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How to Lawfully Terminate an Employee

Employment can end for many reasons and when it comes to terminating an employee as an employer, there are correct processes to follow. If correct processes aren’t followed, you open yourself up to legal risks including (but not limited to) unfair dismissal claims, fines, or even reputational damage.

In this blog article, we explain how to follow a lawful employee termination process, from having a valid reason to avoiding common legal errors.

Know Your Legal Obligations as an Employer

Before terminating any employee, understand your obligations under the:

Dismissing an employee for the wrong reason, or without proper process, can lead to unfair dismissal, general protections, or discrimination claims.

Head to the Fair Work website here for more information.

Have a Valid and Lawful Reason for Termination

Under Australian law, you must have a valid reason for dismissal that is:

  • Based on performance, conduct, or capacity

  • Clearly documented and communicated

  • Not connected to discrimination, retaliation, or protected workplace rights

And when it comes to redundancies, these must be genuine and follow specific consultation steps.

Check out one of our most popular blog articles here on: The Difference Between Getting Fired, Made Redundant, or Being Stood Down.

Follow a Fair and Transparent Process

A valid reason alone isn’t enough. You must also follow a fair termination process:

  • Clearly explain the issue to the employee

  • Give them an opportunity to respond

  • Allow a support person if requested

  • Consider their response before making a final decision

Failing to follow this process often results in findings of unfair dismissal, even if the reason was valid.

For small businesses (fewer than 15 employees), you should follow the Small Business Fair Dismissal Code which you can access here. 

Comply with Notice and Final Pay Requirements

Most employees are entitled to notice of termination or payment in lieu of notice. The minimum is based on their length of service (under the NES).

Also, final pay must include:

  • Wages owed

  • Accrued annual leave

  • Long service leave (if applicable)

  • Redundancy pay (where eligible)

For more information, check out the Fair Work website Notice and Final Pay here.

Be Prepared for Unfair Dismissal Claims

If an employee believes they were unfairly dismissed, they can lodge a claim with the Fair Work Commission within 21 days.

To defend it, you’ll need to show:

  • A lawful and valid reason

  • A fair process

  • Accurate documentation

Don’t wait for a claim to be lodged, plan ahead and document everything.

Common Termination Mistakes to Avoid

Here are some of the most common errors employers make when terminating staff:

  • No written warnings or performance records

  • Dismissing without notice (except for serious misconduct)

  • Letting an employee go while they’re on sick or parental leave

  • Making redundancy decisions without consultation

  • Forcing an employee to resign (constructive dismissal)

Each of these can lead to avoidable legal issues and financial exposure.

Final Tips for a Lawful Termination

  • Always provide a written termination letter

  • Communicate clearly and respectfully

  • Keep all records (emails, warnings, meeting notes)

  • Seek legal advice in complex or sensitive situations

If you need assistance with a termination or workplace issue as an employer, contact our friendly team here. We’ll help guide you with tailored advice on how to reduce your risk and protect your business.