Ending someone's employment is the single most litigated decision an Australian employer makes. An unfair dismissal application costs the employee less than $100 to lodge and must be filed within 21 days, which means a termination handled badly on a Friday can be a Fair Work Commission matter before the next pay run. The employers who get into trouble are rarely the ones with bad reasons. They are the ones with defensible reasons and a broken process.
This guide covers the full termination of employment framework for employers in the national workplace relations system: the lawful ways employment can end, the minimum notice periods, payment in lieu, serious misconduct, unfair dismissal exposure and the current caps, the Small Business Fair Dismissal Code, unlawful termination, and what has to happen with final pay after the exit.
The ways employment can lawfully end
Termination of employment is an umbrella, and the legal obligations differ by exit type. Ending the employment relationship lawfully starts with identifying which of these you are actually dealing with:
- Resignation: the employee ends the employment. Notice owed by the employee is set by the award, enterprise agreement or employment contract, not by the National Employment Standards.
- Dismissal with notice: the employer ends the employment for a reason related to conduct, capacity or performance, giving the minimum notice or payment in lieu.
- Summary dismissal: immediate termination without notice for serious misconduct.
- Redundancy: the job, not the person, is no longer required. Redundancy carries its own consultation and redundancy pay obligations, covered in the dedicated redundancy guide on this blog.
- End of a fixed term or task: employment ends by effluxion of the agreed period, task or season.
The reason for termination of employment determines the process. A capacity dismissal needs a different evidentiary trail to a misconduct dismissal, and a redundancy dressed up as either is the classic way employers lose cases they should never have run.
The legal framework in one view
Four layers govern how an employer must terminate an employee. The Fair Work Act 2009 carries the National Employment Standards (including minimum notice of termination) and the unfair dismissal and general protections jurisdictions. The applicable modern award or enterprise agreement adds consultation clauses, notice rules for employees, and any industry-specific termination entitlements. The employment contract can improve on the statutory minimums but never undercut them. And procedural fairness, while not a standalone statute, is what the Fair Work Commission tests when it asks whether a dismissal was harsh, unjust or unreasonable.
Commonwealth workplace laws about terminating employment apply to national system employers, which covers the large majority of Australian businesses. State systems persist for some unincorporated and public sector employers; this guide addresses the national system.
Notice of termination: the section 117 minimums
An employer must not terminate an employee's employment unless written notice of the day of termination has been given. That is section 117(1), and "written" is doing real work in it: verbal notice does not satisfy the National Employment Standards. Notice can be delivered personally, left at the employee's last known address, sent by pre-paid post, or, if the employee agrees, sent electronically.
The minimum notice period scales with continuous service:
- Not more than 1 year of service: 1 week
- More than 1 year, up to 3 years: 2 weeks
- More than 3 years, up to 5 years: 3 weeks
- More than 5 years: 4 weeks
The amount of notice increases by one week if the employee is over 45 years old and has completed at least 2 years of continuous service at the end of the day the notice is given. An award, enterprise agreement or employment contract can require more than these minimums; they cannot provide less. Periods of casual employment do not count toward continuous service for notice purposes.
Payment in lieu of notice
An employer may end employment immediately by providing pay in lieu of notice instead of having the employee work the notice period. The payment must be at least what the employee would have received at the full rate of pay for the hours they would have worked through the notice period. Full rate means everything: incentive-based payments and bonuses, loadings, monetary allowances, overtime, penalty rates and any other separately identifiable amounts. Paying base salary only is a common and quietly expensive error.
Note the contrast: payment in lieu of notice is calculated at the full rate, while redundancy pay under the NES is calculated at the base rate. The two amounts answer different rules, and payroll needs to apply each correctly when both are owed.
Who is not entitled to notice
Section 123 excludes several categories from the NES notice provisions: casual employees, employees engaged for a specified period, task or season, employees dismissed for serious misconduct, trainees on fixed training arrangements, and daily hire employees in building and construction and parts of the meat industry. The exclusion cannot be engineered: a fixed-term structure adopted substantially to avoid notice obligations does not attract the exemption. And an employee dismissed during a probation period is still entitled to notice based on their length of service; probation is a contractual concept, not an NES carve-out.
Serious misconduct and summary dismissal
Serious misconduct allows immediate termination without notice. The Fair Work Regulations (reg 1.07) define it as wilful or deliberate behaviour inconsistent with the continuation of the employment contract, or conduct causing serious and imminent risk to a person's health or safety or to the reputation, viability or profitability of the business. The named examples: theft, fraud, assault, sexual harassment in the course of employment, being intoxicated at work, and refusing to carry out a lawful and reasonable instruction consistent with the contract.
Summary dismissal removes the notice obligation. It removes nothing else. The employee may lose the notice period, but all outstanding wages and accrued annual leave must still be paid, the dismissal can still be tested as unfair if the process or proportionality fails, and "serious misconduct" claimed in the heat of the moment but not made out at the Commission converts a defensible exit into a costly one. Investigate first, even briefly and even where the conduct seems clear-cut. The employer who dismisses an employee on the spot in anger almost always pays for the privilege.
Unfair dismissal: where claims concentrate
An unfair dismissal occurs when the Fair Work Commission finds a dismissal was harsh, unjust or unreasonable, was not consistent with the Small Business Fair Dismissal Code (where it applies), and was not a genuine redundancy. The application window is strict: 21 days after the dismissal takes effect, extendable only in exceptional circumstances.
Who can claim
The employee must have completed the minimum employment period: 6 months, or 12 months where the employer is a small business employer (fewer than 15 employees by headcount, counting regular casual employees and employees of associated entities, including the person being dismissed). Above the minimum employment period, the employee must also be award or agreement covered, or earn below the high income threshold.
For the 2026-27 financial year, the high income threshold is $190,100, and the unfair dismissal compensation cap is $95,050. The cap is the lesser of 26 weeks of the employee's remuneration or half the high income threshold. Both figures index on 1 July each year, so verify the current numbers before relying on them in a live matter.
What the Commission examines
A valid reason related to capacity or conduct is the start, not the end. The Commission also weighs whether the employee was notified of the reason, given an opportunity to respond, allowed a support person in termination discussions, warned about unsatisfactory performance before a capacity dismissal, and whether the process matched the size and HR resources of the business. The pattern across the case law is consistent: employers lose on process far more readily than on substance. A valid reason for termination delivered through an ambush meeting still produces compensation.
The Small Business Fair Dismissal Code
Small business employers (less than 15 employees by headcount) have a separate shield. A dismissal consistent with the Small Business Fair Dismissal Code is not an unfair dismissal, and the Code (declared under the Fair Work Act and maintained with a checklist on the Fair Work Commission's small business hub) sets two standards.
Summary dismissal under the Code
For summary dismissal, the employer needs a belief, on reasonable grounds, that the employee's conduct was serious misconduct: theft, fraud, violence, sexual harassment or serious breaches of safety procedures. Reasonable grounds generally means some inquiry was made; a genuinely held suspicion with nothing behind it does not qualify.
Other dismissals under the Code
For other dismissals, the Code requires that the employee is given a warning, a valid reason based on conduct or capacity, and a real chance to fix the problem, including extra training where appropriate. The Code also requires the employer to allow the employee a support person in discussions. The Code's checklist is worth completing at the time of the dismissal and filing, because a completed checklist is evidence the Commission will accept.
The Code governs dismissal fairness only. It does not displace notice of termination, accrued entitlements, or the general protections provisions.
Unlawful termination and the general protections
Separate from unfair dismissal, an employer must not dismiss an employee, or terminate their employment, for a prohibited reason. The general protections (and the parallel unlawful termination provisions) prohibit dismissal because of temporary absence due to illness or injury, union membership or non-membership, filing a complaint against the employer, discrimination attributes (race, colour, sex, sexual orientation, breastfeeding, gender identity, intersex status, age, disability, marital status, family or carer's responsibilities, subjection to family and domestic violence, pregnancy, religion, political opinion, national extraction or social origin), absence on parental leave, or the exercise of a workplace right.
Two features make this jurisdiction more dangerous for employers than unfair dismissal. There is no minimum employment period and no high income threshold, so day-one employees and executives can both claim. And the reverse onus applies: once the employee shows the dismissal and points to a protected attribute or workplace right, the employer must prove the prohibited reason played no part in the decision. The application window for a general protections dismissal claim is also 21 days. Documentation of the genuine reason, created at the time, is the entire defence.
Redundancy in brief
Where the job itself is no longer required, the exit is a redundancy, and a distinct framework applies: the genuine redundancy test, award consultation obligations, redeployment, and redundancy pay. Eligible employees may be entitled to redundancy pay under the NES on top of notice, where they have 12 months' service and the employer is not a small business. This guide deliberately does not duplicate that material. The redundancy process guide covers the procedure end to end, and the NES redundancy table sets out the week-by-week redundancy pay scale, including the step-down at 10 years that payroll teams miss. For calculating individual entitlements, the redundancy pay calculator and notice period calculator apply the current scales.
The one point worth repeating here, because it decides cases: a redundancy that is not genuine (the role survives under a new title, consultation was skipped, redeployment was never considered) falls straight back into the unfair dismissal jurisdiction.
Final pay and the paperwork after termination
Whatever the exit type, the employment ends with money and documents, and both have rules. Final pay includes:
- Wages for all hours worked up to the last day, with penalties and allowances
- Accrued untaken annual leave, plus annual leave loading on the payout where it would have been paid during employment, even where an award or contract says otherwise
- Payment in lieu of notice and redundancy pay where applicable
- Long service leave per the relevant state or territory scheme
Accrued sick and carer's leave is not paid out. On timing, the Fair Work Ombudsman's guidance is that employers must follow their award or enterprise agreement, and most awards require final pay within 7 days after the last day of employment.
The two exit documents
Two documents round out the exit. The termination letter should state the day employment ends and the reason, consistent with what the employee was told. And where Services Australia or the departing employee requests an Employment Separation Certificate, the employer is required to provide it within 14 days of the request; it is the document Centrelink uses to assess income support, and the stated reason for separation needs to match the real one.
A compliant termination process, in order
The exit types differ, but the procedures for a defensible employee termination share a stable spine:
- Identify the exit type, the employment type, and the reasons for termination, and write them down before acting
- Check the award or enterprise agreement for consultation, notice and procedure clauses
- Run the process the exit type requires: warnings and opportunity to improve for capacity, investigation for misconduct, consultation and redeployment for redundancy
- Hold the termination meeting with notice, a support person offer, and a genuine opportunity to respond
- Give written notice of the day of termination, working the notice or paying in lieu at the full rate
- Process final pay within the award timeframe, with leave loading and correct tax treatment
- Complete the separation paperwork and retain every document for seven years
Employers who follow that sequence rarely hear from the Commission. Employers who improvise step 4 keep lawyers busy.
Termination of employment is where employment law concentrates its consequences. The same decision can be clean or catastrophic depending entirely on the weeks before it, and by the time a Form F2 arrives the process is already fixed in the record. The reliable approach is unglamorous: identify the exit type, follow the framework for that type, document as you go, and take advice before the meeting rather than after the claim.
