How to terminate an employee in Australia without a Fair Work claim

Letting someone go is never the fun part of running a team. In Australia, it's also one of the easiest places to trip up. The rules are spread across the Fair Work Act, the National Employment Standards (NES), modern awards, enterprise agreements, and your own employment contracts.

You might be dealing with a performance problem that's dragged on for months, or a role that just isn't needed any more. Either way, you want to do it properly, treat the person fairly, and not open a letter from the Fair Work Commission (FWC) a few weeks later.

The good news is that the rules aren't as murky as they look, and most of the expensive mistakes are easy to dodge once you know where they hide.

What you need to know about termination in Australia

• There's no at-will employment in Australia, so you need a valid reason and a fair process to dismiss someone.

• NES notice runs from one to four weeks, plus an extra week for employees over 45 with at least two years' service, and you can pay it out instead.

• Redundancy pay ranges from four to 16 weeks for employees with at least a year's service, unless you're a small business.

• Unfair dismissal protection starts after six months (12 for small businesses) for employees covered by an award or enterprise agreement, and for anyone earning under $190,100.

• Final pay covers outstanding wages, unused annual leave and loading, notice and redundancy pay where they apply, and super on qualifying earnings.

What counts as a valid reason to terminate employment?

Outside serious misconduct, ending someone's employment takes a valid reason and a fair process. When the FWC hears an unfair dismissal claim, it looks hard at both.

Valid reasons fall into three groups:

• Capacity: the employee can't do the job to the required standard.

• Conduct: misconduct, from repeated lateness through to theft or harassment.

• Operational requirements: the job no longer needs to be done by anyone, which is redundancy.

To decide whether a dismissal was harsh, unjust, or unreasonable, the FWC asks a set of questions:

• Was there a valid reason?

• Was the employee told the reason and given a chance to respond?

• Did you unreasonably refuse a support person?

• Was the employee warned about underperformance before being let go?

Your business size and whether you had HR expertise on hand count too. A 10-person team without an HR person gets some slack on how polished its process was, but not on whether it had a good reason or let the employee have their say. With an in-house HR team, expect the FWC to hold you to a tighter process. And if you've got fewer than 15 employees, there's a separate set of rules on top of this, including the Small Business Fair Dismissal Code.

How to terminate an employee, step by step

1. Check your award, agreement, and contract: any of them can add notice, redundancy pay, or consultation steps on top of the NES minimums. It's also a good moment to check your contracts actually include a termination clause.

2. Document the reason: for performance, that means clear expectations, warnings, and a genuine chance to improve. For misconduct, it means investigating and hearing the employee's side before you decide.

3. Hold a fair meeting: explain the reason, let the employee respond, and let them bring a support person. You don't have to arrange one, but unreasonably refusing one counts against you.

4. Give written notice: the NES requires notice of termination in writing, including the last day of employment.

5. Pay everything owed: final pay covers notice (worked or paid in lieu), unused annual leave and loading, redundancy pay where it applies, and super.

6. Close the loop: revoke system access on the last day and collect company devices. Offer an exit interview, and complete an Employment Separation Certificate if the employee or Services Australia asks for one.

How much notice do you have to give in Australia?

How much notice you owe comes down to how long the person has worked for you. The NES sets the minimums:

Treat those numbers as the minimum. Your award, enterprise agreement or the employee's contract can ask for more, and whichever is longest is the one you owe. Employees over 45 who've been with you for at least two years get an extra week on top. That extra week is easy to miss.

Then there's the question of whether they work their notice or you pay it out. Paying it out is common when someone has access to sensitive systems or clients and you'd rather they weren't in the building for another month. The payment has to match what they'd have earned at their full rate for the hours they would have worked. The ATO counts it as ordinary time earnings, so it attracts super too. Under Payday Super, that contribution has to reach their fund within seven business days of the final payday, so build it into the final pay run rather than tidying it up later.

Not everyone gets NES notice. Casuals don't, and neither do employees on fixed-term or specified-task contracts that simply run their course, or someone dismissed for serious misconduct. There are a few narrower exclusions too, so when you're not sure, the Fair Work Ombudsman's Notice and Redundancy Calculator will check the rules for a specific role.

Can you dismiss an employee without notice?

Walking someone out the door the same day, known as summary dismissal, is reserved for serious misconduct. The Fair Work Regulations define that in two ways:

• wilful or deliberate behaviour that's inconsistent with the employment continuing

• conduct that causes a serious and imminent risk to health and safety, or to the business's reputation, viability, or profitability

Theft, fraud, assault, sexual harassment, intoxication at work, and refusing a lawful and reasonable instruction are the classic examples.

The bar is high. A late arrival or a snippy email is misconduct, but it's rarely serious misconduct. Investigate first, put the allegations to the employee, and keep records. A summary dismissal the FWC later finds unjustified can leave you paying the notice you skipped plus unfair dismissal compensation.

When is a redundancy genuine, and what does it cost?

Calling a role redundant doesn't make it a genuine redundancy in the eyes of the Fair Work Act. Section 389 sets three tests:

• You no longer need anyone to do the job because of changes in your operational requirements.

• You've met any consultation obligations in the applicable award or enterprise agreement.

• It wouldn't have been reasonable to redeploy the employee within your business or an associated entity.

All three have to hold. Skip the consultation, or overlook a suitable open role elsewhere in the group, and the redundancy can be found not genuine. At that point, an unfair dismissal claim is back on the table.

NES redundancy pay is calculated at the employee's base rate for ordinary hours:

And yes, it really does drop to 12 weeks at the 10-year mark.

Before you start calculating, check whether you owe it at all. Small businesses with fewer than 15 employees are generally exempt, and so are casuals. On the flip side, some awards have their own industry-specific redundancy clauses that replace the NES scale altogether, so treat the table above as your starting point, not the final word.

There's also some room to move when the full amount isn't realistic. You can apply to the FWC to reduce NES redundancy pay if you've found the employee other acceptable work, or if the business can't afford it. That option only exists when the entitlement comes from the NES. Redundancy pay set by an award or agreement has to be paid as written.

The tax side softens the blow for the employee. Genuine redundancy payments are tax-free up to a limit, which for 2026–27 is $13,598 plus $6,801 for each completed year of service. And unlike payment in lieu of notice, redundancy pay doesn't attract super guarantee, so leave it out of the super calculation in the final pay run.

What goes in an employee's final pay?

The final pay run is where small mistakes get expensive, so it's worth knowing exactly what goes in it:

• outstanding wages for hours worked, including penalty rates and allowances

• notice pay, when you've paid out the notice period

• unused annual leave, plus annual leave loading when the employee received loading during employment

• accrued or pro rata long service leave, where state or territory law (or an award or agreement) entitles them to it

• redundancy pay, where it applies

Two things trip people up here. Unused personal and carer's leave doesn't get paid out, so there's nothing to add for it. Annual leave loading is the opposite: when the employee got loading on their leave during employment, it has to be paid out on termination too, even if the award or contract says otherwise.

Timing matters as well. Most modern awards require final pay within seven days of employment ending. Where nothing sets a timeframe, the Fair Work Ombudsman's best-practice guidance is the employee's last day or the next scheduled payday, so it's worth having the numbers ready before the final meeting.

Then there's super. Unused leave paid out at termination doesn't attract it, even though payment in lieu of notice does. And because final pay is reported through Single Touch Payroll like any other pay run, the ATO sees exactly what you paid, and when.

Getting it right matters more than ever. Intentional wage underpayment has been a criminal offence since 1 January 2025, and while honest mistakes aren't crimes, your records are what show the difference.

Unfair dismissal, general protections, and unlawful termination

A former employee can challenge a dismissal in three main ways, and the rules for each are very different.

Two exceptions take unfair dismissal off the table: a genuine redundancy, and a small business dismissal that follows the Small Business Fair Dismissal Code. Neither one protects you from a general protections claim, though, and those don't need a minimum employment period. That's why the reason behind a dismissal matters as much as the process, even for someone who started last week.

Small business termination rules (fewer than 15 employees)

Small businesses get their own set of rules, and a few of them work in your favour. First, though, you need to know whether you count as one. Small business status comes down to a headcount at the time of the dismissal, not full-time equivalents. So a team of 20 part-timers isn't a small business, even if they only add up to eight full-time roles. The count includes:

• the employee being dismissed, plus anyone else let go at the same time

• regular and systematic casual employees

• employees of associated entities, including entities overseas

Come in under 15, and three things change. The minimum employment period for unfair dismissal stretches to 12 months. You're exempt from NES redundancy pay, with some exceptions in insolvency. And when you follow the Small Business Fair Dismissal Code and keep evidence that you did, the FWC will treat the dismissal as fair.

The Code itself is short. It lets you dismiss without notice when you reasonably believe the employee committed serious misconduct. For anything else, you need a valid reason, a warning that their job is at risk, and a reasonable chance for them to fix the problem. Keep the paperwork, because the FWC will ask for it.

None of this touches notice obligations or general protections, which still apply in full.

Can you terminate an employee during probation?

Probation isn't the legal free pass a lot of employers think it is. The Fair Work Act doesn't even define it. What matters is the minimum employment period for unfair dismissal, which is six months (12 for small businesses). Writing a nine-month probation into a contract doesn't push that date back.

Notice and final pay still apply during probation, and so do general protections and anti-discrimination laws. Ending someone's probation days after they disclose a pregnancy or take sick leave is exactly the kind of timing that invites a claim.

What happens when you get termination wrong?

Most termination mistakes don't feel like mistakes at the time. It could be something as simple as working out the notice period incorrectly. You often won't find out until weeks later, when a claim lands. What happens then depends on which rule you've tripped over. For unfair dismissal, the FWC can order reinstatement or compensation. Breaches of the NES and general protections go to court, where civil penalties apply.

And those penalties add up fast, because they're counted per contravention. Fair Work Act penalties are set in Commonwealth penalty units, worth $364 each from 1 July 2026. For a company with 15 or more employees, breaches of the NES, awards, or enterprise agreements can reach 1,500 penalty units ($546,000) each. A serious contravention can reach 15,000 units ($5.46 million), or three times the underpayment if that's higher.

The business isn't the only one exposed. Directors, HR and other managers, and even accountants involved in a contravention can be held personally liable.

Ending a contractor's engagement

Contractors play by different rules. NES notice and redundancy pay don't apply, so the contract's termination clause decides how the engagement ends. If the contract doesn't set a notice period, a court may imply a reasonable one, which makes a silent contract a risk worth fixing well before you need it.

They're not without protections, though. Contractors earning under the contractor high income threshold ($190,100 from 1 July 2026) can challenge unfair contract terms through the FWC.

The bigger question is whether they're really a contractor at all. Since 26 August 2024, the whole-of-relationship test has applied, and a worker who's been misclassified as a contractor can be owed employee entitlements, including notice, leave, and super.

Run cleaner exits with Rippling

A termination touches HR, payroll, and IT at once, and most exit mistakes happen in the gaps between them. Take payment in lieu of notice. The notice period depends on the employee's start date and age, the payment goes out in the final pay run, and the super on it has seven business days to reach their fund. When each team works from its own version of the employee, one missed handover is all it takes for a date or a dollar figure to slip.

Rippling is built as one platform, so HR, payroll, and IT work from the same employee record instead of syncing between separate tools. The last day you enter in HR is the same date payroll uses for final pay and super, and the same date IT uses to cut off access.

• Rippling Payroll runs Australian pay runs with STP Phase 2 reporting and super processing, so final pay and contributions go out together.

• Modern award pay rules, including base rates, penalty rates, overtime, and allowances, apply through Time and Payroll. That helps final pay reflect what the employee is owed.

• Identity and access management lets you revoke app access on the last day and track device returns in the same offboarding workflow.

Rippling AI runs on that same data, so you can ask questions about your workforce in plain English and get answers linked back to the source records, within the permissions you've already set.

Run your next exit from one system. See Rippling

See how much you could save with Rippling

Get your personalised ROI in seconds.

Calculate your savings →

FAQs

Can you ask an employee to resign instead of dismissing them?

You can ask someone to resign, but it won't necessarily protect you. If an employee resigns because your conduct left them no real choice, the FWC can treat it as a dismissal, known as a forced resignation. That opens the door to the same claims as any other dismissal, so if things aren't working out, running a fair process is usually the safer route.

How many warnings do you need to give before dismissing someone?

There's no set number of warnings you have to give before dismissing someone. For performance issues, the FWC wants to see three things: the employee knew the problem, knew their job was at risk, and had a real chance to improve.

Can you dismiss an employee who's off sick or injured?

Not because they're off sick or injured. Dismissing someone because of a temporary absence for illness or injury breaches the general protections, as long as they've given you a medical certificate or other reasonable evidence. The absence stops counting as temporary once it runs past three months, or adds up to more than three months in a 12-month period, unless they've been on paid personal leave the whole time. Even then, you still need a valid reason, such as them no longer being able to do the job, and a fair process.

Can casual employees make an unfair dismissal claim?

Some casual employees can make an unfair dismissal claim. A casual's service counts towards the minimum employment period when they've worked on a regular and systematic basis and could reasonably expect that to continue. So a casual on a steady roster for more than six months (12 for small businesses) can usually bring a claim, just like a permanent employee. A casual who picks up the odd shift generally can't.

Does unpaid leave count towards notice and redundancy pay?

Agreed unpaid leave counts towards notice, but not towards redundancy pay. It doesn't break an employee's continuous service, so you work out their notice period from their whole time with you. For redundancy pay, you leave the unpaid period out and count the time before and after it. Unpaid community service leave is the exception and counts as service for both.

What should a termination letter include?

A termination letter has to confirm the employee's last day, because the NES requires written notice of it. Most letters also cover the notice period and whether it'll be worked or paid out, what's in the final pay, and any company property that needs to come back. Keep the reason brief and consistent with what you said in the meeting, because the letter can end up as evidence if there's a claim.