Managing employee dismissal and redundancy
An employment relationship can be ended by the employee or the employer for many different reasons. As an employer, you must be aware of your obligations regarding resignations, dismissals, redundancy, notice periods and final pay.
Consider professional advice
Ending an employee's employment can be a complex issue for an employer. If you're unclear about your legal responsibilities and obligations, it's a good idea to seek professional HR advice before starting a dismissal or redundancy process.
An employee may resign at any time if they want to end their employment. This is a voluntary decision made by the employee. Often an employee will give written notice to their employer in the form of a letter or email. It's good practice for the employer to acknowledge that they have received the notice of resignation.
In most cases the employee will work through to the end of their notice period as detailed in their employment contract.
Dismissing an employee
If you need to dismiss an employee, it must be for valid reasons. A dismissal should not be harsh, unjust or unreasonable.
You may need to dismiss an employee immediately in circumstances relating to:
- serious work health and safety breaches.
This is known as a summary dismissal.
Other dismissals may relate to an employee's behaviour or performance.
You may also need to dismiss an employee because their role has become redundant due to a downturn in business, or you no longer need someone to do their specific role.
Specific rules for small businesses
Small businesses employers with fewer than 15 employees are granted different legal rights for dismissing staff.
Dismissal because of redundancy
You may need to dismiss an employee if their role becomes redundant. The redundancy may be necessary, for example, when:
- you no longer need that specific role
- your business has become bankrupt or insolvent
- new technology has eliminated the need for someone to do the job
- you are going through a business downturn, relocation, merger, takeover or restructure.
If you dismiss an employee because of a redundancy, it has to be genuine. A redundancy is not genuine if your operational needs have not changed, or you have not consulted with the employee. It may also not be considered genuine if you could reasonably employ the employee somewhere else in your business or an associated business. If the redundancy is not genuine, the employee may claim it as an unfair dismissal.
Learn more about redundancy from the Fair Work Ombudsman.
If you're in a position where you think you have to dismiss an employee, make sure you have a valid reason. A dismissal may be deemed unfair if it is harsh, unjust or unreasonable, or not due to a genuine redundancy.
Unfair dismissal can result in penalties, such as prosecution, and can be damaging for your business's reputation.
Learn more about unfair dismissal from the Fair Work Ombudsman.
Notice given by the employer
The National Employment Standards (NES) sets out the minimum notice or redundancy periods that an employer needs to give their employees. In some cases, a modern award or enterprise agreement may require the employer to give their employees a more beneficial entitlement.
Not all employees will be entitled to a period of notice. These employees include:
- serious misconduct dismissals
- fixed-term contracts.
Notice given by the employee
How much notice an employee is required to provide their employer generally depends on the terms of the relevant:
- modern award
- enterprise agreement
- employment agreement/contract.
If the above does not apply, the employee should provide their employer with 'reasonable notice'.
Read more about resignation, dismissal and notice periods from the Fair Work Ombudsman.
Notice period examples
Advise Mary to check the notice of termination required by an employee in the Clerks – Private Sector Award 2020, section 41.1. Table 8 sets out the period of notice based on the employee's period of continuous service with the employer. As Mary has worked for your business for more than 1 year but less than 3 years, she would be required to provide 2 weeks' notice to you, her employer.
If Mary had been working for your business as a casual employee, she wouldn't be required to give you a period of notice. Likewise, if Mary was employed by you on a fixed-term contract and the contract came to an end, Mary wouldn't be required to provide you with a period of notice, nor would you be required to provide Mary with any period of notice.
Read more about resignation and giving notice.
The National Employment Standards (NES) set out the requirements for notice of termination, or payment in lieu, by an employer. In accordance with the Fair Work Act 2009, section 117, the period of notice is based on the employee's period of continuous service with the employer. As Bill has been employed for more than 5 years, you're required to provide a period of 4 weeks' notice or payment in lieu of notice.
As Bill is also over 45 years of age and has been working for you for a continuous period of more than 2 years, you'll be required to increase the notice period by 1 week. This will take Bill's notice of termination to 5 weeks.
If the scenario was different and instead of underperforming Bill had been caught stealing from your business, you could make the decision to dismiss him immediately. This is known as a summary dismissal. Summary dismissal for serious misconduct takes effect immediately without providing a notice period or payment in lieu of a notice period. Before making such a decision it's always a good idea to seek advice from an human resources (HR) professional or employment lawyer.
Read more about notice periods in case of dismissal.
Redundancy pay is provided for in the National Employment Standards (NES). The redundancy pay period you are required to pay to your employee is listed under section 119. The table outlines the redundancy pay period based on the employees' period of continuous service. As Sally has worked for your business for at least 3 years but less than 4 years she is entitled to a redundancy pay period of 7 weeks.
In addition to Sally's redundancy payment, you also have to give her written notification of the date her employment will end. The NES sets out the requirements for notice of termination or payment in lieu. In accordance with section 117 of the Fair Work Act 2009, the period of notice is based on the employee's period of continuous service with the employer. As Sally has been employed for more than 3 years, you have to give her 2 weeks' notice or payment in lieu of notice.
In some circumstances, you won't need to pay redundancy. This includes, for example:
- if an employee has been working for you for less than 12 months
- if you have fewer than 15 employees.
Remember too, redundancy pay depends on the terms of the relevant award or agreement. Before taking any action, check the industry award that applies to the employee and your business.
It is considered best practice for employers to pay employees their final pay within 7 days of their employment ending. This is reflected in most modern awards. Some awards or enterprise agreements may, however, state more or less time. Before finalising an employee's final pay, always check your modern award or employment agreement.
An employee's final pay should include:
- outstanding wages (including penalty rates and allowances)
- accumulated annual leave and annual leave loading (if applicable)
- accrued or pro-rata long service leave (if applicable)
- redundancy pay (if being made redundant)
- pay in lieu of notice (if being dismissed)
Read more about final pay from the Fair Work Ombudsman.
Find advice and support
The Workplace Advice Service is a free, independent legal assistance program for small businesses and employees. The program, offered by the Fair Work Commission, provides advice on topics including:
- general protections
- workplace bullying.
Read more about the Workplace Advice Service, including eligibility and how to request a consultation.
Alternatively, seek advice and support from a HR professional or an employment lawyer before you make any final decisions or take action to end an employee's employment.
- Learn about managing conflict in the workplace.
- Find out how to manage people through change.
- Find the mental health and wellbeing resources for businesses.
- Find out if the Small Business Fair Dismissal Code applies to your business.
- Last reviewed: 30 Nov 2022
- Last updated: 30 Nov 2022