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Guide before Employment Contract Termination

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Terminating an employment contract in Australia is a critical process that requires careful consideration and adherence to legal obligations. Employers must be aware that they may face potential legal troubles if they do not terminate correctly. Employees have the right to sue if they believe their employment was unlawfully ended. To end a work contract properly and legally, employers must know the necessary steps to take beforehand.

In this article, we will discuss what are the things that an employer must do before terminating an employee to avoid any future legal dispute. Our employment lawyers are experienced in employment disputes and can provide a fixed fee quote for employment law advice.

What must an Employer do Before Termination of Employment Contract?

Termination of contracts requires careful consideration and compliance with legal and contractual obligations. Therefore, employers must take specific actions or considerations before ending an employment contract. These actions can help to ensure a smooth and legally sound termination. 

Some essential aspects for employers to consider before termination of an employment contract in Australia are as follows:

Review the Employment Agreement

The first step of any employment termination is a thorough review of the employment contract. The employment contract forms the legal basis for the relationship between employer and employee. It sets out the terms, conditions, and expectations of both parties.

A careful review can ensure employers understand the agreed-upon terms, including provisions on termination. This knowledge is important to make informed and legally sound decisions. It helps avoid confusion, ensures following contracts, and establishes a fair and clear termination process.

When reviewing employment contracts, employers must review:

Job Duties and responsibilities of the employee. Have a clear understanding of the employee’s role and responsibilities.

Identify the specific duties, project expectations, and performance metrics. Know the employee’s duties and responsibilities inside and out. Any ambiguity can lead to disputes during or after termination.

Compensation and benefits the employee receives. Review salary details, bonuses, benefits, and other financial entitlements to ensure accurate termination calculations. This includes reviewing salary details, bonuses, commissions and benefits.

Duration of employment. Verify the duration of the employment contract and any probationary periods. Clarify whether it is a fixed-term contract or a permanent employment relationship. This is because the type of employment relationship impacts termination procedures.

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Analyse termination clauses and provisions

Most employment contracts contain special termination clauses. Employers must pay close attention to these clauses. Analysing these clauses will ensure that the termination procedure complies with the law, and reduces the risk of legal problems. These clauses include:

Termination for cause. You should identify and understand the circumstances that justify termination for cause. This will ensure a legally defensible termination if it is necessary. Some common grounds include:

  1. serious misconduct,
  2. repeated breaches of company policies, or
  3. failure to meet performance expectations.


Termination without cause. Be aware of the conditions under which termination without cause can occur and the associated severance or notice requirements. Know the legal duties, especially the Fair Work Act, which sets fair and valid reasons for ending employment.

Notice periods. Identify and comply with the notice periods in the contract and under Australian employment law. Failure to give reasonable notice may result in legal consequences, including claims for unfair dismissal.

Severance packages. Review any severance packages or redundancy entitlements included in the contract. Ensure compliance with the relevant laws. Consider negotiating fair and reasonable terms to avoid potential disputes.

Understand notice periods, termination reasons, and dispute resolution mechanisms

The notice period is a crucial element in terminating an employment contract. Consider the following:

Minimum notice periods. Familiarise yourself with the minimum notice periods in the National Employment Standards (NES) and the applicable Modern Awards. Make sure you comply with these statutory requirements to avoid legal complications.

Reasons for termination. Clearly define the reasons for termination based on valid grounds. These reasons can be poor performance, redundancy, or a genuine operational need. Ensure that these reasons are consistent with both contractual and legal requirements.

Dispute resolution mechanisms. Find out about any dispute resolution mechanisms provided for in the contract. Consider alternative dispute resolution methods before taking legal action.

Employment Contract Termination

Examination of Relevant Policies.

Besides the employment contract, employers must also consider internal company guidelines. They play an important role in the termination process. These internal policies may be

Code of Conduct. Ensure the company’s code of conduct and ethical standards are adhered to. Make sure that the termination process aligns with ethical standards, and promotes a fair and respectful environment.

Disciplinary Policies. Follow established disciplinary procedures and policies based on an employee’s behaviour when considering termination. This includes conducting fair investigations, providing employees an opportunity to respond, and ensuring procedural fairness.

Performance Management Policies. If the termination is because of performance issues, follow the company’s performance management guidelines. Document instances of poor performance and provide feedback. Allow the employee to improve before considering termination.

Key Takeaways

  • Thoroughly review employment contracts, analyse clauses, and understand notice periods before termination.
  • Internal company policies, such as codes of conduct and disciplinary procedures, are crucial in ensuring a fair termination process.
  • Employers can fire employees during probation without cause if the probation period is shorter than the minimum employment period.
  • Managers should conduct performance management before terminating employees for underperformance, which includes identifying poor performance and providing improvement plans.
  • Dismissing an employee for conduct-related reasons requires fair procedures, including a hearing and warnings, and serious misconduct may justify summary dismissal.

Frequently Asked Questions:

Is a resignation valid if given in the heat of the moment?

Unless circumstances suggest coercion or duress, we may consider a resignation given impulsively as valid. You can read our article on Forced Resignation to understand more. 

Remember to consult with workplace lawyers if you have any concerns regarding termination of employment.

A letter of resignation should include:

  1. the effective date of the resignation, 
  2. reasons for the termination of employment, 
  3. any notice period or severance payment, and 
  4. details of any final entitlements.

Although involving the police strengthens the employer’s position, it is not mandatory. The employer is free to pursue recovery separately. However, if the employer reports the theft to the police, they can bring criminal charges against the employee.

Thorough documentation is crucial. Employers should keep:

  1. records of specific instances of misconduct,
  2. written warnings, performance evaluations, and
  3. any communication related to the termination.

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