When can I terminate an employee?

When can I terminate an employee?

At some stage most employers will need to deal with terminating employment of some of their staff. An employment relationship can be ended by either the employer or the employee, however, if an employer dismisses an employee, they must do it lawfully and fairly. 

There are two ways an employer can lawfully end the employment relationship with an employee: either redundancy or dismissal. Whether an employment contract is being terminated because of redundancy or dismissal, it is important for you to provide proper notice to the employee. 

Redundancy 

Redundancy occurs when an employer either no longer requires that employee’s role to be performed by anyone, or becomes insolvent or bankrupt. Employees made redundant may be entitled to redundancy benefits, largely dependent on their length of service and the award, agreement or contract that they were employed under. 

Businesses are obligated to provide redundancy pay if 

  • The employee worked full time or part time; 
  • The employee worked more than period of 12 months; and 
  • Your company employed more than 15 employees at the time of the redundancy.

For further information, please see our article on ‘How do I make a redundancy pay?’

Dismissal 

Employee can be dismissed for the following reasons: 

  • Poor performance 
  • Conduct 
  • Changes to operational requirements 

The notice period of an employee largely depends on varying factors. Full or part time employees require a notice period, while casuals and employees that have worked for less than a year don’t require notice.

Generally, the notice period begins the day after you inform the employee of the termination of their employment and ends on the last day of employment. An employee may continue working until the end of the notice period, or an employer may elect to pay the employee for the notice period and have them finish right away, known as payment in lieu of notice. 

Minimum Notice Period 

The minimum amount of notice an employee largely depends on the length of service an employee has undergone with their employer. If the employee served a certain period of continuous service, they are entitled the following minimum notice period. 

Period of Notice Minimum notice period 
1 year or less 1 week 
More than 1 year – 3 years2 weeks 
More than 3 years – 5 years 3 weeks 
More than 5 years 4 weeks 

Employees over 45 years

Employees aged over 45 and who have been employed for at least 2 years are entitled to an extra week of notice. However, depending on the award, agreement or contract that the employee has with you, they may be entitled to more notice. 

Key points

Terminating employment can be a stressful and emotional process. If not handled correctly it can open your business to unfair dismissal claims and brand damage. It is essential that your company takes the appropriate steps when terminating an employee, which includes getting legal advice from a specialist employment lawyer.

About Kristine Tran

Kristine TranKristine is a legal intern at OpenLegal. She is a fifth year UTS law student nearing the final stages of her law degree. She has previously worked for a boutique law firm and volunteered as a paralegal with the Refugee Advice and Casework Services (RACS).