismissals & layoffs

When making your first Australian hire, you’re unlikely to be thinking about termination policies. Letting employees go, however, is an inevitable part of managing a workforce, so you’ll want to understand the basics well in advance.

Australia has strong employee protections against unjustified dismissals. If you don’t adhere to minimum notice of termination and pay requirements, and fail to provide a valid reason for involuntary termination, you could be subject to wrongful dismissal claims from Australian courts.

Read on to learn everything you need to know about terminating employment in Australia—and how hiring through an Employer of Record (EOR) can spare you from mishandling any local requirements.

7 things to know about terminations before hiring in Australia

• You must establish terms of dismissal in your employment contract. The offer letter to your Australian employee needs to include a termination clause that spells out statutory requirements for notice periods and acceptable reasons for terminating employees without notice.
• Non-compliance with termination requirements can be costly. Australian courts can impose penalties of up to AUD 16,500 per breach for individuals and up to AUD 82,500 for companies.
• Australian laws don’t recognize at-will employment. You can only terminate employees without notice in cases of serious misconduct.
• Generally, you can only dismiss employees if you give notice or pay in lieu of notice. Employees can work through minimum notice periods that vary according to length of service and enterprise agreements (which are company-specific contracts negotiated through collective bargaining). If you instead decide to pay an employee out and have them stop working for you immediately, you have to pay them in full—including superannuation contributions—for the equal length of their minimum notice period.
• Employees may be entitled to redundancy pay if they’re laid off for factors outside their performance (e.g.if the job no longer needs to be done by anyone, or if an employer becomes insolvent).
• Termination procedures may vary by Award category. Australia has more than 100 “Modern Awards”—legal documents outlining working conditions across the commonwealth’s different job categories. Certain awards may have different notice periods and redundancy requirements than minimums set by National Employment Standards (NES). You can use the Fair Work Ombudsman’s Notice and Redundancy Pay Calculator to check a specific job’s dismissal rules.
• Small businesses have different termination requirements. The Small Business Fair Dismissal Code applies to companies with less than 15 employees and sets separate dismissal rules, including exemption from redundancy pay.

Termination of employment rules in Australia: What are acceptable grounds for firing an employee?

Australian employees can leave their job voluntarily for any reason, so long as they give the advance notice stipulated in their employment agreement (usually between 1 and 4 weeks). Here are the valid reasons an employee can be terminated involuntarily in Australia:

• Performance. Employers can dismiss Australian employees for unsatisfactory performance, but only after first warning them of the issue and providing attempts to fix the situation, like offering training or reiterating job expectations.
• Misconduct. Australian employees can be immediately dismissed for serious misconduct, which the Fair Work Act 2009 defines as willfully risky behavior that negatively impacts the business or threatens someone’s safety. This can include theft, fraud, or assault. While serious breaches of conduct can result in summary dismissal, meaning immediate termination without a notice period of pay in lieu of notice, lesser misconduct offenses—such as showing up to work late— require a more lenient disciplinary procedure.
• Redundancy. If a job no longer needs to be performed because of new technology, insolvency, a business slowdown, or some other reason outside an employee’s control, that employee can be terminated.
• Probation: Employers can dismiss an employee during their first 6 months of employment without the need for a performance plan if the employee is deemed to be unsuitable for the role. Care should be taken to ensure that anti-discrimination laws are not breached if terminating during the probation period.

Employers should always write a letter clearly explaining the reason they’re terminating an employee and provide evidence supporting their decision. They should meet with the employee in person to deliver the letter and give the employee the opportunity to answer any questions.

Most Modern Awards require the employer to allow the employee an opportunity to have a support person present at any meeting related to discipline or termination.

Australia’s termination requirements might differ from those in other countries where you hire, and it’s crucial to keep your global hiring compliant with local laws.

What are the mandatory notice periods for Australian employees?

Australia’s National Employment Standards, which outline working conditions, entitle full-time employees to a termination notice period. This means employers must either provide advance written notice of the day an employee will be laid off or pay the employee out at their full pay rate throughout the entire period of notice.

Minimum notice periods vary depending on an employee’s length of service, as shown in the table below.

Employees aged 46 and up get an additional weeks’ notice if they’ve completed at least two years of continuous service with a company.

What are the redundancy pay guidelines for Australian employees?

Australian employees terminated due to a redundancy are generally entitled to their base rate of pay for a certain amount of weeks after their dismissal. They’re paid out according to the length of their tenure, as shown below:

If an employer can’t afford redundancy pay, or if they’ve found a dismissed employee a replacement job, they can apply for relief from the Fair Work Commission. And small business employers who have less than 15 employees are exempt from redundancy pay requirements.

The easiest way to comply with Australian termination requirements

If you employ a global workforce, keeping track of termination requirements gets complicated. Without any assistance, employers need to master conflicting just-cause considerations, probationary and notice periods, and severance pay laws that vary both within and among countries.

An alternative is to hire through an EOR, which can monitor termination requirements for you.

Frequently asked questions about terminating employees in Australia

Do you need a reason to terminate an employee in Australia?

Yes, after an initial probationary period (generally three to six months), you need a valid reason for terminating an employee in Australia. This can include misconduct, poor performance, or a redundancy.

Employers need to ensure they follow strict procedural guidelines before dismissing an Australian employee. In addition to having a valid reason for terminating an employee, this includes:

• Notifying the employee of the reason in writing
• Allowing the employee to prepare a response for the claimed reasons
• Allowing a support person to be present for any discussion about dismissal
• Providing warnings and a chance for an employee to rectify any performance issues

What is considered misconduct when terminating an employee in Australia?

In Australia, instances of serious misconduct include (but aren’t limited to):

• Theft
• Physical assault
• Sexual harassment
• Fraud
• Intoxication at work

In these severe cases, employees can be dismissed immediately without written notice or pay in lieu of notice. Employers should ensure they have strong evidence of any serious breach of conduct before terminating an employee without notice.

In milder, more isolated cases of misconduct—such as unexcused absences or using inappropriate language in the workplace—employers should issue warnings and try to rectify the problem before considering termination proceedings.

What is the difference between an unfair dismissal and an unlawful termination in Australia?

In Australia, the Fair Work Commission can cite employers for violating termination requirements in two different ways: unfair dismissal and unlawful termination.

Fired employees can file an unfair dismissal claim when an employer fires an employee in a manner that is harsh, unjust, or unreasonable, which includes:

• Not dismissing an employee for a valid reason
• Not properly notifying an employee of their dismissal
• Not giving an employee enough time to respond to dismissal claims
• Failing to allow an employee to have a support person present for dismissal proceedings
• Failing to provide warnings before termination
• Citing a redundancy when the redundancy wasn’t genuine

To be eligible for unfair dismissal claims, an employee must have worked for at least 6 months and have a salary below the high income threshold of AUD  167,500.

Unlawful dismissals, on the other hand, are when employees get fired for reasons that violate the Fair Work Act’s General Protections Provision, including:

• On the basis of a protected anti-discrimination attribute such as race, gender, sexual orientation, age, or disability
• Work absences related to sickness or injury
• Work absences related to maternity or paternity leave
• Exercising workplace rights against an employer

What is always required when an employer terminates an employee in Australia?

All Australian employees who are laid off should be paid out within a week of the end of the employment relationship. Final pay should include:

• Outstanding salary payments
• Any applicable pay in lieu of notice
• Compensation from accrued but untaken annual leave and other entitlements (such as long service leave if the employee has worked for the company for at least seven years)

What is the law for dismissing a contractor in Australia?

The termination process for independent contractors in Australia can vary depending on the terms of the contract.

Typically, either party may terminate by providing notice as specified in the contract. If the contract does not specify a notice period, the reasonable notice period will depend on the length of the contract and the nature of the work performed.

If an independent contractor is found to be misclassified, they may be entitled to back pay and termination pay in lieu of notice.

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• Set up a localized Australia employment agreement.
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• Easily stay compliant with Australia overtime, leave, and termination requirements.

Catch Rippling in action and learn how Rippling EOR can monitor the tangled web of global termination requirements—so you don’t have to.

Rippling and its affiliates do not provide tax, accounting or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.