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The termination of an employee’s employment can occur for many reasons. It can be the employee’s choice to end their contract of employment or it may be the employer’s choice. Examples for reasons for the termination of employment include:

  • resignation;
  • redundancy;
  • dismissal;
  • retirement;
  • agreed separation; or
  • abandonment of employment.

Employers need to make sure employees are subject to an employment contract stipulating the applicable notice period for termination of employment. A reasonable period of notice is notice that which enables the other party sufficient time to either seek new employment or to employ another employee.

Employees must be paid the relevant amounts when their employment is terminated. Termination pay is the monetary entitlement legally due to an employee when they cease their employment. Termination pay will usually include severance pay (if the end of employment is for reasons of redundancy), notice pay (if the payment is made in lieu of notice), and leave pay.

Notice pay, or pay in lieu of notice, means money paid to a departing employee for the period of notice that either you give the employee or the employee gives you (as required under an employment contract, enterprise agreement, modern award or legislation). An employee must be paid their full rate of pay until the end of their notice period.

If a worker has been legitimately engaged to perform work as an independent contractor, the termination pay requirements should be outlined in the terms of their contract.

Leave pay refers to annual leave and long service leave (and if relevant, any personal leave) entitlements owing to the employee at the date that their employment ends. This may also include any accrued leave for completed years of service and a pro rata or proportionate amount for any part year of service.

An employer is also required to pay an employee the following accrued entitlements when they cease employment: wages due for work done, commissions due to the employee for work done (if relevant), any applicable bonus or profit share arrangement, and any other payment payable to the employee under an applicable industrial instrument.

Resignation is when an employee chooses to give up their position or role in an organisation. For a resignation to be lawful, an employee must advise you of their decision to leave and when they intend their last day to be. The last day the employee works must comply with the employee’s obligation to give you a certain period of notice of resignation.

A redundancy occurs when an employer no longer requires a particular job to be performed by anyone due to changes in the operational requirements of its business. And retrenchment occurs when an employee’s employment is terminated because their job has become redundant. Simply put, an employee may be retrenched when their job is made redundant. If the reasons for dismissing an employee are not due to the employee’s role being redundant, the dismissal will not be a genuine redundancy as defined in the Fair Work Act 2009 (Cth) and will not be exempt from unfair dismissal laws.

Dismissal occurs when an employer terminates the employment of an employee. An employer’s ability to dismiss an employee is limited by a number of laws.

An employee can be dismissed expressly, constructively or summarily. An express dismissal occurs when an employer notifies an employee of their last day of employment. Constructive dismissal occurs when an employee leaves their employment immediately because their employer says or does something that the employee can reasonably treat as in effect walking away from the employment contract. A summary dismissal is an instant or ‘on-the-spot’ dismissal, usually only appropriate to dismiss an employee who has engaged in serious misconduct.

Retirement is also a form of termination of employment. In the past, it was generally accepted that employees must retire at a particular age, e.g. 65, but today, Australia has no compulsory retirement age. Generally, retirement is a voluntary resignation, however in some cases retirement can be forced on the employee by a misguided employer or poor health. An employer can never force an employee to retire.

Agreed separation is when an employer and an employee mutually agree to part ways. A settlement agreement might be used to do this on agreed terms. This course of action might be considered in order to prevent or resolve a dispute that might lead to legal liability in court. A settlement agreement is an agreement in which all parties agree to settle all claims and matters between them. Settlement agreements allow employers to confidentially resolve disputes with your employees without admitting fault. An employee consenting to a settlement agreement means they are giving up their right to make any future legal claim in respect of that particular matter.

Further, a common type of settlement agreement – separation agreement – provides the agreed terms on which an employee ceases their employment. A separation agreement is a type of settlement agreement under which the employer and the employee mutually agree to go their separate ways and to settle all matters between them.

Abandonment of employment refers to a situation where an employee fails to attend work for no reason known to the employer, and it is reasonable for the employer to conclude that they no longer wish to work for the business. The employer needs to make sure that all the industrial instruments relevant to the employee for a provision on abandonment of employment have been checked before terminating employment.


Top stories for Termination of Employment


Your questions answered: Must we pay redundancy if an employee resigns before we advise about the redundancy?

Termination of Employment

Q: Must we pay redundancy if an employee resigns before we advise about the redundancy? My opinion is that he resigned, so it is not payable.

By Portner Press on February 11th, 2019

Is it safe to settle an unfair dismissal claim directly with an employee?

Unfair Dismissal

It’s common to settle employee claims by first reaching an in-principle agreement about settlement terms and then recording the settlement in a more comprehensive deed executed by the parties. What if the applicant refuses to execute the deed? Can the employer rely on the in-principle settlement?

By Charles Power on February 3rd, 2019

Your questions answered: Can we dismiss an injured employee who is unable to return to work?

Unfair Dismissal

Q: Is it appropriate to formally terminate an employee due to his inability to carry out the normal duties of his role unless he feels he can?

By Portner Press on February 3rd, 2019

Neo-Nazi electrician receives 11K penalty for ‘appalling’ unfair dismissal

Unfair Dismissal

An electrical contractor who calls himself the “Nazi Sparky” and claims to be “Brisbane’s best Holocauster”, has been ordered to pay an apprentice more than $11,000 in an unfair dismissal claim.

By Portner Press on January 23rd, 2019

Your questions answered: Is an employee’s refusal to relocate reasonable?

Termination of Employment

Q: We are planning to move our office. Are our employees eligible for a severance package if they say they cannot or will not move to the new location?

By Portner Press on January 18th, 2019

Definition of job offer can’t be stretched to deny redundancy pay

Termination of Employment

Making a job offer to avoid redundancy pay? According to the FWC, you might be in trouble.

By Portner Press on January 9th, 2019

Dismissing an employee who can’t work – Is it discrimination?

Unfair Dismissal

If an employer dismisses an employee because of their mental disability, the employer is likely to contravene the general protections of the Fair Work Act.

By Charles Power on December 14th, 2018

Your questions answered: Maximum redundancy pay

Termination of Employment

Q: If we are going to make an employee redundant, is there a threshold/maximum amount that we need to pay when the employee’s salary is over a certain level?

By Portner Press on December 14th, 2018

Your questions answered: Can an employee make a claim against us after they resign?

Termination of Employment

Q: Can an employee make a claim against us AFTER they resign?

By Portner Press on December 5th, 2018

A verbal resignation can be sufficient to end employment

Termination of Employment

In Bonser v Nexus (Aust) Pty Ltd (2016) (Bonser), an employee argued that his notice of resignation was invalid because he did not give it in writing.

By Portner Press on December 3rd, 2018