Dismissal On Notice: in Australia

Ending an employment relationship is never a “set and forget” task. Even when you believe the decision is clear-cut, the process you follow (and the documents you rely on) can make the difference between a clean exit and a costly dispute.

If you’re an Australian small business employer, one of the most common ways to end employment is dismissal on notice. In plain terms, this means you’re terminating an employee’s employment, but you’re giving them notice of termination (or paying them instead of requiring them to work out that notice).

In this guide, we’ll break down what dismissal on notice actually means, when it’s appropriate, how to calculate notice correctly, and the practical steps you can take to protect your business throughout the process.

What Is “Dismissal On Notice” In Australia?

Dismissal on notice generally means an employer terminates an employee’s employment by giving them the required notice period (or by providing payment in lieu of notice).

This is different from “instant” or “summary” dismissal, where employment ends immediately (usually due to serious misconduct).

In many small businesses, dismissal on notice comes up when:

an employee is underperforming and doesn’t improve after a fair process
there’s a breakdown in trust or working relationship (but not serious misconduct)
the role is still needed, but the person is not the right fit
you’re ending employment during (or at the end of) probation

Even though this is a common approach, it still needs to be handled carefully. Giving notice doesn’t automatically protect you from an unfair dismissal claim if the termination is harsh, unjust or unreasonable.

Is Dismissal On Notice The Same As Resignation?

No. With resignation, the employee ends the employment relationship (and usually gives notice). With dismissal on notice, you end the employment relationship and you give notice (or payment instead).

Is Dismissal On Notice The Same As Redundancy?

Not quite. Redundancy is when the job is no longer required to be performed by anyone (for example, due to restructure or downturn). Dismissal on notice is typically performance or conduct-related (or otherwise a decision to end the employment relationship without redundancy being the reason).

If you are considering redundancy, it’s worth taking specific advice, because redundancy has its own rules around consultation and redundancy pay.

When Should You Use Dismissal On Notice (And When Should You Avoid It)?

As a small business owner, you usually want an approach that is:

fair to the employee
practical for your operations
legally defensible if challenged

Dismissal on notice can be appropriate when the reason for termination isn’t “serious misconduct” and you want a structured, lower-risk way to end employment.

Common Situations Where Dismissal On Notice Makes Sense

Performance issues: the employee is not meeting expectations, and you’ve given reasonable feedback and an opportunity to improve.
Behaviour issues: there are conduct problems, but they aren’t severe enough to justify summary dismissal.
End of probation: you’ve assessed the employee isn’t the right fit and want to end the relationship in a compliant way.

If you’re terminating during probation, keep in mind that “probation” is a practical tool, but it doesn’t remove all legal obligations. It’s still important to follow a fair and well-documented process. Many businesses set this up properly from the start with an Employment Contract that clearly explains probation, notice requirements, duties, and workplace policies.

When You Should Be Cautious

Even with notice, termination can be high risk if:

the employee recently raised a complaint (for example, bullying, safety, discrimination, or underpayment)
the employee has a medical condition or injury and there may be a duty to make adjustments
the issue relates to protected attributes (age, pregnancy, family responsibilities, disability, etc.)
you don’t have a clear, documented reason for termination

In these scenarios, dismissal on notice may still be possible, but you should get advice on how to structure the process and communications.

How Much Notice Do You Need To Give?

Notice is one of the most important compliance points in a dismissal on notice. The minimum notice period often depends on:

the employee’s length of service
their age
the applicable award or enterprise agreement (if any)
what the employment contract says (as long as it meets minimum legal requirements)

In Australia, the Fair Work Act sets minimum notice periods for employees (with some exceptions, such as some casuals and certain fixed-term arrangements), and awards/agreements can add further requirements.

Some employers assume they can simply “give two weeks” and move on. In reality, the correct notice period may be longer (and miscalculations can lead to underpayment claims or disputes about the termination date).

Can You Pay Instead Of Giving Notice?

Often, yes - many employers use payment in lieu of notice (also called “pay in lieu”). This means you bring the employment to an end without requiring the employee to work out the notice period, and you pay the employee what they would have earned if they had worked through that period.

Payment in lieu can be useful if:

it’s awkward or unsafe to have the employee remain in the workplace
you’re concerned about client relationships or confidential information
you want a clean and immediate operational handover

However, you should always check the employee’s employment contract and any award or enterprise agreement terms. In some cases, these rules can affect whether payment in lieu is available, how it must be calculated, and what needs to be included (for example, allowances, loadings, or other components of ordinary pay). Questions also often arise about when superannuation applies, which can depend on what is being paid and the nature of the payment.

What About Annual Leave During The Notice Period?

Employees can request to take annual leave during their notice period, but you should be careful about how you handle this. Some awards and workplaces also have rules about directing annual leave or refusing requests.

As a practical point, the termination date is usually the date specified in the notice (or the date employment ends if you pay in lieu). Taking annual leave during the notice period doesn’t automatically extend employment, unless you and the employee agree to change the end date (and you should document any agreement clearly). Either way, payroll calculations need to be correct.

What Process Should You Follow Before Dismissal On Notice?

Small business employers often ask: “If I’m giving notice, do I really need a process?”

In most cases, yes. A fair process is one of the strongest ways to reduce legal risk, particularly if the employee could bring an unfair dismissal claim.

While the right process will depend on the reason for termination, a sensible approach often looks like this:

1. Make Sure The Expectations Were Clear

If you’re terminating for performance, you’ll want to be confident you’ve set the employee up to succeed. That usually means the employee had:

a clear role description and responsibilities
training and support where required
reasonable performance standards communicated to them

This is where having a solid contract and policies from day one really matters. Many businesses also implement a broader workplace framework, like a staff handbook and conduct policies, but at minimum, the contract should be tailored and clear.

2. Document Issues As They Arise

Documentation is not about “building a case” against an employee. It’s about keeping an accurate record of what’s happened and what support you’ve provided.

Depending on the situation, that might include:

file notes of performance discussions
written feedback or coaching plans
records of training provided
formal warnings (where appropriate)

3. Give The Employee A Chance To Respond

If the dismissal relates to conduct or performance, you generally want to give the employee an opportunity to respond before you make a final decision. This is also a helpful step to ensure you haven’t misunderstood the situation.

In more complex matters (especially where allegations are involved), you may need a more formal approach, such as a workplace investigation and (in limited circumstances) a stand-down while investigating. Stand-down rules are technical and depend on the Fair Work Act, the contract and any applicable award or enterprise agreement, so if you’re considering this, it’s worth reviewing your obligations around standing down an employee pending investigation and making sure you communicate clearly and consistently.

4. Consider A Show Cause Process (If Appropriate)

In some workplaces, a “show cause” step is appropriate before termination. This usually involves telling the employee what the concerns are and asking them to explain why disciplinary action (including termination) should not be taken.

If you use a show cause process, it’s important to do it properly and avoid language that suggests you’ve already made up your mind. The wording and timing matter, and this is often a point where employers benefit from tailored advice and documentation, including Show Cause Letters.

5. Communicate The Termination Clearly And Respectfully

Even if the relationship is strained, keep your termination communications factual and calm. You’ll generally want to confirm:

the termination decision
the last day of employment
whether the employee is working the notice period or receiving payment in lieu
final pay arrangements (including outstanding leave)
return of company property and access arrangements

It’s also good practice to provide the decision in writing. While there’s no single “perfect” template, a written notice of termination can prevent misunderstandings later.

Common Mistakes With Dismissal On Notice (And How To Avoid Them)

Even well-intentioned employers can stumble in dismissal on notice situations. Here are some of the most common issues we see, and what you can do to reduce risk.

Mistake 1: Relying On A Verbal Conversation Only

If the termination is only communicated verbally, disputes often arise about what was said, when, and what the employee understood their end date to be.

Better approach: Follow up with a written notice (email is common), and keep a copy for your records.

Mistake 2: Getting The Notice Period Wrong

A mistake in notice calculations can lead to underpayment and undermine your compliance position.

Better approach: Check the Fair Work Act minimums, then check the award/enterprise agreement, and then check the employment contract. Where there’s inconsistency, you generally need to meet the most beneficial minimum entitlements.

Mistake 3: Using “Summary Dismissal” Language Without Serious Misconduct

Sometimes employers label a termination as “instant dismissal” without meeting the serious misconduct threshold. This can increase dispute risk and lead to claims.

Better approach: If the situation isn’t clear-cut serious misconduct, dismissal on notice (or payment in lieu) is often a safer pathway.

Mistake 4: Not Paying Final Entitlements Correctly

Final pay often includes multiple moving parts, such as:

wages up to the termination date
notice pay (if applicable)
unused annual leave
leave loading (if applicable)
superannuation (depending on what is being paid and how)

Better approach: Make sure your payroll and termination letter align. It’s also important that any agreement about a different end date is properly documented.

Mistake 5: Forgetting Confidentiality And Restraints

If an employee has access to your confidential information, customer lists, pricing, or trade secrets, termination can create risk if you don’t have enforceable protections in place.

Better approach: Ensure confidentiality clauses and (where appropriate) restraint clauses are in your employment contract, and remind the employee of their ongoing obligations in the termination process.

What Documents Should You Have In Place Before You Dismiss Someone On Notice?

Most dismissal on notice problems don’t start at the end of employment. They start at the beginning, when the relationship wasn’t properly documented.

Having the right documents in place helps you set expectations, manage performance, and reduce disputes if termination becomes necessary.

Depending on your business and team structure, consider:

Employment Contract: sets out role expectations, probation, termination notice, confidentiality, and other key terms. Many employers start with a tailored Employment Contract rather than relying on informal agreements.
Workplace Policies: a code of conduct, performance management process, leave procedures, and workplace behaviour expectations help create consistency (and can make disciplinary steps easier to justify).
Record-Keeping Systems: keep written warnings, meeting notes and training logs in an organised way so you can demonstrate fairness if challenged.

If your business collects and stores personal information about employees (for example, payroll details, emergency contacts, medical certificates, or surveillance footage), it’s worth ensuring your workplace policies and internal practices are consistent and legally compliant. Workplace monitoring and communications can be particularly sensitive, so it can also help to understand the rules that apply to workplace communication in Australia.

Key Takeaways

Dismissal on notice is when you terminate an employee’s employment by giving the required notice period (or by providing payment in lieu of notice).
Giving notice does not automatically prevent legal risk, so it’s important to follow a fair and documented process, especially for performance or conduct terminations.
The correct notice period depends on minimum legal requirements, the employment contract, and any applicable award or enterprise agreement (and some employees, such as some casuals, may not have notice entitlements in the same way).
Payment in lieu of notice can be a practical option, but it needs to be permitted and calculated correctly under the contract and any applicable award or enterprise agreement.
Common risk areas include incorrect final pay, unclear termination communications, weak documentation, and not addressing confidentiality or post-employment obligations.
Strong contracts and consistent workplace processes make dismissal on notice smoother and help protect your business if the termination is challenged.

If you’d like help managing a dismissal on notice (or putting the right employment documents in place), reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Dismissal On Notice: What Employers Need To Know In Australia