Sample Letter To End A Contract For Services In Australia

Ending a contract of service (in other words, an employment arrangement) is one of those business tasks that can feel deceptively simple: you want the working relationship to end, you send a letter, and you move on.

In practice, the details matter. Using a sample letter to end a contract of service can be a great starting point, but you’ll usually need to tailor it to your situation - especially if you’re ending employment because of performance concerns, misconduct, redundancy, or medical capacity issues.

This guide is written from a small business employer perspective. We’ll walk you through what to include, the key legal checks to make first, and provide a practical template you can adapt (including a service contract termination letter sample doc-style format you can copy into Word).

Important note: This article is general information for Australian businesses. Termination risks can turn on the facts, the employee’s length of service, whether an award or enterprise agreement applies, and how the process is handled. If you’re unsure, it’s worth getting advice before you send the letter.

What Is A “Contract Of Service” (And Why The Wording Matters)?

In Australia, a “contract of service” usually refers to an employment relationship (employee/employer), as opposed to a “contract for services” which usually refers to an independent contractor arrangement.

The distinction matters because:

• Employees are covered by the Fair Work Act, the National Employment Standards (NES), modern awards/enterprise agreements (if applicable), and unfair dismissal protections (if eligible).
• Contractors are governed primarily by the services agreement, general contract law and (sometimes) specific legislation depending on the industry. They generally won’t have unfair dismissal rights under the Fair Work Act (though some may have other remedies depending on the circumstances, such as general protections or contractual claims).

This article focuses on ending an employment arrangement (contract of service). If you’re not 100% sure whether your worker is actually an employee or a contractor, it’s worth checking before you proceed - misclassification can create payroll, superannuation, and termination risks.

Before You Use A Sample Letter To End A Contract Of Service, Check These Legal Basics

A letter is only one part of a lawful termination. Before you use any sample letter to end a contract of service, take a moment to run through these checks so you don’t accidentally create a bigger issue (like an unfair dismissal claim or underpayment problem).

1) Identify The Minimum Notice Period

Notice can come from the employment contract, an applicable award/enterprise agreement, and the NES. If you’re providing “payment in lieu” instead of having the employee work out their notice, make sure you calculate it correctly and document it clearly.

For a deeper explanation of how payment in lieu of notice works in Australia, it’s helpful to understand what should (and shouldn’t) be included.

2) Confirm The Termination Reason (And Whether It Needs A Process)

Common reasons include:

• Performance issues (usually requires warnings, support, and a fair opportunity to improve)
• Misconduct (procedural fairness still matters - and summary dismissal has a high threshold)
• Redundancy (role no longer required; consultation obligations may apply; redundancy pay may apply)
• Medical capacity (complex area involving capacity, adjustments, and discrimination risk)
• End of probation (still needs care, and you should also watch for general protections and discrimination risks)

If you’re considering ending employment during probation, it’s still wise to follow a fair process and check your contract terms. This is an area where termination during probation can trip businesses up if the letter and process don’t match.

3) Check Any Award Or Enterprise Agreement Requirements

Many small businesses assume the employment contract is the only document that matters. Often, a modern award also applies and can set minimum standards for things like:

• notice periods and (in some cases) consultation or notification steps
• final pay timeframes
• redundancy consultation and redundancy pay
• classification levels and pay rates

If you’re not sure which award applies (or whether you have an enterprise agreement in place), it’s worth checking before you send the letter, because a valid-sounding termination letter won’t fix an award breach.

4) Plan For Final Pay (And Put It In Writing)

Termination letters often become a flashpoint because the employee is anxious about money. Being clear about final pay reduces confusion and can help keep the exit smoother.

Your final pay section typically covers:

• wages up to the last day of employment
• payment in lieu of notice (if applicable)
• unused annual leave payout (if applicable)
• any redundancy pay (if applicable)
• any lawful deductions (only if permitted)

Be careful with deductions. In most cases, you can’t just “take it out of their pay” unless the law allows it and the requirements are met. If you want guidance on deductions, withholding pay is a common area where employers accidentally get it wrong.

Tax and payroll note: Final pay can involve withholding, superannuation and (in some cases) employment termination payment (ETP) reporting/treatment. It’s a good idea to confirm the correct treatment with your payroll provider or tax adviser.

5) Keep Records Of The Process

Your termination letter should not be the only record you have. Keep a file with relevant documents, such as:

• employment contract and position description
• warnings (if performance-related)
• meeting notes and letters/emails
• any show cause correspondence
• payroll calculations for final pay

This is especially important if the termination could later be challenged.

What To Include In A Contract Of Service Termination Letter (Employer Checklist)

A strong termination letter is clear, factual, and consistent with what you’ve already discussed with the employee. As a guide, most Australian employer termination letters should include:

• Employee details: full name, role, and (optionally) employee number
• Date of letter
• Termination decision: a clear statement that employment is ending
• Effective date: last day of employment
• Notice: whether they will work the notice period or receive payment in lieu
• Reason (optional but often sensible): depends on risk profile and circumstances
• Final pay outline: what will be paid and when (avoid over-promising specific amounts if not finalised)
• Return of company property: laptop, phone, keys, access cards, tools, uniforms
• Confidentiality and IP reminders: obligations continuing after employment (if applicable)
• Next steps: who they contact if they have questions

One practical tip: avoid emotional language or commentary. A termination letter often gets forwarded to advisors or regulators. Keep it professional, brief, and accurate.

Should You State The Reason In The Letter?

There’s no single rule that fits every business. In many cases, giving a short reason helps show the decision wasn’t arbitrary, and it matches what you’ve already communicated in meetings.

However, if the situation is complex (for example, mixed reasons like restructure plus performance concerns), a poorly worded “reason” can create inconsistency and increase risk.

If you decide to include a reason, keep it simple and factual, and make sure it aligns with your records.

Do You Need To Mention Restraints Or Confidentiality?

If your employment contract includes confidentiality, non-solicitation, or restraint terms, it’s usually helpful to remind the employee that those obligations continue after employment ends.

Don’t introduce “new” obligations in a termination letter. The letter is a reminder, not a replacement for a properly drafted employment contract. If you’re reviewing or updating your contracts, an Employment Contract that matches your business (and the relevant award conditions) is a good foundation.

Sample Letter To End Contract Of Service (Copy-and-Paste Template)

Below is a practical sample letter to end a contract of service. You can copy this into a Word document and adjust it to suit your circumstances.

Note: This template is for a straightforward termination with notice (or payment in lieu). If you are dealing with serious misconduct, redundancy, or a complex dispute, it’s worth getting advice before using a template.

Service Contract Termination Letter Sample (Doc Format)

[On Company Letterhead]

Date: [Insert date]

Private & Confidential

To: [Employee full name]
Address: [Employee address or email if sending electronically]

Dear [Employee first name / Mr/Ms Last name],

Re: Notice Of Termination Of Employment

We write to confirm that your employment with [Company name] will end on [insert last day of employment].

Your final day of work will be [insert date]. You will be paid your ordinary wages up to and including this date.

Notice
In accordance with your employment terms and applicable workplace laws, you will receive [insert notice period] notice.

[Choose one option below]

Option A (Working Notice):
You are required to work your notice period and your employment will end on the date noted above. During this time you are expected to continue performing your usual duties and comply with all workplace policies and directions.

Option B (Payment In Lieu Of Notice):
We will provide payment in lieu of notice, and your employment will end on the date noted above. You are not required to attend work after [insert last working day].

Final Pay
Your final pay will include:

• wages up to your last day of employment;
• [payment in lieu of notice, if applicable];
• any accrued but unused annual leave entitlements that are payable on termination; and
• [any other amounts payable, e.g. redundancy pay if applicable].

Your final pay will be processed on [insert date or “the next normal pay cycle”].

Return Of Company Property
By your last day of employment, please return all company property in your possession, including (where applicable) keys, access cards, laptop, mobile phone, tools, documents, and any other materials belonging to [Company name].

Confidentiality
We remind you that your confidentiality obligations continue after the end of your employment. This includes not using or disclosing [Company name]’s confidential information, customer information, pricing, or business methods except as permitted by law.

If you have any questions about this letter or your final pay, please contact [insert name/role] on [insert phone/email].

Yours sincerely,

[Name]
[Title]
[Company name]

Common Scenarios: How To Tailor Your Termination Letter (Without Overcomplicating It)

A “one size fits all” letter is where many businesses get stuck. Here are a few common scenarios and what usually changes in your letter (and your process).

Ending Employment Due To Performance

If the termination is performance-related, the letter should match the story your documents tell. Often, that means referencing that:

• performance concerns were raised previously
• support and reasonable opportunity to improve were provided
• the required standard has not been met

Keep it brief. The letter is not the place to argue every detail. Your supporting file (warnings, meeting notes, performance improvement plan) is what matters if the decision is challenged.

Ending Employment Due To Misconduct Or A Workplace Investigation

Misconduct terminations can be higher risk because:

• the employee may argue the allegations are wrong or the process was unfair
• summary dismissal (no notice) is a serious step and must be justified
• procedural fairness expectations still apply

If you stood the employee down while investigating, make sure your letter aligns with what happened and what you communicated. In more complex matters, it’s often worth getting advice on standing down an employee and how to document the outcome properly.

Ending Employment Due To Redundancy

Redundancy is not simply “we don’t want this person anymore”. It’s about the role no longer being required (or being fundamentally changed) due to business reasons.

When you’re making someone redundant, your documentation often needs to address:

• the operational reasons for the redundancy
• any consultation steps required by an award or enterprise agreement
• whether redeployment was considered
• redundancy pay and notice entitlements

If you’re unsure about redundancy pay, a quick starting point is understanding how a redundancy calculator works (and then confirming the correct legal position for your specific employee).

Ending Employment On Medical Grounds

Medical capacity is a sensitive and legally complex area. Often, you’ll need to consider the employee’s ability to perform the inherent requirements of the role, any reasonable adjustments, and discrimination risk.

If this is your situation, it’s worth reading about termination on medical grounds before you send any termination letter, because the process and wording need to be handled carefully.

Ending Employment Where The Employee Has Already Resigned

Sometimes you’re not “terminating” - the employee is resigning, and you’re confirming the end date and final pay.

Even then, it’s still helpful to send a confirmation letter so there’s no confusion about:

• their last day of work
• whether you’re requiring them to work their notice
• how final pay will be calculated

If you want to check the basics around notice, it’s useful to be familiar with typical resignation notice periods in Australia.

Key Takeaways

• A “contract of service” usually refers to an employee relationship, so ending it often triggers Fair Work and National Employment Standards (NES) obligations.
• Before using a sample letter to end a contract of service, confirm the correct notice period, the reason for termination, and whether an award or enterprise agreement adds extra requirements.
• A good termination letter should clearly state the end date, notice arrangements (including payment in lieu if used), final pay components, and return of company property.
• Keep the letter professional and factual - and make sure it matches your records (warnings, meeting notes, and payroll calculations).
• Higher-risk scenarios like redundancy, misconduct investigations, and medical capacity issues usually need more than a template letter, because process and wording are critical.

If you’d like help preparing a termination letter or managing an employee exit in a way that protects your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.