Unfair Dismissal Minimum Employment Period: Australian Employer’s Compliance Guide

Unfair dismissal is one of the most common employment law issues Australian employers face - especially in the early months of a new hire. If you’re building a team, understanding when unfair dismissal protections apply (and how the minimum employment period works) will help you manage risk, treat people fairly, and stay compliant with the Fair Work Act 2009 (Cth).

In this guide, we unpack the rules step by step - from how long the minimum employment period is, to who is actually eligible to claim unfair dismissal, how to count service correctly, and what a fair dismissal process looks like in practice.

With the right approach and documents in place from day one, you can make confident staffing decisions and protect your business as you grow.

What Is the Minimum Employment Period In Australia?

The “minimum employment period” is the minimum time an employee must have worked for you before they can access unfair dismissal remedies under the Fair Work Act.

• 6 months: if you have 15 or more employees at the time of dismissal
• 12 months: if you’re a small business with fewer than 15 employees at the time of dismissal

It’s critical to count your headcount correctly on the date of dismissal, not the date of hire. The count includes:

• All employees across your business and any associated entities (not just one site or entity)
• Part-time and fixed-term employees
• Casuals who are employed on a regular and systematic basis

Dismissal before the minimum employment period usually means the employee can’t bring an unfair dismissal claim. However, other legal protections can still apply (for example, general protections/adverse action and anti-discrimination laws), so employers should still follow a fair and lawful process whenever ending employment.

Who Is Eligible To Claim Unfair Dismissal?

Completing the minimum employment period is one of several eligibility requirements for unfair dismissal. To have access to unfair dismissal protections, an employee generally must:

• Be a national system employee (most private sector employees in Australia fall into this category)
• Have completed the applicable minimum employment period (6 months or 12 months, depending on business size)
• Either be covered by a modern award or enterprise agreement, or (if not covered) earn less than the high income threshold (indexed annually)

Casual employees may also be eligible if they’ve been employed on a regular and systematic basis, had a reasonable expectation of continuing employment, and have completed the minimum period measured by their regular and systematic service.

There are also strict time limits. Employees must apply to the Fair Work Commission within 21 days of the dismissal taking effect (extensions are rare). When claims do proceed, the Commission considers whether the dismissal was “harsh, unjust, or unreasonable” - you can see the factors it weighs up under section 387 of the Fair Work Act.

Important: unfair dismissal is different to other claims. Even if an employee hasn’t completed the minimum employment period, they may still bring other actions, such as general protections (adverse action) if they were dismissed for a prohibited reason (for example, exercising a workplace right or discrimination). That’s why a careful, documented process matters in every termination decision.

How Do You Count Service For The Minimum Employment Period?

Service is generally counted from the day the employee actually starts work (not when they signed the contract). In working out whether someone has completed the minimum employment period, keep these points in mind:

• Paid leave counts: paid annual leave, paid personal/carer’s leave and public holidays count towards service.
• Unpaid parental leave does not count: periods of unpaid parental leave do not count as service.
• Other unpaid leave generally doesn’t count: most other unpaid absences don’t count towards service unless the law treats the absence as service in specific circumstances.
• Transfer of business: if your business changes hands and an employee moves over to you as a transferring employee, some or all prior service may count - depending on whether there’s a transfer of business and whether you recognise service. This needs careful assessment during acquisitions.
• Breaks in service: a true break in employment (with no intention of continuing employment) can reset the clock. Short gaps that are part of regular and systematic casual work are handled differently.

Counting Headcount Correctly

On the dismissal date, count all employees across your enterprise and any associated entities. Include part-time and fixed-term staff, and any casuals who work on a regular and systematic basis. This headcount determines whether the 6- or 12‑month minimum employment period applies.

Probation vs Minimum Employment Period

Probation is an internal HR tool you set in the contract (for example, three or six months) to assess suitability. The legal minimum employment period is set by law and cannot be shortened by contract or policy. You can have a three-month probation, but unfair dismissal protection may still not apply until six or twelve months, depending on your headcount. Likewise, a longer probation doesn’t extend the statutory minimum employment period.

What Does A Fair And Lawful Dismissal Process Look Like?

Even where an employee has not reached the minimum employment period, a fair and consistent process reduces the risk of other claims, supports a respectful culture, and creates a clean record if your decision is later scrutinised. For employees who are eligible to claim unfair dismissal, following a procedurally fair process is essential.

Step 1: Check Eligibility And Timing

• Confirm the correct minimum employment period based on headcount (including associated entities and eligible casuals).
• Check award/enterprise coverage and remuneration against the high income threshold.
• Note the 21‑day application deadline that applies to employees - your internal timelines should anticipate this.

Step 2: Identify The Reason

Be clear on the reason for dismissal: performance, conduct, capacity to perform the role, redundancy (genuine operational change), or another lawful reason. Some reasons require specific processes - for example, a redundancy must be genuine and compliant with consultation obligations. Where redundancy is in play, consider getting early redundancy advice.

Step 3: Follow A Fair Process

• Put the concerns in writing, with enough detail for the employee to respond (a show cause letter can help frame this).
• Offer a meeting and a support person where appropriate.
• Consider the employee’s response before making your decision.
• Document your reasoning and keep file notes of meetings and outcomes.

Where misconduct is serious, a short suspension on pay while you investigate can be appropriate, but this needs to be handled carefully and proportionately. In some cases, you may consider standing down an employee pending investigation if the facts and any applicable industrial instrument allow it.

Step 4: Communicate The Outcome

Provide a written termination letter confirming the employment end date, notice arrangements, and any final entitlements. If you’re paying out notice, ensure the wording aligns with payment in lieu of notice requirements and the employment contract. This is also the right time to retrieve company property and revoke system access.

Step 5: Use The Right Documents

Well-drafted contracts and policies make this process simpler. An Employment Contract should set expectations from day one (including duties, performance standards, notice, and any probation clause). For the termination stage, using a consistent suite of letters and checklists - such as an employee termination documents suite - helps you follow best practice every time.

Small Business Fair Dismissal Code

If you employ fewer than 15 people, the Small Business Fair Dismissal Code offers a framework. If you genuinely follow the Code, a dismissal is more likely to be considered fair. In broad terms, the Code requires a valid reason and that you give warnings and a chance to improve (except for cases of serious misconduct). Keep copies of warnings, meeting notes and the termination letter to demonstrate compliance.

When Probation Is Ending

Some decisions fall around the end of probation. Again, probation does not replace the minimum employment period - but it can be a useful checkpoint for a structured assessment. If you need to end employment during or near probation, pair fairness with efficiency. For further guidance on this scenario, see terminating during probation.

Practical Compliance Tips For Employers

Good systems turn complex rules into simple workflows. Here’s a practical approach you can implement now.

1) Confirm Business Size Before Any Dismissal

On the intended dismissal date, calculate your total headcount across associated entities and include part-time, fixed-term, and regular and systematic casuals. This dictates whether the minimum employment period is 6 or 12 months.

2) Track Start Dates And Absences Accurately

Record the actual first day worked. Track paid and unpaid leave so you can assess whether the minimum employment period has been completed - remembering unpaid parental leave does not count as service.

3) Set Clear Expectations Early

Job descriptions, KPIs and regular feedback make performance conversations easier. If issues arise, follow a transparent improvement process. Where appropriate, a structured performance management process helps you demonstrate fairness.

4) Use Fit-For-Purpose Documents

• Employment Contract: sets the foundation (duties, remuneration, notice, probation).
• Workplace policies: a Staff Handbook or core policies on conduct, performance, bullying/harassment and complaints help set standards.
• Letters and templates: consistently worded warnings, show cause letters and termination letters support a fair process; a ready-made termination documents suite can streamline this.

5) Align Notice And Final Pay With The Law

Check the contract, the National Employment Standards (NES) and any applicable award or enterprise agreement before finalising notice and final pay. If you’re paying out notice instead of having the employee work it, confirm your notice period calculation and any payment in lieu meets all requirements.

6) Keep Thorough Records

Retain performance notes, warnings, meeting minutes, and outcome letters. If a dispute arises (including within the 21‑day Fair Work Commission window), contemporaneous records are invaluable.

Frequently Asked Questions

Can I dismiss an employee before they complete the minimum employment period?

Yes - provided the reason is lawful and you comply with contract terms, any applicable award/enterprise agreement, minimum notice, and the NES. While unfair dismissal may not be available to the employee, other claims (like adverse action or discrimination) can still apply, so follow a fair and documented process.

Does unpaid parental leave count towards the minimum employment period?

No. Unpaid parental leave does not count as service for the purpose of the minimum employment period. Paid leave does count; most other unpaid leave does not.

How does the high income threshold affect eligibility?

If an employee is not covered by a modern award or enterprise agreement and earns above the high income threshold, they generally cannot access unfair dismissal (even if they’ve completed the minimum employment period). The threshold is indexed annually.

Do casuals get unfair dismissal protection?

Regular and systematic casuals who had a reasonable expectation of ongoing work may access unfair dismissal if they meet the eligibility rules (including completing the minimum employment period measured by their regular and systematic service). Always assess the pattern of engagement carefully.

What if the business is sold - does past service count?

In a transfer of business scenario, prior service with the old employer may count where the employee becomes a transferring employee and you recognise service or the law deems recognition. This should be checked carefully during due diligence and reflected in your contracts and onboarding.

What makes a dismissal “harsh, unjust or unreasonable”?

The Fair Work Commission weighs factors set out in section 387, including whether there was a valid reason related to capacity or conduct, whether the employee was notified of the reason, given a chance to respond, and whether a support person was allowed. A sound process matters.

Do I need a reason if the employee is still within the minimum employment period?

The Act doesn’t require a detailed reason for unfair dismissal purposes at that stage, but best practice is to document a lawful reason and communicate it respectfully. Use consistent documentation - for example, a show cause letter, outcome letter and correctly worded notice or payment in lieu - to reduce risk and maintain trust.

Key Takeaways

• The minimum employment period is 6 months for employers with 15+ employees and 12 months for small businesses with fewer than 15 employees (counted on the dismissal date and including eligible casuals across associated entities).
• Unfair dismissal access also depends on award/enterprise coverage or being below the high income threshold - service alone isn’t the only test.
• Paid leave counts towards service; unpaid parental leave does not. Most other unpaid leave won’t count either.
• A fair, documented process reduces risk (including other claims like adverse action) and supports culture, whether or not unfair dismissal protections apply yet.
• Use strong foundations: an Employment Contract, clear policies, and a reliable suite of termination documents help you act consistently and lawfully.
• Small businesses should follow the Small Business Fair Dismissal Code and keep careful records of warnings, meetings and outcomes.
• Act promptly and keep records - employees have 21 days to lodge an unfair dismissal application, and your evidence will matter.

If you’d like a consultation about the unfair dismissal minimum employment period and setting up compliant HR processes in your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.