Terminating an employee in Australia can have significant legal and financial implications for an employer. However, employers can mitigate risk by understanding and complying with their legal obligations and approaching employee termination with professionalism. This article discusses the key considerations for employers when contemplating employee termination, with a focus on the Small Business Fair Dismissal Code. This is general information only, and we recommend seeking professional advice relevant from an employment lawyer to your circumstances.

Compliance with Contracts and Awards

Before dismissing an employee, employers should review all employment contracts, modern awards, or enterprise agreements that may affect the termination process. These agreements often contain strict provisions relating to notice periods, termination procedures, and severance pay.

Consistent Processes

Employers must ensure that their dismissal practices apply consistently across the workforce, while abiding by specific requirements under different contracts and awards. Inconsistencies in how dismissals are handled within an organisation may lead to claims of unfair treatment. Prudent employers should establish a standard process for terminating employees. This should clearly set out the steps to follow in consideration of factors such as the employee’s performance, conduct, and any mitigating circumstances. Ideally these processes should be available to all staff in a written policy document.

Unfair Dismissal in Australia

Unfair dismissal occurs when an employee is dismissed from their job in a “harsh, unjust or unreasonable” manner. It is important to understand that a dismissal may be deemed unfair, even if the employer believes it was warranted. To avoid an unfair dismissal claim, employers must ensure that they follow appropriate procedures, keep excellent documentation, and seek legal advice in complex cases.

Employees who believe they have been unfairly dismissed may file a claim with the Fair Work Commission (FWC). If the FWC decides that a dismissal was unfair, they may order that the employee be reinstated to their former position or compensated by the employer for the loss caused by the termination. The FWC will not order compensation for any pain or suffering caused by the unfair dismissal.

Genuine Redundancy

Redundancy is a valid reason for termination when a position is no longer required due to changes in the operational needs of the business. However, employers must demonstrate that the redundancy is genuine and that they have explored all reasonable options to redeploy the affected employee within the organisation. Proper consultation with the employee during redundancy processes is crucial.

Small Business Code

The Small Business Fair Dismissal Code applies to businesses with fewer than 15 employees when terminating an employee. The Code precludes small business employees from making a claim for unfair dismissal in the first 12 months following their engagement.

For employees with more than a year of service, the Code sets out a simple and clear process to follow when dismissing an employee and aims to provide a defence against unfair dismissal claims. If a small business employee is terminated, the dismissal will be deemed to be fair so long as the employer followed the Code.

Summary Dismissal

It is fair for a small business employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures.

For a dismissal to be deemed fair, it is sufficient that the employer reported the allegation of theft, fraud or violence to the police (as long as there was reasonable grounds for making the report).

Other Dismissals

In cases other than serious misconduct, a small business employer must give employees appropriate warnings before being dismissed. This must include providing the employee with an opportunity to respond to the warning and a reasonable chance to rectify the problem. This might involve the employer providing additional training and ensuring the employee understands the employer’s job expectations. Documenting the performance management process can be valuable evidence if an employee later challenges a termination.

Termination Meetings

When conducting a termination meeting, employers should handle the situation with sensitivity and respect. The meeting should be held in a private and neutral location, and a witness should be present to ensure transparency and prevent potential misunderstandings about the content of the conversation.


In any termination process, documentation is crucial. Keeping accurate records of performance discussions, warning letters, performance improvement plans, and any other relevant communications can be essential when defending an unfair dismissal claim. These records can demonstrate that the employer has followed a fair and reasonable process.


Terminating an employee is seldom an easy task and can have significant legal and financial implications for a business. To minimise the risk of an unfair dismissal claim, employers should ensure that they understand and comply with their legal obligations. Having clear policies and processes in place, keeping comprehensive records, and seeking legal guidance in complex cases can help mitigate risk.

This is general information only, and we recommend seeking professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please contact us on (03) 9600 2768 or email [email protected].