Managing employee separation carefully, whether due to resignation, redundancy, or dismissal, is essential. It reduces the risk of legal issues, protects the reputation of your business, and helps ensure departing employees speak positively about you.

Use fair and lawful termination procedures, as replacing staff is costly and unfair or unlawful dismissal claims can be expensive and time-consuming. Poor processes can also harm workplace morale.

Resignation

When an employee resigns, they are entitled to any accrued annual leave, which may include annual leave loading. Under the Pastoral Award 2020, annual leave loading must be paid out on termination.

Employees with long service may also be entitled to long service leave under state laws (see State Industrial Laws for details).

Notice requirements depend on the relevant award or workplace agreement. The Pastoral Award 2020 requires employees to give the same notice as employers, except for the additional week based on age and experience. If proper notice is not given, the employer may deduct the notice period from termination payments.

Summary dismissal

Summary (instant) dismissal is termination without notice, used only for deliberate and serious misconduct where continued employment is unreasonable. Employers should keep detailed records to defend potential unfair dismissal claims.

Serious misconduct includes theft, fraud, assault, intoxication at work, refusal to follow lawful orders, or behaviour posing a serious risk to health, safety, or the business. Allegations of theft, fraud, or violence should be reported to police.

Notice or pay in lieu is not required in these cases. However, if similar behaviour was previously tolerated, it may not justify instant dismissal, instead, issue written warnings and consider termination with notice if there’s no improvement. (This does not apply to criminal offences.)

Dismissal with notice

If the employee’s conduct is not sufficiently serious to justify summary dismissal, or if work performance is unsatisfactory, employers may dismiss the employee with notice.

Federal industrial laws lay down which classes of employees must be given notice. Casual and seasonal employees are excluded.

Notice: Notice of termination applies to all employers and is provided for in the National Employment Standards, regardless of whether they are national system employers or non-national system employers.

Employee notice: Under the Pastoral Award 2020, employees must give the same notice period as employers, though written notice is required from employers. Employees are not required to give the additional week of notice based on age or service.

If an employee fails to give notice, employers may deduct a reasonable amount from termination payments, up to one week’s pay for employees over 18. No deduction is allowed for those under 18.

Award-free employees are only required to give notice if specified in an enterprise agreement.

Notice pay must equal the full amount the employee would have earned if they had worked the notice period.

Unfair dismissal

A dismissal is considered unfair if:

• there is no valid reason for termination,
• the process used was harsh, unjust, or unreasonable, or
• the employee was not given a “fair go.”

Both federal industrial laws and Western Australian state laws allow employees who believe they have been unfairly dismissed to lodge a claim. Procedures and requirements differ between jurisdictions. (For WA-specific information, see State Industrial Laws.)

Federal Unfair Dismissal Laws: Since 1 July 2009, employees can lodge an unfair dismissal claim regardless of business size, provided they have completed the required minimum employment period:

• 12 months – for small businesses (fewer than 15 employees, including the dismissed employee and any regular casuals).
• 6 months – for all other businesses.

The definition of a “business” includes associated businesses.

Employees Who Cannot Make a Claim: The following categories of employees are excluded from making unfair dismissal claims:

• Employees earning above the high-income threshold who are not covered by an award or agreement.
• Employees hired for a specific task or fixed period, if dismissed at the end of that task or period.
• Seasonal employees, if termination occurs at the end of the season.
• Employees who are demoted without a significant reduction in pay or duties.
• Certain trainees.

Short-term casual employees without regular and systematic work and no reasonable expectation of ongoing employment.

Termination procedures for small businesses – National System Employers: Since 1 July 2009, federal industrial laws provide a procedure for small businesses to follow when dismissing employees. The code outlines when dismissal can occur summarily (without notice), when it must be with notice, and sets guidelines to ensure fairness.

It is recommended that all warnings be issued in writing and that written records are kept at every stage of the process.

Process for unfair dismissals – National System Employers: Unfair dismissal claims must be lodged with the Fair Work Commission within 21 days of the date of the termination. This time limit can be extended by the Fair Work Commission if there are exceptional circumstances.

Once lodged, the FWC can investigate, speak with both parties, and hold informal conferences or formal hearings if needed.

When deciding if a dismissal was unfair, the FWC considers:

• whether there was a valid reason for dismissal;
• if the employee was told the reason;
• whether warnings were given;
• if the employee had a chance to respond;
• whether a support person was allowed at meetings;
• the size of the business and whether the employer lacked HR expertise;
• and whether the employer followed the Small Business Fair Dismissal Code (for small businesses).

For further information about the process for unfair dismissal claims, visit Unfair dismissal – Fair Work Ombudsman.

Remedies for unfair dismissal – National System Employers: Under federal industrial laws (effective 1 July 2009), the preferred outcome of an unfair dismissal claim is reinstatement, either to the original position or one with the same terms and conditions, unless the Fair Work Commission decides this is inappropriate. If reinstatement isn’t possible, the FWC may order compensation of up to six months’ wages or salary.

Unlawful dismissal: Federal unlawful dismissal laws apply to all employers in Australia, including non-national system employers in WA.

A dismissal is unlawful if it is based on discrimination or if the employer fails to provide the minimum statutory notice. Termination is unlawful if it occurs for any of the following reasons (or includes such a reason):

• Race, colour, sex, sexual preference, age, disability, marital status, family or carer responsibilities, pregnancy, religion, political opinion, national extraction, or social origin.
• Temporary absence due to illness or injury (up to 3 months with medical certificates if not on paid sick leave).
• Maternity or parental leave.
• Temporary absence for a voluntary emergency management activity, if reasonable.
• Trade union membership or activities, non-membership, or acting as an employee representative.

If an employee claims unlawful dismissal (e.g. age discrimination), the employer must prove that the alleged reason was not a factor in the termination. Written records of warnings and responses are critical evidence.

Unlawful dismissal claims can be costly and time-consuming to defend, regardless of the outcome.

Fair procedures for termination

All employees must be given a fair opportunity to respond to any allegations of poor performance or misconduct.

Businesses that do not qualify as small businesses, as well as state employers in WA, should follow the standard practice of issuing three written warnings — detailing the issue and allowing time for improvement — before dismissing an employee.

All warnings (including those under the Small Business Fair Dismissal Code) should:

• clearly describe the problem and the changes required;
• state that dismissal may occur if the issue continues;
• set a review date to assess performance or behaviour; and
• outline a timeframe for improvement, noting that dismissal can still occur during the review period if performance remains unacceptable.

Keep signed and dated copies of all warnings and make diary notes. If possible, have the employee sign each warning to confirm receipt.

Offer the employee a support person during counselling, especially if they have language or learning difficulties or are very young or older.

For redundancies, selection must be fair, and employees should have a chance to respond. Under federal laws, employers must also consider whether the employee can be redeployed elsewhere in the business before terminating.

A fair, documented selection process helps prove that a redundancy was not unlawful or discriminatory.

Redundancy

A job is redundant when an employer decides it is no longer required or that fewer employees are needed due to the business’s operational needs.

Redundancy and federal industrial laws: Since 1 January 2010, the National Employment Standards (NES) require employers with 15 or more employees to provide redundancy pay.

Additional award terms about redundancy: In addition to the NES, the Pastoral Award 2020 provides extra redundancy entitlements. Employees given notice of redundancy are entitled to one day of paid leave per week of the notice period to look for work. If more than one day is taken, employers may request proof of job interviews.

If an employee is transferred to lower-paid duties due to redundancy, they must still receive the same notice period. Employers may choose to pay the difference between the higher and lower rates during that notice period.

Notice, notification and redundancy – National System Employers: Employees made redundant are entitled to the same notice periods as for any other dismissal, based on their length of continuous service. (See the National Employment Standards for details.)

If an employee resigns during the notice period, they retain their redundancy pay but are not entitled to pay in lieu of notice.

Notice and consultation with Centrelink and union: If 15 or more employees (excluding exempt categories) are dismissed at once for economic, technological, structural, or similar reasons, employers must notify Centrelink as soon as possible after the decision and before any dismissals occur.

If any affected employees are union members, the employer must also notify the union and consult on ways to reduce the impact and minimise job losses.

Failure to notify Centrelink can result in financial penalties, and unions may complain to the Fair Work Commission and seek orders if consultation does not occur.

Exclusions from notification and consultation requirements

These notification and consultation provisions do not apply to the termination of the following employees:

• employees employed for a specified period of time, for a specified task, or seasonal employees;
• employees whose employment is terminated because of serious misconduct;
• casual employees;
• trainees (other than apprentices) and whose employment is for a specified period of time or is, for any reason, limited to the duration of the training arrangement.

Pastoral Award requirements for consultation

The Pastoral Award 2020 also requires the employer to consult with employees and any unions whenever they decide to introduce major changes to the workplace.

If an employer does not comply with these terms, the person dismissed may be able to make an unfair dismissal claim.

Payments on termination

Time for payment of entitlements on termination of employment: Since 26 August 2019, clause 16.3 of the Pastoral Award 2020 sets specific timeframes for paying entitlements when employment ends:

1. Final wages (including any pay for unworked notice) must be paid:

• By cash or cheque on the day of termination, or
• Posted to the employee the next working day, or
• By EFT no later than 7 days after termination.

2. Other entitlements (e.g. accrued annual leave) must be paid:

• By cash or cheque on the day of termination, or
• Posted as soon as reasonably practicable, but no later than 7 days after termination, or
• By EFT no later than 7 days after termination.

Payment for accrued annual leave: Accrued annual leave must be paid out on termination under federal and state (WA) laws.

Payment of annual leave loading: Under the Pastoral Award 2020, annual leave loading must be paid out on termination if annual leave is paid at that time.

Payment for long service leave: State and territory laws govern long service leave, including how long an employee must serve and when pro-rata entitlements apply. Payment may not be required if an employee is summarily dismissed for serious misconduct. Employers should check their state or territory laws to confirm obligations. (See State Industrial Laws for more details.)

Payment for work performed until time of termination: Employees are entitled to be paid for all work performed and other entitlements owing at the time of termination.

Payment in lieu of notice: The minimum periods of notice of termination and payments which must be made if notice is given are dealt with in the National Employment Standards.

Payment for sick/personal leave: WA state laws and the Pastoral Award 2020 do not allow cashing out of personal/carer’s leave, and under the National Employment Standards, it is only permitted if expressly allowed by a workplace agreement or award.

Superannuation: The following termination payments are not considered ordinary time earnings under the Superannuation Guarantee Charge, so superannuation is not payable on them: lump-sum payments for accrued annual leave, long service leave, or personal/carer’s leave, payment in lieu of notice, redundancy pay, and any other payments made by an employer on termination.

Taxation of termination payments: The Australian Taxation Office (ATO) classifies certain termination payments as Employment Termination Payments (ETPs), which are taxed differently depending on the employee’s age.

ETPs include:

• Payment in lieu of notice
• Unused RDOs or sick leave
• Gratuities or “golden handshakes”
• Compensation for job loss, wrongful dismissal, or permanent disability (excluding personal injury)
• Redundancy or retirement scheme payments above the tax-free threshold
• Lump-sum payments made after an employee’s death

Exit interviews

Employees leave for many reasons, and it’s important to understand why, the impact on operations and staff, and how to prevent future negative exits.

An exit interview is a useful tool for this. If the departure is amicable, it can be done before the employee finishes; if not, it may be better to wait until emotions have settled.

How an employee leaves influences what they say about your business, so it’s in your best interest to ensure they leave on good terms.