Grounds For Employment Termination In Australia: Employer’s Essential Guide

Ending someone’s employment is never easy. In Australia, it also comes with clear legal rules you need to follow. If the process isn’t fair or you don’t have solid grounds, you could face unfair dismissal claims, penalties and reputational damage.

The good news? With the right preparation and a consistent process, you can make defensible decisions, protect your business, and treat people with respect. This guide walks you through lawful reasons to dismiss, how to check if your reason stacks up, the steps to follow, and the key risks to watch out for.

We’ll focus on employer‑initiated terminations (dismissals) for permanent and casual employees. Contractors are different and are generally managed through contracts rather than dismissal rules.

Lawful Vs Unlawful Reasons To Dismiss In Australia

Termination means ending the employment relationship-either with notice or immediately for serious misconduct (summary dismissal). Under the Fair Work framework, you must have a valid reason and follow a fair process in most cases.

Lawful (Valid) Grounds For Termination

• Performance: Ongoing underperformance after clear expectations, feedback, support and reasonable time to improve.
• Misconduct: Breaches of policy or reasonable directions (e.g. repeated lateness, dishonesty, disrespectful behaviour) where warnings and process have been followed.
• Serious misconduct: Conduct that destroys trust and justifies immediate dismissal, such as theft, fraud, assault or serious safety breaches. You should establish the facts (a reasonable investigation) before you act.
• Redundancy: The role is genuinely no longer required due to operational changes, restructure, technology or downturn, and redeployment isn’t reasonable.
• Capacity/incapacity: The employee can’t perform the inherent requirements of the role (e.g. ongoing illness or injury) even after reasonable adjustments.

Unlawful Reasons To Dismiss (Do Not Do This)

It is unlawful to dismiss an employee because they:

• have a protected attribute (e.g. race, sex, age, disability, pregnancy, religion, sexual orientation)
• are temporarily absent from work (e.g. sick leave, parental leave, carer’s leave)
• exercise a workplace right (e.g. make a complaint, request flexible work, join a union)
• raise a work health and safety or bullying complaint

Terminations for these reasons-directly or indirectly-risk general protections or discrimination claims, in addition to unfair dismissal exposure.

Is Your Reason Valid? Practical Checks Before You Decide

Before you move to dismiss, pressure-test your reasoning and your evidence. The Fair Work Commission looks at both the reason and the process. A fair reason without fair process can still lead to liability.

Performance

• Have you set clear KPIs and expectations (ideally in writing and consistent with the Employment Contract and any policies)?
• Did you give timely feedback, a reasonable improvement period and appropriate support/training?
• Have you warned that continued underperformance may lead to termination?
• Did you give the employee a real chance to respond and consider that response?

Misconduct And Serious Misconduct

• Is there a clear policy or lawful and reasonable direction the employee breached?
• Have you conducted a fair investigation and invited a response (often using a show cause letter) before deciding?
• For summary dismissal, do you have a reasonable basis for concluding serious misconduct occurred?

Redundancy

• Is it a genuine redundancy (the job itself is no longer required), not a performance issue in disguise?
• Have you consulted as required (e.g. under an Award/EA) and considered reasonable redeployment?
• Have you calculated the correct redundancy pay and entitlements (if applicable)?

Capacity/Incapacity

• Have you identified the inherent requirements of the role and assessed whether the employee can meet them?
• Have you considered reasonable adjustments, medical evidence and options short of termination?

Tip: Keep contemporaneous records-meeting notes, warnings, investigation steps and evidence. These are often pivotal in section 387 unfair dismissal assessments (which look at reason and procedural fairness).

Follow A Fair Termination Procedure (Step‑By‑Step)

Except for some cases of proven serious misconduct, a transparent, consistent process is essential. Here’s a practical sequence most employers can follow.

1. Identify the reason and evidence: Clarify what grounds you rely on and gather your documents (performance history, warnings, policies, witness accounts, emails).
2. Invite a response: Outline concerns in writing and invite the employee to a meeting to respond. Provide reasonable notice and allow a support person if they request one.
3. Meet and genuinely consider: Hold a fair meeting, ask questions, and keep open mind. Consider any new information (e.g. explanation, context, medical info).
4. Decide and communicate: If dismissal is appropriate, confirm the decision in writing, specify the reason(s), and set out notice (or why it’s summary) and the final day of work.
5. Notice and entitlements: Provide the required notice (or payment in lieu of notice if you choose), and calculate all final entitlements accurately.
6. Exit logistics: Recover property, revoke access and, if appropriate, conduct an exit discussion.

Document each step. Consistency across your workforce helps demonstrate fairness and reduces risk.

Notice, Final Pay And Essential Documents

Getting the paperwork and payments right is just as important as getting the reason right.

Notice (Or Summary Dismissal)

• Notice required: Follow the notice period in the NES, Award/EA or the Employment Contract. You can direct the employee to work out the notice or pay in lieu.
• Summary dismissal: Only for serious misconduct after a reasonable investigation. Even then, confirm the decision in writing and pay any outstanding wages and accrued entitlements that still apply.

Final Pay And Exit Entitlements

• Final pay: Include all owed amounts-outstanding wages, accrued annual leave, and other loadings or penalties. Use a clear process for final pay so it’s accurate and on time.
• Long service leave: Check state or territory rules for accrual and payout triggers.
• Redundancy pay: If it’s a genuine redundancy and the employer is not a small business for redundancy purposes, calculate statutory redundancy pay (unless an exception applies).

Termination Documents To Prepare

• Termination letter: Reason(s) for dismissal, notice arrangements and last day of work.
• Meeting notes and warnings: Keep copies in case of a dispute.
• Separation certificate: Provide an Employer Separation Certificate on request.
• Policies and contracts: Ensure your templates are up to date and consistently applied.

Key Risks, Small Business Rules And FAQs

Understanding unfair dismissal exposure, minimum employment periods and casual eligibility will help you plan and act confidently.

What Is The Minimum Employment Period For Unfair Dismissal?

• Small business employers (fewer than 15 employees): 12 months minimum employment period.
• Other employers: 6 months minimum employment period.

This minimum period is separate from any “probation” you set. A probation clause doesn’t control unfair dismissal eligibility-the law’s minimum employment period does.

How Does Probation Affect Termination?

You can end employment during probation, but you still need fair reasons and a fair process. While many employees can’t access unfair dismissal until they’ve met the minimum employment period, general protections (e.g. adverse action or discrimination) apply from day one.

Are Casual Employees Protected?

Casuals may qualify for unfair dismissal if they are employed on a regular and systematic basis, had a reasonable expectation of ongoing work, and meet the relevant minimum employment period. If they don’t meet these criteria, they usually won’t have unfair dismissal eligibility-but general protections still apply.

What Is The Small Business Fair Dismissal Code?

Small business employers can rely on the Small Business Fair Dismissal Code if they follow it correctly. It sets out practical steps for warnings, process and summary dismissal decisions. Keep written records-adherence to the Code can be a strong defence in unfair dismissal matters.

What If An Employee Alleges Unfair Dismissal?

Be prepared to show a valid reason and a fair process. The Commission’s analysis under section 387 of the Fair Work Act considers, among other things, whether the employee was notified of the reason, allowed to respond, and whether there was support and warnings for performance issues.

Do I Need To Pay Out Accrued Leave On Termination?

Accrued annual leave must be paid out. Long service leave depends on state and territory laws (and service length). If you terminate with immediate effect for serious misconduct, accrued annual leave still needs to be paid out; the difference is usually the absence of notice or payment in lieu.

Can I Use Payment In Lieu Of Notice?

Yes-many employers opt for payment in lieu of notice to bring the relationship to an end immediately while still meeting legal obligations.

How Do I Reduce Risk Day‑To‑Day?

• Keep job descriptions and KPIs current and matched to your operational needs.
• Maintain reliable records-reviews, warnings, coaching notes and outcomes.
• Apply policies consistently to all staff to avoid claims of differential treatment.
• Seek advice early for complex situations (e.g. medical issues, potential discrimination, multi‑incident misconduct).

Key Takeaways

• Valid grounds for termination include performance, misconduct (including serious misconduct), genuine redundancy and incapacity-unlawful reasons (like discrimination or adverse action) are off‑limits.
• Fair process matters: notify concerns, invite a response, consider it genuinely and confirm decisions in writing; summary dismissal requires a reasonable investigation first.
• The minimum employment period is 12 months for small business employers and 6 months for others; probation doesn’t change these statutory thresholds.
• Casuals may be eligible for unfair dismissal if they work regularly and systematically with a reasonable expectation of ongoing work and meet minimum employment periods.
• Get the mechanics right-notice (or pay in lieu), accurate final pay, and provide documents like a separation certificate when requested.
• Strong contracts, current policies and consistent documentation will reduce disputes and support defensible decisions throughout the employment lifecycle.

If you’d like tailored guidance on dismissals-whether it’s reviewing your Employment Contract, drafting a show cause letter, working through redundancy and redundancy pay, or planning a fair process-you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.