Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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Ending someone’s employment is never easy. But when it has to happen, a clear, compliant termination letter helps you close things out professionally, reduce risk and support the employee’s transition.
In Australia, employers have specific obligations under the Fair Work framework. A well-drafted termination of employment letter template ensures you capture the essential details every time and avoid common mistakes that lead to disputes.
In this guide, we’ll explain when to use a termination letter, what to include, how to issue it step-by-step, and provide a practical sample you can adapt to your business.
What Is A Termination Of Employment Letter (And Why It Matters)?
A termination of employment letter is the written confirmation that an employee’s employment has ended. It records the decision, the final date, any notice (or payment in lieu), and what the employee can expect next (final pay, entitlements, return of property, post-employment obligations, and who to contact).
This letter is important because it:
- Sets out the key terms of the separation in writing, reducing misunderstandings.
- Shows you’ve communicated clearly and fairly, which is relevant if the decision is later reviewed.
- Demonstrates compliance with notice requirements and other obligations.
- Provides a consistent, repeatable process for your managers and HR team.
Often, a termination letter is part of a broader pack. Many employers keep a repeatable toolkit that includes performance management documents, a Show Cause Letter, the termination letter, and-where appropriate-a Separation Agreement.
When Should You Use A Termination Letter In Australia?
You should issue a termination letter whenever you end the employment relationship-whether the decision is based on conduct, performance, capacity, redundancy or during probation. The content and process will differ depending on the context.
1) Performance or Conduct
For performance or conduct issues, you’ll typically have already run a fair process: set expectations, provide support, and allow the employee to respond. Many employers use a formal Performance Management framework before moving to termination.
2) Serious Misconduct
Where serious misconduct is substantiated (for example, theft or serious safety breaches), summary dismissal may be justified. Even then, follow a procedurally fair process (including an opportunity for the employee to respond) before issuing the letter. If you need time to investigate, consider a lawful suspension or a carefully managed option like Garden Leave (where contractually available).
3) Probation
During probation, the threshold for unfair dismissal protection is different, but basic fairness still matters. Keep a record of your reasons and process and confirm the decision in writing. For deeper guidance, see termination during Probation.
4) Redundancy
Genuine redundancy is a different pathway with consultation, redeployment considerations and severance obligations. Your letter must reflect redundancy-specific entitlements and the lawful basis for the decision. For tailored support, consider Redundancy Advice.
What To Include In A Termination Of Employment Letter Template
Your template should be structured, clear and adaptable to different scenarios. At minimum, include the following elements (we’ve explained the “why” so you can tailor each section):
- Date and Employee Details: The letter date, employee name, position title and work location anchor the document to the correct person and role.
- Decision Statement: A clear line that employment will end, and the effective date of termination.
- Lawful Basis: A brief, factual reason (e.g. unsatisfactory performance, serious misconduct, genuine redundancy, or probation) - use neutral language and avoid editorial comments.
- Notice Or Payment In Lieu: State the notice period you’re providing, or if you’re making Payment In Lieu Of Notice. If the employee will work through notice, specify the last working day and any expectations during this period.
- Final Pay: Outline what’s included (e.g. wages to termination date, accrued but untaken annual leave, and any redundancy pay if applicable). If there’s an overpayment or authorised deduction, explain what will happen and when.
- Company Property: Set a date and method for returning devices, keys, uniforms, and documents, and detail any security steps (e.g. access deactivation) so the handover is smooth.
- Confidentiality and Post-Employment Obligations: Remind the employee of ongoing obligations under their contract (confidentiality, restraint, IP). Refer to the specific clause numbers if you can.
- Support And References (If Appropriate): Where suitable, indicate if you can provide a statement of service or a neutral reference (a considerate tone can reduce conflict).
- Contacts and Next Steps: Provide a contact for questions (usually HR or a manager), and attach any relevant documents (final payslip, statement of service, property checklist).
Optional Add-Ons
- Settlement/Release: If you’re offering additional benefits in exchange for a release, use a separate, tailored document (not the termination letter itself). This is typically done via a Deed and often packaged within a broader Employee Termination Documents suite.
- Separation Agreement: For negotiated exits, a concise Separation Agreement can wrap up entitlements, confidentiality and non-disparagement terms.
- Garden Leave (contract-dependent): If you’re requiring the employee not to attend work during notice while remaining employed and paid, confirm the garden leave period.
Step-By-Step: How To Draft And Issue The Letter
Step 1: Confirm The Lawful Basis And Process
Before writing the letter, make sure you’ve followed a fair process for the context. For performance or conduct, that usually includes clear expectations, warnings (where required), and an opportunity for the employee to respond. If there are allegations, a Show Cause Letter often forms part of the process. If more time is needed to review, consider lawful suspension or a short period of paid leave (check contracts and policies first).
Step 2: Calculate Notice
Work out the minimum notice required by the Fair Work Act, any applicable award or enterprise agreement, and the contract - then apply the most beneficial to the employee. If you prefer not to have the employee work during notice, you may choose Payment In Lieu. To sense-check your obligations, revisit how Notice Periods are calculated in Australia.
Step 3: Draft The Letter Using Your Template
Populate the template with the correct details and keep the tone confident, respectful and factual. Avoid over-explaining the reasons or including opinions - your letter should be precise and professional.
Step 4: Prepare The Attachments
- Final payslip and a breakdown of entitlements.
- Statement of service (if provided).
- Company property checklist and return instructions.
- Any agreed documents (e.g. a Separation Agreement or Deed) for signature.
Step 5: Issue The Letter Correctly
Invite the employee to a meeting to communicate the decision verbally and provide the letter at the meeting (or immediately after). If remote, send by email with confirmation of receipt. Keep a record of how and when you delivered it.
Step 6: Close Out Access And Property
Arrange return of property, disable logins, and ensure confidentiality is respected. Confirm the final pay timeframe and who they can contact with questions.
Sample Template (Copy And Tailor)
Private & Confidential Subject: Termination of Employment Dear , We write to confirm that your employment with in the role of will end effective . Reason Your employment is ending due to . This decision follows and your opportunity to respond / consultation regarding redundancy on ]. Notice and Final Day You will work your notice period of , with your final working day being . We will pay you in lieu of notice. Your employment will end immediately on . Final Pay Your final pay will include: • Wages up to and including your termination date • Accrued but untaken annual leave (and leave loading, if applicable) • , if applicable • Deductions (if any) will be made in accordance with your contract and the Fair Work Act. Company Property and Information Please return all company property (including devices, keys, uniforms, documents and other materials) by to . Your system access will be deactivated on . Ongoing Obligations Please be reminded of your continuing obligations under your employment contract, including confidentiality, intellectual property and . If you have any questions, contact at . Statement of Service / Support We can provide a statement of service upon request. Please let us know if you require this. We thank you for your contributions to and wish you all the best for the future. Yours sincerely,
Important: Treat the template as a starting point only. Tailor it to the reason for termination, the employee’s contract, any relevant award or enterprise agreement, and the Fair Work Act requirements.
Legal Traps And Best Practice For Australian Employers
Australian employment law focuses on both substantive reasons and a fair process. Even a well-written letter can’t fix procedural issues that occur earlier. Keep these points in mind:
1) Procedural Fairness
Give employees a chance to respond to concerns before you decide to terminate (especially for conduct or performance issues). Provide clear information about the issue, any evidence you rely on, and time to reply - then genuinely consider that response.
2) Substantive Fairness
Ensure your reason is lawful and supported by facts. In unfair dismissal claims, the Fair Work Commission considers a range of Section 387 factors, including whether the employee was notified of the reason, given an opportunity to respond, and whether the dismissal was disproportionate.
3) Notice And Final Pay
Apply the correct statutory, award/enterprise, and contractual notice entitlements, and pay all amounts owing on time. If you don’t want the employee to work during notice, use a compliant approach (e.g. Payment In Lieu or contractually-permitted garden leave).
4) Redundancy Process
For genuine redundancy, consult properly, explore redeployment and pay the correct redundancy entitlement. Don’t use “redundancy” to end employment for performance reasons - that’s risky. If in doubt, seek tailored Redundancy Advice.
5) Investigations And Stand Downs
Where allegations are serious, document your investigation and maintain a fair process. If you need to step an employee away from the workplace while you investigate, consider your contractual and legal options, including a lawful suspension or, in some cases, a Stand Down Pending Investigation (note that stand downs are limited by law and must be justified).
6) Probation Isn’t A Free Pass
Probation periods simplify things, but you should still act reasonably and document your reasons. A concise, respectful letter confirming the decision and final entitlements remains best practice.
7) Don’t Over-Explain Or Under-Explain
Your letter should be clear but not argumentative. Avoid lengthy narratives or opinions. A short, factual reason is usually sufficient and safer.
8) Consider A Clean Exit
In some cases, a mutual exit is better for everyone. That’s where a tailored Employee Termination Documents pack or a bespoke agreement can finalise confidentiality, non-disparagement, property returns and a release of claims in exchange for agreed terms.
Key Takeaways
- A termination letter formalises the end of employment, confirms dates, notice or payment in lieu, final pay and next steps.
- Use a consistent template but tailor it to the lawful basis (performance, conduct, serious misconduct, redundancy or probation) and any applicable award or agreement.
- Fair process matters: notify concerns, allow a response and document your decision - these steps are central to the Section 387 fairness factors.
- Calculate notice correctly and decide between working notice, Payment In Lieu or (if contractually allowed) Garden Leave.
- For redundancies, follow the separate consultation and severance pathways - a standard termination letter won’t cover those requirements on its own.
- Where appropriate, use supporting documents like a Show Cause Letter, a Separation Agreement, and an Employee Termination Documents suite.
If you’d like help tailoring a termination of employment letter template or need guidance on running a fair process, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
