How To Lawfully Dismiss An Employee In Australia

Dismissing an employee is one of the hardest (and riskiest) decisions you’ll make as a small business owner. Even when someone isn’t performing, their behaviour is unacceptable, or the role is no longer needed, you still need to follow the right legal process.

The good news is that you can dismiss an employee lawfully in Australia - and you don’t need to be a lawyer to understand the basics. What you do need is a clear plan, a fair process, and solid paperwork.

In this guide, we’ll walk you through how to dismiss an employee in a way that’s practical for small businesses and aligned with Fair Work requirements, modern awards and good HR practice.

Important: This article provides general information only and doesn’t constitute legal advice. Because your obligations depend on the employee’s contract, award coverage, length of service and the dismissal reason (among other factors), it’s a good idea to get tailored advice before taking action.

What Does “Dismiss” Mean In An Employment Context?

In simple terms, to dismiss an employee means you end their employment - either:

• with notice (or by paying notice out), or
• immediately (usually for serious misconduct), or
• because the job is no longer required (redundancy).

From a legal perspective, the “how” and “why” of the dismissal matters. The main risks for employers usually come from claims such as:

• Unfair dismissal (the dismissal was harsh, unjust or unreasonable)
• General protections / adverse action (the employee claims they were dismissed for a prohibited reason, like exercising a workplace right)
• Discrimination (for example, related to age, disability, pregnancy or family responsibilities)
• Wrongful dismissal / breach of contract (for example, you didn’t give the required notice)

One practical takeaway: you can have a legitimate reason to dismiss, but still end up in trouble if you don’t follow a fair process (and pay correct entitlements).

Dismissal vs Resignation vs Redundancy

It’s also worth being clear on what’s happening:

• Resignation is initiated by the employee (though there are situations where a “resignation” can be argued as forced).
• Dismissal is initiated by you as the employer.
• Redundancy is a type of dismissal where the role is no longer required to be done by anyone (it’s not about the individual’s performance).

If you’re unsure which category your situation falls into, it’s worth pausing before you take action - because the legal steps can differ.

Before You Dismiss: The Key Legal Checks Small Businesses Often Miss

Before you dismiss anyone, do a quick “risk and compliance” scan. This is where many small businesses get caught out - not because they acted maliciously, but because they moved too fast.

1. Check The Employment Contract And Any Applicable Award

Start with the employee’s Employment Contract. Look for terms about:

• notice periods
• probation (and whether it was extended properly)
• disciplinary processes (if your contract includes one)
• grounds for summary dismissal (immediate dismissal)

Then check whether a modern award or enterprise agreement applies. Awards and agreements often add rules about consultation, warnings, notice, and sometimes “show cause” style processes. Some also contain specific requirements for termination-related matters (including consultation obligations for redundancy, and sometimes how particular disputes should be handled).

2. Work Out Whether They’re Protected From Unfair Dismissal

Unfair dismissal laws generally apply when an employee has completed the minimum employment period:

• 6 months for most businesses
• 12 months if you’re a small business employer (fewer than 15 employees)

If they haven’t reached the minimum period, unfair dismissal is less likely - but general protections, discrimination, and breach of contract risks can still apply.

If you’re a small business employer (fewer than 15 employees), it’s also important to follow the Small Business Fair Dismissal Code. Complying with the Code can be a key defence to an unfair dismissal claim (where it applies), but it still needs to be followed in a practical, evidence-based way.

Probation can also add complexity, particularly if it wasn’t documented properly. If you’re dealing with a new starter, the details in termination during probation situations matter.

3. Confirm The Real Reason For The Dismissal (And Pressure-Test It)

Ask yourself (and document): what is the actual reason you want to dismiss?

• Performance (not meeting KPIs, repeated mistakes, inability to do the role)
• Misconduct (breaching policies, inappropriate behaviour, refusal to follow lawful directions)
• Serious misconduct (theft, fraud, violence, serious safety breach)
• Redundancy (role no longer required due to business changes)

This matters because the “right” process depends on the reason. For example, a performance dismissal usually needs warnings and a chance to improve. A serious misconduct dismissal usually requires a prompt but fair investigation.

4. Make Sure You’re Not Dismissing For A Prohibited Reason

This is a big one. Even if you’re confident performance is the issue, ask whether the situation overlaps with something protected, such as:

• the employee taking sick leave
• the employee raising a workplace complaint
• workplace injury
• pregnancy or parental responsibilities
• union activity

If any of these are “in the mix”, get advice before you dismiss. These are the situations where general protections claims can escalate quickly.

A Step-By-Step Process To Dismiss An Employee Fairly (And Reduce Risk)

If you’re aiming to dismiss lawfully, think of the process as your protection. A clear process helps you demonstrate that the dismissal wasn’t arbitrary - and that you acted reasonably.

Step 1: Gather Evidence And Document The Issues

Before you have any formal meeting, collect and organise:

• examples of performance issues (dates, errors, customer complaints)
• policy breaches (what policy, what happened, when)
• witness accounts (if relevant)
• previous warnings or coaching notes

If you don’t have evidence, it doesn’t necessarily mean you can’t dismiss - but it does mean you should slow down and create a fair improvement process first.

Step 2: Consider Whether You Need To Investigate (And Whether To Stand Them Down)

If the allegations are serious (for example, theft, bullying, safety breaches), it’s usually appropriate to investigate before deciding the outcome.

In some cases, you may need to temporarily remove the employee from the workplace while you investigate. If you’re considering that step, the rules around standing down an employee pending investigation can be nuanced.

In particular, “stand down” isn’t automatically available just because there’s an allegation. Whether you can stand someone down (and whether it’s paid) will depend on things like the Fair Work Act stand down provisions, the employee’s contract, and any applicable award or enterprise agreement. Many employers choose paid administrative leave while investigating, especially where there’s no clear stand down right.

Step 3: Raise The Issue Formally And Give Them A Chance To Respond

Procedural fairness is a key theme in dismissal law. In practical terms, that usually means:

• telling the employee the concerns clearly
• giving them a reasonable opportunity to respond
• considering their response genuinely before making a final decision

This is often done via a meeting. It can also be supported by a written letter outlining the concerns.

For more serious performance or misconduct matters, a structured show cause letter can be a useful tool, because it creates a clear paper trail and sets expectations about what the employee needs to address.

Step 4: If It’s Performance, Use A Clear Improvement Plan (With Real Support)

For performance-based dismissals, you’ll usually want to show you:

• explained what “acceptable performance” looks like
• provided training, tools, or support (where reasonable)
• gave a reasonable timeframe to improve
• held follow-up meetings
• warned them that dismissal was a possible outcome if improvement didn’t occur

This doesn’t have to be overly complicated. But it does need to be genuine.

Step 5: Decide The Outcome And Communicate It Clearly

Once you’ve reviewed the evidence and their response, decide what action is appropriate. Options can include:

• no action (allegation not substantiated)
• coaching or a performance plan
• a formal warning
• final warning
• dismissal with notice (or pay in lieu)
• summary dismissal (only where justified)

If you decide to dismiss, communicate the decision in writing. Your letter should usually cover:

• the reason for dismissal (brief but clear)
• the effective date
• notice period (or whether you’re paying it out)
• final pay details (including unused leave, if applicable)
• return of company property and handover requirements

Step 6: Handle Notice And Final Pay Correctly

Many dismissal disputes start as “process” claims, but end up being about money - because final pay wasn’t calculated or paid correctly.

If you don’t want the employee working out their notice period (for example, due to risk or workplace disruption), you may be able to end employment immediately and pay the notice instead. Just make sure you do it properly, because payment in lieu of notice can affect entitlements and needs to align with the contract and any award.

Notice requirements can also be affected by the Fair Work Act and modern awards, so it’s important not to rely on “what we’ve always done.” Also make sure final pay includes all applicable entitlements (for example, payment of accrued but unused annual leave, and any other award/contract-based amounts). In redundancy situations, redundancy pay may also apply unless an exception applies.

Common Dismissal Risk Areas (And How To Avoid Them)

Even where a dismissal feels straightforward, there are a few “classic” problem areas that regularly cause headaches for small businesses.

Summary Dismissal: Don’t Jump To Immediate Termination

Summary dismissal (immediate dismissal without notice) is generally reserved for serious misconduct.

A common mistake is treating “serious” misconduct as “any misconduct that frustrates you.” Courts and the Fair Work Commission usually look for behaviour that is fundamentally incompatible with ongoing employment (or creates serious safety/financial risk).

If you’re not sure whether the conduct is serious enough, it’s often safer to:

• investigate first
• give the employee a chance to respond
• consider dismissal with notice instead of summary dismissal

If you’re a small business employer, the Small Business Fair Dismissal Code also sets out what’s generally expected for summary dismissal scenarios (including having reasonable grounds to believe the conduct was sufficiently serious).

Procedural Fairness: The Process Can Matter As Much As The Reason

Small business owners are often time-poor and conflict-avoidant, so it’s tempting to “rip the bandaid off.”

But if you dismiss without warning, without evidence, or without giving the employee a chance to respond, you increase your risk significantly.

As a general guide, decision-makers look at factors such as those discussed in section 387 considerations - including whether there was a valid reason and whether the employee had a chance to respond.

General Protections: Be Careful When The Employee Has Recently Exercised A Workplace Right

If an employee has recently:

• made a complaint about the workplace
• requested flexible work
• taken sick leave
• raised safety concerns

…and you dismiss soon after, they may claim the dismissal was because of that action (even if you believe performance was the real reason).

That doesn’t mean you can’t dismiss. It does mean you should be extra careful about:

• documenting the real reason clearly
• showing a consistent history of performance management (if relevant)
• getting advice before you act

Redundancy: It’s About The Role, Not The Person

If business conditions change and you no longer need a role, redundancy can be lawful - but it needs to be a genuine redundancy.

In practice, that often involves:

• showing the job is no longer required to be performed by anyone
• consulting as required under any award or agreement (and documenting that consultation)
• considering redeployment options (where reasonable)

Also remember that redundancy pay may apply under the National Employment Standards unless an exception applies (for example, some small business employers are exempt from redundancy pay under the NES, and there are other limited exceptions). Modern awards and enterprise agreements can also affect consultation obligations and, in some cases, redundancy-related entitlements.

If you “label” a dismissal as redundancy when the real driver is performance or conflict, you may expose yourself to a claim.

What Documents And Systems Help You Dismiss More Safely?

When you’re running a small business, you don’t want to build a bureaucratic HR department - but you do want a few core documents and habits that protect you when issues come up.

Employment Contracts And Policies

A well-drafted contract helps you set expectations upfront and creates clarity when things go wrong. As your team grows, it also helps keep treatment consistent across employees.

Alongside an Employment Contract, consider having workplace policies that cover things like:

• code of conduct
• performance expectations
• leave and absenteeism
• workplace investigations and disciplinary steps
• IT and confidentiality

Policies won’t eliminate risk on their own, but they make it much easier to justify your decisions.

Warnings, Meeting Notes, And Written Correspondence

If it’s not documented, it’s hard to prove later.

Even brief notes can help, such as:

• date of the meeting
• who was present
• what the issue was
• what support was offered
• what the employee said in response
• what the next steps are

Keep the tone factual and professional. Avoid emotional language - write as though a third party might read it later.

Notice And Termination Letters

Termination letters should be tailored to the reason for dismissal and the employee’s entitlements.

Notice is a particularly common area of confusion. Some businesses rely on a “standard” notice rule, but in reality you may need to consider contract terms, minimum standards under the Fair Work Act, and modern award requirements. If you’re trying to confirm the legal baseline, section 117 notice rules are an important reference point.

Manager Training (Even If It’s Just You)

If you have team leaders or supervisors, make sure they understand the basics of performance management and documentation. Many disputes start because a manager said something informal like “don’t worry about it” - and later the business tries to rely on strict standards without a paper trail.

If you’re the only manager, the same principle applies: a little structure now saves you time and stress later.

Key Takeaways

• You can dismiss an employee lawfully, but the reason and the process both matter - rushing the process is where many small businesses get caught.
• Start with the basics: review the Employment Contract, check any modern award/enterprise agreement obligations (including consultation where required), and confirm the minimum notice and final pay requirements.
• Match the process to the reason: performance issues usually require warnings and a chance to improve, while serious misconduct usually requires an investigation and a chance to respond.
• Document everything (meetings, warnings, evidence and correspondence) so you can show the decision was reasonable and consistent.
• Be careful with higher-risk scenarios like dismissals following sick leave, workplace complaints, or requests for flexible work - these can trigger general protections issues.
• If you’re a small business employer, make sure you follow the Small Business Fair Dismissal Code (where it applies), as it can be crucial in defending an unfair dismissal claim.
• When in doubt, slow down and get advice, especially before summary dismissal, redundancy, or any dismissal with potential discrimination/general protections angles.

If you’d like help to dismiss an employee lawfully (or to set up the right contracts and processes before issues arise), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.