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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


One Nation candidate alleges she was sacked for political views

Unfair Dismissal

A senior employee who was sacked after standing as a candidate for the One Nation party is suing her employer, a wind turbine manufacturer, alleging it took adverse action against her because of her political views. Gaye Cameron, who ran […]

By Portner Press on June 21st, 2019

Poor performance cannot be dealt with as misconduct, FWC rules

Unfair Dismissal

A Tokyo Sushi franchisee who thought she could give her employees a raw deal has been hit with $383,616 in penalties from the Fair Work Ombudsman (FWO). Ms Kiyoshi Hasegawa was personally fined $63,936 for underpaying 31 employees a total […]

By Portner Press on June 19th, 2019

How the unfair dismissal high-income threshold is determined

Unfair Dismissal

An employee who is not covered by a modern award or an enterprise agreement can only make an unfair dismissal claim under the Fair Work Act 2009 (Cth) (FW Act) if their ‘annual rate of earnings’ is less than the […]

By Hannah Pelka-Caven on June 7th, 2019

Employer may terminate staff to maximise profit says WAIRC commissioner

Termination of Employment

The Western Australian Industrial Relations Commission (WAIRC) has told a Subway franchisee that he was entitled to dismiss a long-serving employee so he could employ cheaper junior staff to “maximise his profit”. The employer had dismissed the award-winning ‘sandwich artist’ […]

By Portner Press on June 3rd, 2019

Employee with cancer was unfairly dismissed: FWC

Unfair Dismissal

A wholefood café owner has been lambasted by the Fair Work Commission (FWC) for her summary dismissal of a chef who couldn’t attend work after he received cancer treatment. Gabrielle Levette, the owner of Urban Orchard Food in Sydney’s Circular […]

By Portner Press on May 31st, 2019

No pity for SUICIDAL employee

Unfair Dismissal

An employee who attempted to take his own life after being dismissed from his job has been allowed to file his unfair dismissal application 33 days late. Damstra Technology had verbally dismissed the employee with immediate effect for allegedly drafting […]

By Portner Press on May 27th, 2019

FWC rejects director’s claim he did not dismiss apprentice

Unfair Dismissal

The Fair Work Commission (FWC) has taken a director to task for dismissing a young apprentice and then later denying he did so. The 19-year-old apprentice at Solar and Batteries Direct Pty Ltd was employed on an ad hoc basis, […]

By Portner Press on May 24th, 2019

Do you KNOW how to dismiss an employee?

Termination of Employment

There are a number of instances where dismissal for a lawful reason may exist. For example, the dismissal may relate to poor performance, misconduct, dangerous behaviour, refusing to follow instructions or redundancy. Prior to carrying out a dismissal process, you […]

By Portner Press on May 22nd, 2019

Employee threatened with violence was not forced to resign: FWC

Unfair Dismissal

An employee who maintained he had no choice but to resign after a manager threatened to take his liver was told by the Fair Work Commission (FWC) he left his employment of his own accord. The incident occurred after the […]

By Portner Press on May 17th, 2019

Can’t dismiss a casual without a reason, FWC rules

Unfair Dismissal

The Fair Work Commission (FWC) has recently ruled that a casual employee who was given just 90 minutes’ notice before his employer told him he was no longer required was unfairly dismissed. The mechanic and auto electrician had been working […]

By Portner Press on May 15th, 2019