Employee termination

What Is Employee Termination?

Employee termination refers to the formal end of an individual’s employment with a business or organisation. It can be initiated by either the employer or the employee, and may occur for a variety of reasons, including resignation, redundancy, dismissal for misconduct or poor performance, or the completion of a fixed-term contract.

In Australia, employee termination is governed by the Fair Work Act 2009, along with applicable modern awards, enterprise agreements, and employment contracts. Businesses must follow lawful processes and ensure entitlements are paid correctly to avoid legal disputes or penalties.

Types of Employee Termination

1. Resignation

The employee voluntarily ends the employment. They are generally required to give notice as per their contract or award. Employers should:

• Acknowledge the resignation in writing.
• Confirm the final workday.
• Calculate final entitlements, including unused leave.

2. Dismissal (Termination by Employer)

The employer ends the employment relationship. Dismissals can occur due to:

• Serious misconduct (e.g. theft, violence, fraud).
• Poor performance (after adequate warnings and support).
• Ongoing misconduct or breaches of policy.

Procedural fairness must be observed—this includes providing warnings, the opportunity to respond, and documentation of any actions taken.

3. Redundancy

A genuine redundancy occurs when an employer no longer requires a role to be performed by anyone due to changes in the business. A genuine redundancy may entitle the employee to:

• Redundancy pay (based on service length).
• Notice or payment in lieu of notice.
• Accrued entitlements.

Fair Work – Redundancy Pay & Entitlements

4. End of Fixed-Term Contract

When a contract expires on an agreed end date or milestone, the employment ends automatically, unless renewed or made ongoing.

Employer Obligations at Termination

Australian employers have legal responsibilities when terminating employment:

• Provide written notice of termination or payment in lieu.
• Pay out entitlements, including accrued annual leave, long service leave (if applicable), and redundancy pay.
• Issue a final payslip.
• Lodge final Single Touch Payroll (STP) report with the ATO.
• Cancel access to systems and return of company property.
• Provide an Employment Separation Certificate (if requested).

Failing to meet these requirements may result in claims of unfair dismissal, underpayment, or general protections disputes through the Fair Work Commission.

Notice Periods

Minimum notice periods are set out in the National Employment Standards (NES) and depend on the employee’s length of continuous service:

Final Pay Entitlements

Employers must calculate and process the final pay, which may include:

• Ordinary hours worked up to the end date.
• Accrued and unused annual leave.
• Long service leave (depending on state legislation and tenure).
• Redundancy payments (if applicable).
• Payment in lieu of notice (if no notice was given).

Final pay should be made within 7 days of termination in most cases, though some awards or agreements may require faster payment.

How Microkeeper Helps with Employee Termination

Microkeeper simplifies termination processes through its all-in-one HR and payroll platform:

• Automated final pay calculations for unused leave and entitlements.
• STP compliant reporting to the ATO, including employment end dates.
• Employee exit management tools to ensure a smooth offboarding.
• Historical recordkeeping to support audits or disputes.
• Role and access deactivation to maintain data security.

Avoiding Legal Risks in Termination

• Follow your award or enterprise agreement obligations carefully.
• Ensure terminations are documented and based on valid reasons.
• Use performance management tools to track concerns early.
• Engage in fair consultation for redundancies.
• Offer the right of reply in all dismissal scenarios.
• Provide written documentation and termination letters.

For complex cases, seek legal advice or consult with the Fair Work Ombudsman to ensure compliance.

Final Thoughts

Employee termination is a critical process that must be handled with care, clarity, and legal compliance. Whether due to resignation, redundancy, or dismissal, employers must ensure fair treatment and accurate payout of entitlements.

With tools like Microkeeper, businesses can manage employee exits efficiently while staying compliant and avoiding costly errors or disputes.

_{Disclaimer: This glossary entry is intended as general information and does not constitute legal advice. For tailored support, consult the Fair Work Ombudsman or a workplace relations specialist.}