Notice Period Terms in Employment Contracts

When you’re running a small business, it’s easy to focus on the day-to-day priorities (customers, cash flow, hiring, growth) and assume the “HR paperwork” will sort itself out later.

But in practice, few issues cause more frustration, cost and confusion than notice periods - especially when someone resigns suddenly, you need to terminate employment, or you’re trying to plan rosters and handovers.

That’s where your terms of notice matter. The way you set, explain and apply them can be the difference between a smooth, professional transition and a stressful dispute.

In this guide, we’ll walk you through what “terms of notice” generally mean in Australia, how notice interacts with the Fair Work Act, awards and enterprise agreements, and how to draft notice clauses that actually work for your business.

What Are “Terms Of Notice” In An Employment Contract?

Terms of notice are the parts of an employment contract that explain how much notice must be given if employment is ending - whether that’s because:

an employee resigns,
you terminate the employee (with notice),
you pay out notice instead of having them work it (payment in lieu), or
you end the role through redundancy (which has extra rules).

Most small businesses think of notice as simply “two weeks” or “four weeks”, but the reality is that notice periods often depend on several layers of rules - and your contract should be written with those layers in mind.

Why Terms Of Notice Matter For Small Businesses

From an employer perspective, clear notice terms help you:

plan for handovers and reduce operational disruption when someone leaves,
protect confidential information and client relationships during the exit period,
avoid underpaying or overpaying final entitlements, and
reduce the risk of disputes about whether a termination was lawful or properly handled.

Notice periods also interact with other important clauses (like duties during notice, access to systems, return of property, and whether you can direct someone not to attend work). If those things aren’t consistent, your “notice clause” may not work the way you expect.

What Is The Minimum Notice Period Under Australian Employment Law?

In Australia, minimum notice requirements are often set by the Fair Work Act 2009 (Cth), but the correct answer for your business may also depend on any applicable:

Modern Award,
Enterprise Agreement, or
employment contract terms that provide more than the minimum.

As a general rule, your contract can provide a longer notice period than the minimum, but it generally shouldn’t provide less than what’s legally required.

Notice Under The Fair Work Act (The NES Baseline)

The National Employment Standards (NES) set minimum notice periods for termination by the employer (except in cases like serious misconduct where summary dismissal may apply).

Those minimum periods depend on how long the employee has been employed. In many cases, there is also an extra week for employees who are over 45 years old and have at least 2 years’ service.

Because notice can be fact-specific, many businesses choose to set the contract notice clause as “the greater of”:

the NES minimum; and
the contractually agreed notice period.

This approach can help ensure your contract stays compliant as circumstances change.

Awards And Enterprise Agreements Can Change The Outcome

A Modern Award or enterprise agreement may set notice obligations (and related requirements) that are different to what you assumed. Depending on the instrument, it may also include rules about:

how notice must be given (for example, in writing),
final pay timing,
what happens with rostered shifts during the notice period, and
when you can direct an employee not to attend work.

If you’re unsure which award applies, or you’re changing roles and classifications, it’s worth sorting that out early - notice issues often show up at the worst possible time (when someone is already leaving).

Probation Doesn’t Automatically Mean “No Notice”

A common misconception is that if someone is on probation, you can terminate immediately without notice. Probation can reduce risk, but it doesn’t automatically cancel notice obligations.

Your obligations may depend on:

the contract’s probation clause and termination clause,
the NES minimum notice (if applicable), and
any award/enterprise agreement requirements.

This is why it’s important your Employment Contract is drafted as a complete document - not just a template with a notice number inserted.

How Should Employers Draft Terms Of Notice In Employment Contracts?

When you’re drafting a notice clause, the goal is to be clear, compliant, and practical to apply in real life.

Here are the key drafting points we usually recommend small businesses consider.

1) Be Clear About Who Must Give Notice (And How)

Your terms of notice should spell out whether the notice period applies to:

termination by the employer (with notice),
resignation by the employee, or
both.

It’s also worth stating how notice must be given - for example, in writing to a specific email address or person (like the business owner or manager).

This reduces uncertainty later, such as whether a casual “I’m done” text message counts as notice, and when the notice period actually starts.

2) Avoid Accidentally Contracting Below the Legal Minimum

Sometimes businesses try to simplify their contract by stating a single notice period for everyone (for example, “2 weeks’ notice”).

That can backfire if the NES minimum notice for termination by the employer is higher based on service length.

A safer approach is wording that aligns to the NES baseline (and any applicable award). This reduces the risk your clause becomes unenforceable or creates a dispute about what you “really” owe.

3) Deal With Payment In Lieu Of Notice Properly

Many employers want the option to end employment quickly and pay out the notice period instead of having the employee work it. That can be a sensible risk-management tool, particularly where you’re concerned about customer relationships, workplace conflict, access to systems, or performance issues.

If your contract allows payment in lieu, it should be drafted clearly (including how it will be calculated). In practice, you’ll also want your payroll process to be accurate and consistent with award obligations.

It’s also important to understand the mechanics of payment in lieu of notice before you rely on it in a termination meeting.

4) Consider Whether You Need Garden Leave (And Use It Carefully)

Some businesses want the right to direct an employee not to attend work during their notice period, while still keeping them employed (and paying them). This is often called “garden leave”.

Garden leave can be useful where you want to:

reduce risk of solicitation of clients or staff,
protect confidential information,
avoid workplace disruption, and
allow the business to transition smoothly.

However, it should be drafted carefully and applied reasonably. A poorly drafted clause can create confusion about duties, pay, and whether the employee can work elsewhere during notice.

5) Align Notice With Restraint and Confidentiality Clauses

Notice periods don’t exist in isolation. If your contract includes confidentiality obligations, IP ownership, non-solicitation or restraint of trade clauses, your notice arrangements may affect:

how long the employee remains bound as an employee,
whether you can control access to information during exit, and
how you practically enforce your post-employment protections.

It’s worth making sure the contract reads consistently across all of these areas, so you’re not relying on clauses that contradict each other.

What Happens If An Employee Doesn’t Work Their Notice Period?

This is one of the most common practical issues employers face. You’ve got a resignation email, a notice period in the contract, and then… the employee doesn’t show up.

In that situation, the right response depends on a few factors, including:

whether the employee is permanent or casual,
whether an award/enterprise agreement applies,
what the contract actually says about resignation and notice, and
whether the employee is abandoning employment or simply refusing shifts.

Can You Withhold Pay If They Don’t Give Notice?

Many employers assume they can automatically withhold wages if an employee doesn’t give the correct notice. In Australia, deductions from wages are heavily regulated.

You generally can’t withhold or deduct wages unless it’s permitted by law. In practice, that usually means the deduction is authorised in writing by the employee and meets the Fair Work Act requirements, or it’s specifically allowed by an applicable modern award or enterprise agreement (some awards allow a deduction of up to one week’s wages if an adult employee doesn’t give the required notice).

If you’re considering deductions, it’s important to tread carefully and understand the rules around withholding pay.

Practical Steps If Someone Leaves Without Working Notice

If an employee leaves abruptly, you’ll usually want to move quickly but calmly. Often the best path is to focus on closing out employment properly rather than escalating conflict.

Confirm the resignation in writing (including the last day of employment based on what actually occurred).
Secure business property and access (keys, devices, logins, client lists).
Pay final entitlements correctly (and document your calculations).
Consider whether there are performance or misconduct issues that should be recorded (particularly if there are safety concerns).
Get advice early if you suspect the situation could turn into a dispute.

If your contract is silent or vague on notice, it’s much harder to respond confidently - which is why getting the wording right upfront is so valuable.

Common Notice Period Mistakes That Create Risk For Employers

Most notice disputes come from the same handful of issues. If you can avoid these, you’re already ahead of the curve.

Using Generic Templates That Don’t Match Your Workplace

A contract that was “good enough” for one business can be risky for another, even in the same industry. Differences in role seniority, award coverage, rostering practices and access to confidential information can all change what you need in your terms of notice.

If your business is scaling, or you’re hiring your first employee, it’s usually worth investing in contracts that are fit for purpose from day one.

Mixing Up Notice, Redundancy, and Unfair Dismissal Risk

Notice is only one part of ending employment lawfully. For example:

Redundancy involves additional obligations (like consultation and redundancy pay, unless an exemption applies).
Unfair dismissal risk is about whether the termination was harsh, unjust or unreasonable - not just whether you gave notice.
General protections issues can arise if the termination is connected to a workplace right or protected attribute.

So even if your terms of notice are correct, the termination process still matters. It’s also why employers often prepare a suite of documents for different exit scenarios (rather than relying on the notice clause alone).

Forgetting That “Notice” Impacts Final Pay Calculations

Notice periods can affect:

the employee’s last day of employment,
how you calculate final wages,
leave accruals up to the termination date, and
whether any additional entitlements apply under an award/enterprise agreement.

If you’re paying out notice, you’ll also need to make sure the payment is calculated correctly and shown clearly in the final payslip.

Many small businesses find it helpful to have a consistent internal checklist or process for terminations and resignations, especially once you start employing multiple people.

Key Documents And Policies That Support Your Notice Terms

Your notice clause is important, but it works best when it sits inside a broader, consistent employment framework.

Depending on your business and industry, you may want to consider having (at minimum) the following documents in place.

Employment Contract: the core document setting out notice, pay, duties, confidentiality, and key termination rights (including Employment Contract drafting tailored to your role types).
Workplace Policy Suite / Staff Handbook: sets expectations about behaviour, performance management, leave, misconduct, and IT use - which can reduce disputes when an exit occurs.
Exit checklist and handover process: a practical internal process for return of company property, access removal, confidentiality reminders, and final pay steps.
Role and award coverage records: documentation showing the employee’s classification, pay basis, and any applicable award or enterprise agreement terms, so notice and final pay are easier to calculate correctly.

Not every small business needs every document from the beginning, but it’s worth thinking ahead. If you’re hiring for key roles (sales, management, operations, tech), a strong contract and policies can save you a lot of stress later.

Key Takeaways

Terms of notice are the contract clauses that set out how employment can end and how much notice must be given, and they are a key risk-management tool for employers.
Minimum notice in Australia often depends on the NES under the Fair Work Act, and may be affected by modern awards or enterprise agreements.
Your notice clause should clearly cover resignation and termination, specify how notice must be given, and align with the legal minimums.
If you want to use payment in lieu of notice or garden leave, you should ensure your contract permits it and that you apply it consistently and correctly.
If an employee leaves without working notice, be careful about deductions and wage withholding - the rules are strict and mistakes can create bigger problems than the resignation itself.
Strong employment contracts and workplace policies make notice periods easier to manage and reduce disputes during exits.

If you’d like help reviewing or updating the terms of notice in your employment contracts, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Notice Period Terms in Employment Contracts in Australia