Termination in Australia

Legal Grounds for Termination

An employee’s term of service may come to an end for various reasons such as resignation, termination by employer, redundancy, and so on. Other than the case of a resignation where the employee notifies the employer, in all other instances, the employer must notify the employee that his/her employment will be terminated.

Employers can allow employees to work through the notice period, or to issue a payout to them (pay in lieu of notice).  Employees who are terminated may receive a lump-sum payment within 12 months of being terminated. This payment can be taxed by the government.  Other payments that an employee would be entitled to upon termination of employment include:

• Any outstanding wages or other remuneration still owing,
• Any pay in lieu of notice of termination,
• Any accrued annual leave and long service leave entitlements,
• The balance of any time off instead of overtime that the employee has accrued but not yet taken,
• Any redundancy pay or entitlements if the employee has been made redundant and is eligible.

Some of the payments listed may be included in the lump-sum payment mentioned above and therefore may be taxed.

In the case of redundancy, an employee who has worked for at least a year for a company that has 15 or more employees may be entitled to a redundancy/severance payment of 4 weeks’ salary.

Employment law in Australia is relatively employee friendly and employers must follow and document appropriate processes whenever there is a termination of an employee.

Unfair Dismissal Laws

Employers need to be careful of termination resulting in unfair dismissal or an unlawful termination, e.g. termination due to:

• A reason that was harsh, unjust or unreasonable,
• Discrimination,
• Another protected right.

Generally speaking, employees can complain to the Fair Work Commission if they:

• Have a minimum employment period of 12 months+ in a small business (<15 employees) or 6 months for larger business.
• Are covered by an award or a registered agreement or have an annual earnings rate which is less than the high income threshold (from 1 July 2024 this is AU$175,000).

Employment law in Australia is complex and fact specific.

Compliance and Best Practices

Employers must ensure compliance with all legal requirements to avoid disputes and potential penalties. Best practices include:

• Clear Documentation: Maintain accurate records of termination procedures and communications.
• Fair Process: Ensure the termination process is fair and transparent.
• Legal Advice: Seek legal counsel to navigate complex termination cases.

Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of Australia employment laws and regulations, please visit the official governmental websites.

Updated on: March 2025