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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


OK to bring a termination letter to a show cause meeting for ‘convenience

Termination of Employment

If an employer arranges a meeting with an employee to give the employee a chance to respond to allegations of misconduct, it is important the employer not prejudge the outcome of that meeting. If there is evidence that the employer […]

By Portner Press on March 30th, 2020

FWC slams ‘superficial’ HR manager

Unfair Dismissal

In Chioma Okoye v SACARE Supported Accommodation and Care Services T/A SACARE (2020) the Fair Work Commission (FWC) took issue with an HR manager simply “going through the motions” when she dismissed a disability care worker. This was even though […]

By Portner Press on February 24th, 2020

Is it ever ok for employees to break the rules?

Unfair Dismissal

While one would expect a bank to be within its rights to sack an employee for fraud, a recent decision by the Fair Work Commission (FWC) highlights that not every situation is black and white. In Jonalyn Snell v Bendigo […]

By Portner Press on January 22nd, 2020

Your questions answered: Can we sack an employee for misuse of a company credit card?

Termination of Employment

Q Our employee has a work credit card. They used it for personal use without permission – several transactions in one day amounted to about $2,000. They have agreed to pay this back. Is this employee’s misconduct sufficient reason for […]

By Portner Press on January 22nd, 2020

Your questions answered: Can we dismiss a delivery driver whose licence has been suspended?

Termination of Employment

Q Are we able to terminate a delivery driver who has lost his licence for 3 months? Most of the infringements have occurred whilst driving a company vehicle. A Assuming this employee would have access to unfair dismissal laws if […]

By Portner Press on January 15th, 2020

Ageist sacking was out of ‘respect’, employer claims

Unfair Dismissal

In Leslie Jones v S & Q Group Pty Ltd, the Fair Work Commission (FWC) found that a 74-year-old motel handyman was unfairly dismissed because of his age. He was terminated when the employer appointed a new company director. The […]

By Portner Press on January 14th, 2020

Your questions answered: If an employee resigns then is soon reemployed, are their entitlements reinstated?

Termination of Employment

Q Could you please advise what entitlements would be reinstated for an employee who resigns and then is reemployed within one month? The employee has worked for us for 11 years and is covered by the General Retail Award 2000. […]

By Portner Press on December 9th, 2019

Your questions answered: Is there a maximum amount of redundancy pay we can pay an employee?

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? A No. Under the Fair Work Act 2009 (Cth) National Employment […]

By Portner Press on December 4th, 2019

Audi’s lack of HR expertise is ‘astounding’, FWC commissioner says

Unfair Dismissal

Fair Work Commission (FWC) Commissioner Jennifer Hunt has lambasted Audi Australia for a lack of HR expertise, after a dealership service advisor at Audi Indooroopilly was dismissed because his customer service KPI score was in the bottom 50% of all […]

By Portner Press on November 18th, 2019

Federal Court confirms employer’s right to manage ill and injured employees

Termination of Employment

Your employee goes on extended personal leave and submits medical certificates stating inability to work due to “a medical condition” or “significant work-related stress and depression”. The employee refuses your request for them to submit to an independent medical assessment […]

By Charles Power on October 30th, 2019