How to Terminate an Employee Legally in Australia

By Natasha Silveira | 1 October 2026 | 11 min read

Your best barista has turned up late nine times in six weeks, and two chats haven’t changed a thing. You want her gone, but you’re not sure how to terminate an employee in Australia without landing in front of the Fair Work Commission. The rest of the team is covering for her, and patience is running out.

Getting this wrong is expensive. One rushed conversation can turn a fair decision into an unfair dismissal claim with a 21-day clock already running. This guide walks through the four legal steps, the notice you owe, the extra rules for small businesses and the mistakes that most often lead to a claim.

Before you act, check who can make a claim

Not every employee can bring an unfair dismissal claim. Knowing where your employee sits tells you how much risk you are carrying before you say a word.

Under the Fair Work Act, an employee must have finished a minimum employment period before they are protected. That period is six months for most employers and 12 months if you have fewer than 15 employees. High earners are also outside the system if they are not covered by an award or enterprise agreement and earn more than the high income threshold. The Fair Work Commission’s high income threshold is adjusted every 1 July, and from 1 July 2026 it sits at $190,100.

Outside unfair dismissal, other protections still apply from day one. A dismissal linked to a workplace right, a complaint, illness or a protected attribute can lead to a general protections claim, whatever the length of service. So a short tenure is never a licence to skip the process.

The 15-employee threshold callout

Headcount changes the rules. If you employ fewer than 15 people, counting regular casuals, you are a small business employer under the Act. That gives you a longer minimum employment period and access to the Small Business Fair Dismissal Code.

Cross 15 and both disappear, and redundancy pay obligations switch on as well. We cover the full list in HR obligations that change once you pass 15 employees.

How to terminate an employee in Australia: the four-step process

A lawful dismissal follows the same core sequence whether the issue is conduct or performance. Here it is in order.

1. Confirm a valid reason linked to conduct, capacity or performance.
2. Tell the employee the reason clearly, before any decision is made.
3. Give them a real chance to respond and consider what they say.
4. Provide correct notice or pay in lieu, then confirm in writing.

These steps mirror what the Commission looks at when it decides whether a dismissal was harsh, unjust or unreasonable. Skip one and a sound reason can still produce an unfair outcome.

Step 1: a valid reason

The reason must be sound, defensible and well founded. It has to relate to the employee’s capacity or conduct, including the effect on the safety and welfare of other staff. “I don’t think it’s working out” is not a reason. “You have been late nine times since 15 August, after two documented warnings” is.

Step 2: notify the employee of the reason

The employee must know exactly why their job is at risk before you decide. Put the concerns in writing, with dates and examples. Vague references to “attitude” give the employee nothing to respond to, and the Commission notices.

Step 3: a real opportunity to respond

Meet with the employee, let them bring a support person if they ask, and listen. They may raise something you didn’t know, such as a carer’s crisis or a health issue. Write down what they said and how you weighed it. A decision made before the meeting, with the meeting held for show, is one of the fastest ways to lose a claim.

Step 4: the right notice period

The National Employment Standards set minimum notice based on continuous service. Awards, agreements and contracts can require more. You can ask the employee to work the notice or pay it out in lieu.

Notice isn’t required for casuals or for dismissal for serious misconduct. The Fair Work Ombudsman’s guide to ending employment has a notice and redundancy calculator if you want to double check your numbers.

Performance or misconduct: two different paths

The four steps apply to both, but the route to step one looks very different.

Poor performance

Performance problems need time and evidence. Set clear expectations, give the employee support or training, and issue written warnings that spell out what has to change and by when. A fair improvement period is usually four to eight weeks, depending on the role. If you have never managed this before, our guide on handling your first performance issue covers the conversations step by step.

The Commission specifically asks whether an employee dismissed for unsatisfactory performance was warned first. No warning usually means no defence.

Serious misconduct

Theft, fraud, assault, serious safety breaches and being intoxicated at work can justify summary dismissal, meaning dismissal without notice. You still need to investigate, put the allegations to the employee and hear their side. Suspending on full pay while you investigate is often the safest option.

Be honest about the label. Calling something serious misconduct when it is really a third late arrival invites a claim. If you are unsure, pay the notice. It costs far less than defending a hearing.

Running the termination meeting

Once the decision is made, the meeting itself should be short, private and planned. Twenty minutes is plenty.

• Book a private room at a time that lets the employee leave with dignity.
• Have a second manager present to take notes.
• Offer the employee a support person, and don’t refuse one unreasonably.
• State the decision and the reason in the first two minutes.
• Hand over a termination letter with the date, reason, notice and final pay details.
• Collect keys, devices and access cards, and switch off system logins the same day.

What the termination letter should say

The letter is often the first document a conciliator reads. Keep it short, factual and calm. It should cover:

• The date the employment ends.
• The reason, with a reference to the warnings or meetings that came before.
• Whether notice will be worked or paid in lieu.
• What is included in final pay and when it will be paid.
• Any company property to return and who to contact with questions.

Leave out opinions about the person. Stick to what happened and what you decided.

Then get the money right. Final pay includes outstanding wages, accrued annual leave and leave loading if it applies, notice paid in lieu and any redundancy pay. Many modern awards require final pay within seven days of the employee’s last day. If your payroll is stretched, VeiraMal payroll services can process termination pays and the Single Touch Payroll reporting that goes with them.

Using the Small Business Fair Dismissal Code

If you have fewer than 15 employees, the Code is your best protection. When you follow it and the employee claims unfair dismissal, the Commission treats the dismissal as fair.

For summary dismissal, the Code requires that you believed on reasonable grounds that the employee’s conduct was serious enough to justify immediate dismissal. For any other dismissal, the employee must have been warned, verbally or in writing, that they risked being dismissed. They must also have been given a reasonable chance to fix the problem.

The Code comes with a checklist. Complete it at the time, not after a claim lands, and keep it with your notes, warnings and the termination letter. Written records are what turn “we followed the Code” from a claim into evidence.

Remember too that the Code only applies to unfair dismissal. It won’t protect a dismissal that breaches the general protections.

Five mistakes that turn a fair dismissal into a claim

Claims are not rare. The Fair Work Commission received more than 44,000 lodgements in 2024-25, and unfair dismissal applications made up 37 per cent of them. Most never reach a hearing. The Commission says around three quarters settle at or before conciliation, which often means an employer paying to make a weak case go away.

These are the gaps we see most often.

1. Deciding before the meeting. If the letter is printed before the employee speaks, the response step is a formality.
2. No paper trail. Verbal warnings that were never written down are hard to prove later.
3. Dismissing by text or email. It denies the employee a chance to respond and reads badly at conciliation.
4. Getting final pay wrong. Missed leave loading or short notice creates a second claim on top of the first.
5. Ignoring the timing. A dismissal soon after a complaint or a leave request invites a general protections claim.

If a claim does go all the way and succeeds, the usual remedy is compensation, capped at six months’ pay or half the high income threshold, whichever is lower. Reinstatement is also possible. Neither is a cost you want to carry.

When to bring in outside HR support

Most owners terminate someone only once or twice a year. That is not enough practice to get every step right under pressure, especially when the employee is upset or the facts are messy.

Outside help makes sense when the employee has raised a complaint or taken leave recently, when the reason involves alleged misconduct you need to investigate, or when you are close to the 15-employee line and unsure which rules apply. It also helps when the relationship has become personal. A neutral third party keeps the process clean.

The cost comparison is simple. A few hours of advice before the meeting is a small, known expense. A conciliation, a settlement and the management time lost to a claim are not.

VeiraMal’s outsourced HR services cover warnings, investigations, termination letters and the meeting itself, for businesses in Melbourne, Sydney and Hobart. If you want a quick read on a situation you are dealing with right now, call VeiraMal directly or send a message through the contact form. It’s far cheaper to check a process before the meeting than to defend it after.

Frequently asked questions