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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


‘Very bad employer’ must pay $20k for probation period dismissal

Unfair Dismissal

An employer who apparently believed he had “carte blanche” to dismiss an employee on probation has received a very expensive lesson. Richard Trainer, who runs M4 Marketing in Perth, was hit with a $20,000 fine after the employee filed an […]

By Portner Press on September 16th, 2019

Your questions answered: Are we obligated to provide terminated employees with a reference?

Termination of Employment

Q Our organisation policy is that written references are not given to staff who terminate, or whose employment is terminated. We will provide a statement of service and that is all. Can you please advise if we are legally required […]

By Portner Press on September 13th, 2019

Your questions answered: Can we dismiss a pregnant employee?

Termination of Employment

Q We have a full-time employee who has worked with us for seven months. Since she finished probation, she has started to not listen to instructions and not perform well. We keep telling her to improve, but she just won’t […]

By Portner Press on September 6th, 2019

Important decision defines what a leave day is for NES purposes

Unfair Dismissal

The National Employment Standards (NES) in the Fair Work Act 2009 (Cth) provide for a minimum entitlement for all employees (other than casual employees) to 10 days of paid personal/carer’s leave for each year of service with his or her […]

By Portner Press on September 2nd, 2019

Employee who denigrated employer on Facebook unfairly dismissed: FWC

Unfair Dismissal

  An employee who took to Facebook to advertise her disgust with new business owners was unfairly dismissed, the Fair Work Commission (FWC) has ruled. The control room operator had been with her employer for almost 15 years when she […]

By Portner Press on August 30th, 2019

‘Conversational swearing’ justifies blue-collar worker’s dismissal, FWC commissioner decides

Termination of Employment

  Fair Work Commission (FWC) Deputy President Abbey Beaumont had very little sympathy for an “idiosyncratic”, long-serving store person who was dismissed for becoming angry and swearing in a disciplinary meeting. Behaviour Deputy President Beaumont described as “repugnant”. This was […]

By Portner Press on August 28th, 2019

FWC upholds dismissal of badly behaved employee

Termination of Employment

Consider the following: sexual harassment of a colleague; insubordination; misuse of a company credit card; damaging an employer’s reputation; damaging company property; stealing company property; breaching work health and safety policies; and physically threatening other staff members. All cases of […]

By Portner Press on August 26th, 2019

Employer can’t use redundancy to “get rid” of employee

Unfair Dismissal

  Any employer who thinks redundancy can be used as a simple way to “get rid” of an unwanted employee is sorely mistaken. The sole director of Fortis Products Pty Ltd learnt this when he retrenched an employee he was […]

By Portner Press on August 23rd, 2019

Your questions answered: Are employees who don’t relocate entitled to redundancy?

Termination of Employment

Q We are planning to move our office from an inner suburb location to the city centre. Are our employees eligible for a severance package if they say they cannot or will not move to the new location? A Whether […]

By Portner Press on August 23rd, 2019

One random comment spirals into HR nightmare

Termination of Employment

It all started on the Ghan train from Adelaide to Darwin. An elderly passenger told a hospitality worker that another passenger – who was drunk at the time – had said the worker made a sexual comment about the drunken […]

By Rebecca Macdougall on August 9th, 2019