Terminating employment is one of the highest-risk decisions an employer can make. Whether you are dealing with probationary employees, underperformance, misconduct, theft, or redundancy, understanding the correct legal process is essential.
This guide, prepared by our qualified employment lawyers, explains the most common employment termination scenarios in Australia, how to manage them lawfully, and how to reduce the risk of unfair dismissal or adverse action claims.
Key Takeaways
Termination processes must follow Australian employment law to avoid claims.
Probationary employees can’t claim unfair dismissal, but adverse action risks still apply.
Underperformance claims should be backed by a documented PIP before termination.
Misconduct dismissals must follow procedural fairness unless the conduct is serious misconduct.
Redundancies must be genuine, with consultation and redeployment considered.
Common Reasons for Employment Termination in Australia
In Australia, employers most frequently terminate employment because of:
probationary period outcomes
underperformance or ongoing capability issues
conduct-related dismissals
theft or serious misconduct
redundancy or operational requirements
By following best-practice processes and seeking professional legal advice, employers can minimise exposure to claims under the Fair Work Act 2009 (Cth).
1. Termination During the Probationary Period
Terminating an employee during probation is generally more straightforward – however, it is not risk-free.
Minimum Employment Period
Employees only gain unfair dismissal protection after the minimum employment period:
Small businesses (<15 employees): 12 months
Other businesses: 6 months
If you terminate within probation and within the minimum employment period, the employee cannot claim unfair dismissal. However:
Risk: Adverse Action Claims
Even probationary employees can claim adverse action if they believe the dismissal was for a prohibited reason, such as:
discrimination
pregnancy
making a workplace complaint
exercising workplace rights
Unlike unfair dismissal, adverse action has no compensation cap.
Tip for Employers: Keep contemporaneous notes that show a lawful reason for termination (performance, suitability, team fit, etc.).
2. Managing Underperformance Before Termination
Employers must carefully manage underperformance. And the best time to do this is when they first notice it.
Employers must demonstrate that they:
Step 1: Identify and Document Poor Performance
Record specific examples and communicate expectations clearly.
Step 2: Implement a Performance Improvement Plan (PIP)
A compliant PIP should include:
measurable performance objectives
support and training
clear timelines
regular review meetings
Step 3: Consider Termination Only After the PIP Fails
If the employee does not improve despite support, termination is more likely to be considered reasonable and lawful.
Best practice: Keep all PIP notes, emails, and meeting minutes as evidence.
3. Conduct-Based Dismissals
Termination for misconduct requires procedural fairness, except in the most serious circumstances.
Before dismissing for misconduct, employers should:
give the employee an opportunity to respond
issue at least one warning (unless it is serious misconduct)
allow the employee to rectify their behaviour
Failing to follow this process often results in unfair dismissal findings.
4. Serious or Gross Misconduct
The National Employment Standards allow employers to terminate employees without notice if they have committed serious misconduct. This is also known as summary dismissal.
The employer must determine whether the action is serious enough to constitute serious misconduct.
Examples may include:
fraud or theft
violence or threats
deliberate safety breaches
serious breaches of company policy
Where misconduct is sufficiently serious, an employer may dismiss the employee without notice if the employment contract and policies allow it.
To determine this, the employer should consider:
- whether the conduct occurred inside or outside the workplace
- the value of the stolen property
- the seniority of the employee
- how the theft has affected the business
If the conduct is not serious, the employer may not be able to terminate the employment immediately. The employer may only issue the employee with a verbal or written warning.
However, if the conduct is serious or minor conduct continues, termination may be appropriate.
5. Redundancy and Genuine Redundancy Requirements
A role is genuinely redundant when:
the employer no longer requires the role due to operational changes
the employer follows consultation obligations
redeployment within the business or associated entities is not reasonable
When redundancy is not genuine
A redundancy is likely not genuine if:
the role still exists
the employer fails to consult under an award or agreement
the employer could reasonably offer redeployment
A non-genuine redundancy exposes employers to unfair dismissal claims.
If considering redundancy, learn more about redeployment and suitable alternative roles in our article.
Frequently Asked Questions
How can employers avoid unfair dismissal during redundancy?
Ensure the redundancy is genuine, consult early, document business reasons, and explore redeployment options before terminating.
Employers should:
- comply with the consultation requirements of the Fair Work Act
- give notice of the dismissal
- explore alternative employment opportunities
- seriously consider any suggestions made by the employee concerned
Compliance with the applicable Modern Awards is also crucial. Read our article on Genuine Redundancy to learn more.
Can an employer deduct money from final pay if an employee stole property?
No, the employer may not deduct any money from the employee’s final payment. This applies even if the stolen item’s value is higher or lower than the payment owed. The employer must pay out all outstanding claims separately.
What rights do employees have during probation?
Employees on probation have less protection than those with over six months of service. However, if they believe that someone terminated them based on discriminatory reasons, they can still bring adverse action claims.
If a person’s employment has been terminated for discriminatory reasons, it is important to consult with employment lawyers.
