How to terminate an employee fairly
Terminating an employee is one of the most difficult tasks any manager faces. Done properly, it protects your business legally and preserves the departing employee's dignity. Done poorly, it can result in unfair dismissal claims, damaged morale, and reputational harm.
Written by
Georgia Morgan
Important: This guide provides general process information only. Termination matters carry significant legal risk. Seek legal advice BEFORE taking action on any specific case.
This is NOT legal advice
High-risk content - professional guidance required
Employee termination is a complex area of law with significant consequences if handled incorrectly. This guide provides general information only and does not constitute legal advice. It should not be relied upon as a substitute for professional advice specific to your situation.
Employment laws, award conditions, and contractual obligations vary significantly. Unfair dismissal claims can result in reinstatement orders or compensation up to 26 weeks' pay. We strongly recommend seeking advice from an employment lawyer or HR professional before terminating any employee.
For detailed terms, see our HR Hub disclaimer.
What is fair termination?
Fair termination means ending someone's employment for a valid reason, following proper procedures, and meeting all legal obligations. Under Australian law, employees have strong protections against unfair dismissal, and employers must demonstrate both a valid reason for termination and a fair process.
According to the Fair Work Ombudsman, termination can occur for various reasons including poor performance, misconduct, redundancy, or the end of a fixed-term contract. Whatever the reason, following the correct process is essential.
Before you proceed - mandatory checklist
Before using this guide to terminate an employee, confirm you have addressed each of these items:
If you cannot answer "yes" to all of these questions, stop and seek professional advice before proceeding.
Sample termination letter structure
Here's what a typical termination letter includes. Always seek legal advice before finalising.
Notice of termination of employment
To: [Employee Name]
1. TERMINATION DETAILS
Your employment with [Company] will end on:
Reason for termination:
2. NOTICE PERIOD
Notice period: [X] weeks
[ ] To be worked / [ ] Paid in lieu
3. FINAL ENTITLEMENTS
Your final pay will include:
- Outstanding wages to [date]
- Accrued annual leave: [X] days
- Payment in lieu of notice (if applicable)
- Long service leave (if applicable)
A termination letter typically includes:
- Date — When the letter is issued
- Last day — Final date of employment
- Reason — Valid reason for termination
- Notice — Period and whether worked or paid
- Entitlements — Final pay breakdown
Australian termination law basics
Understanding these requirements is essential before terminating any employee.
Unfair dismissal
Employees can claim unfair dismissal if the termination was harsh, unjust, or unreasonable.
Notice periods
Minimum notice depends on length of continuous service:
+1 week if over 45 with 2+ years' service
Final entitlements
All of the following must be paid in the final pay:
Small business fair dismissal code
Businesses with fewer than 15 employees have different rules:
Unlawful termination is different from unfair dismissal
It is always illegal to terminate someone because of discrimination (race, sex, age, disability, etc.), taking sick leave, union membership, making a complaint, or other protected reasons. These protections apply to all employees regardless of service length or business size.
Before, during, and after termination
Fair termination requires careful preparation, respectful execution, and proper follow-through.
Before
Ensure you have valid reasons, proper documentation, and have met all legal requirements.
Critical: Get legal advice if unsure
During
Conduct the meeting professionally, directly, and with respect for the employee's dignity.
Keep it brief: 15-20 minutes max
After
Process final pay, handle logistics professionally, and communicate appropriately with the team.
Offer support: Reference letter, outplacement
Pre-termination checklist
Complete these items before proceeding with termination. Missing any essential item creates legal risk.
Valid reason documented
EssentialConduct, capacity, or redundancy with evidence
Warnings on file
EssentialWritten warnings issued and acknowledged (if applicable)
Employee notified of concerns
EssentialEmployee was told the reason and given chance to respond
Notice period calculated
EssentialBased on length of service and award/contract
Final entitlements calculated
EssentialWages, leave, notice pay, redundancy if applicable
Termination letter prepared
EssentialWritten notice with last day and entitlements
Meeting room booked
EssentialPrivate, quiet space for the conversation
Witness arranged
EssentialHR or another manager to attend
IT/security access list
Systems to disable and property to collect
Team communication planned
How and when to inform colleagues
Three ways to manage terminations
Each method has trade-offs. Here's how they compare.
Manual process
Paper records, manual calculations, and memory-based processes. Risky for compliance.
Risk level: High
Pre-made policies and checklists. Better structure but still manual tracking.
Risk level: Medium
Automated workflows, centralised records, and built-in compliance. Professional and defensible.
Risk level: Low
How to terminate an employee fairly
Follow these steps to conduct a fair, legal, and respectful termination.
Establish a valid reason and documentation
Ensure you have a legitimate, documented reason for termination that would be considered fair under Australian workplace law.
Key actions:
- Review all performance records, warnings, and improvement plans
- Ensure the reason relates to conduct, capacity, or genuine redundancy
- Check that any performance management process was followed correctly
- Gather all relevant documentation to support your decision
Review legal obligations
Check the Fair Work Act, relevant award or enterprise agreement, and employment contract for specific requirements.
Key actions:
- Calculate the correct notice period based on length of service
- Determine all final entitlements owed (leave, wages, redundancy pay)
- If a small business (under 15 employees), review the Small Business Fair Dismissal Code
- Consider whether unfair dismissal protections apply to this employee
Prepare for the meeting
Plan exactly what you will say and gather all necessary documents. Arrange for a witness to be present.
Key actions:
- Book a private meeting room away from other employees
- Prepare written notice of termination with last day of employment
- Have a witness (ideally HR or another manager) present
- Prepare final pay calculations and any other documents needed
Conduct the meeting with respect
This is the highest-risk moment. Anything you say can be used in an unfair dismissal claim. If you are unsure about any aspect of this meeting, seek legal advice first.
Deliver the news directly and professionally. Allow the employee to respond and maintain their dignity throughout.
Key actions:
- Be direct and clear — state the decision early in the meeting
- Explain the valid reasons using documented evidence
- Give the employee an opportunity to respond and listen to their perspective
- Keep the meeting brief and factual — it is not a negotiation
Handle logistics with dignity
Manage the practical aspects of departure professionally, respecting the employee's privacy and dignity.
Key actions:
- Provide written termination letter detailing last day, notice period, and final pay
- Discuss return of company property (keys, laptop, uniforms)
- Offer to let them collect belongings outside of busy hours if preferred
- Arrange security access changes in a way that is not humiliating
Process final pay and follow up
Pay all entitlements promptly, inform the team appropriately, and offer support where possible.
Key actions:
- Process final pay including outstanding wages, accrued leave, and any notice payout
- Provide a separation certificate if requested
- Communicate the departure to the team without disclosing private details
- Consider offering outplacement support or a reference letter
Termination tips
Follow these principles to handle terminations professionally and minimise risk.
Document everything
Maintain detailed records of performance issues, warnings, and the termination process.
Be direct but kind
State the decision clearly and early. Avoid beating around the bush or giving false hope.
Respect their dignity
Handle the departure in a way that preserves the employee's self-respect and privacy.
Follow the law
Support compliance with Fair Work Act, applicable awards, and contractual obligations.
Pay what is owed
Calculate and pay all entitlements accurately and on time. Never withhold final pay.
Learn and improve
After the termination, reflect on what led to this point and how to prevent similar situations.
Conducting the termination meeting
The meeting should be brief, direct, and respectful. Here's how to approach it:
Manage terminations with RosterElf HR hub
Reduce risk and support compliance with proper documentation and workflows.
Document performance history
Track performance issues, warnings, and improvement plans in one centralised location.
Calculate entitlements accurately
Award interpretation ensures correct notice periods and final pay calculations.
Run offboarding workflows
Automated checklists ensure nothing is missed during the exit process.
Maintain audit-ready records
Complete documentation trail to defend against any potential claims.
No credit card required
Feature comparison
See exactly how each termination management method stacks up across key features.
Documentation
Warning tracking
Notice calculation
Final pay
Compliance trail
Offboarding tasks
Policy access
Legal updates
| Feature | Manual | Templates | HR software |
|---|---|---|---|
| Documentation | Paper files | Shared drive | Centralised records |
| Warning tracking | Manual notes | Spreadsheet | Automated workflow |
| Notice calculation | Manual lookup | Checklist | Award-based rules |
| Final pay | Manual calculation | Calculator | Automated calculation |
| Compliance trail | Filing cabinet | Document folder | Audit-ready records |
| Offboarding tasks | Memory-based | Checklist | Automated workflow |
| Policy access | Paper manual | Shared drive | Digital policies |
| Legal updates | Manual research | Manual | Built-in compliance |
Common termination mistakes
These mistakes lead to unfair dismissal claims, underpayment penalties, and reputational damage.
No documented warnings or performance management
Consequence: Risk of unfair dismissal claim due to lack of procedural fairness
Solution: Always follow a documented performance improvement process before termination using performance tracking
Not giving the employee a chance to respond
Consequence: The Fair Work Commission may find the dismissal was procedurally unfair
Solution: Always notify the employee of the reason and give them an opportunity to respond before making a final decision using proper procedures
Terminating without calculating correct entitlements
Consequence: Underpayment can lead to penalties, back-pay claims, and reputational damage
Solution: Calculate all entitlements accurately including notice, leave, and any redundancy pay with award interpretation tools
Public or humiliating dismissal
Consequence: Damages employee dignity, morale of remaining staff, and increases legal risk
Solution: Always conduct the meeting privately with a witness and handle logistics with respect workplace policies
Not following the Small Business Fair Dismissal Code
Consequence: Small businesses lose protection against unfair dismissal claims
Solution: Follow the Code exactly, including providing a written warning for performance issues, documented using compliant templates
Download free termination policy templates
Get started with our library of free HR templates including termination, exit management, and misconduct policies.
Termination of employment policy
Covers all types of termination with Fair Work compliance
Exit management policy
Professional offboarding procedures
Misconduct policy
Defines misconduct and disciplinary procedures
Performance management policy
Managing underperformance before termination
Manage terminations properly
RosterElf HR Hub helps you document terminations and calculate final entitlements accurately. Built for Australian small businesses.
Related guides
More HR and employment resources.
Frequently asked questions about terminating employees
- Unfair dismissal occurs when an employee is dismissed in a harsh, unjust, or unreasonable manner. The Fair Work Commission considers whether there was a valid reason, whether the employee was notified and given a chance to respond, whether they were allowed a support person, whether they had been warned about performance issues, and whether the employer's size affected their HR capabilities.
- The minimum notice period under the National Employment Standards depends on length of service: 1 week for less than 1 year, 2 weeks for 1-3 years, 3 weeks for 3-5 years, and 4 weeks for more than 5 years. Employees over 45 with at least 2 years' service get an extra week. You can pay out the notice period instead of having them work it.
- Final pay must include: outstanding wages and any overtime or penalties owed, accrued annual leave, accrued long service leave (if applicable), payment in lieu of notice (if notice not worked), and redundancy pay (if applicable and business has 15+ employees). Any leave taken in advance can be deducted.
- The Small Business Fair Dismissal Code applies to businesses with fewer than 15 employees. If followed, it protects the employer from unfair dismissal claims. Key requirements include: a valid reason for dismissal, a genuine belief the employee is guilty of misconduct (for misconduct cases), a warning about performance issues (for performance cases), and giving the employee an opportunity to respond.
- Summary dismissal (immediate termination without notice) is only permitted for serious misconduct such as theft, fraud, violence, serious safety breaches, or being intoxicated at work. Even then, you should still conduct an investigation and give the employee a chance to respond to the allegations before making a final decision.
Regulatory sources
This guide is aligned with official Australian workplace regulations on ending employment.
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