How to Write a Termination Letter in Australia

In Australia, the process is governed by specific laws and regulations to ensure fairness and legality. This comprehensive guide will walk you through the essential steps and provide a template to help you write an effective termination letter.

Let’s dive right in! 👇

The Legal Aspects of AUS Employee Termination

Fair Work Act 2009

The Fair Work Act 2009 is the foundation of employment law in Australia, serving as the primary legislation that regulates the relationship between employers and employees. Enacted to provide a balanced framework for cooperative and productive workplace relations, the Act aims to promote fairness and equity across Australian workplaces.

The Fair Work Act 2009 was designed with several key objectives in mind:

1. Establish clear and fair standards for employment, including minimum wages, working hours, and leave entitlements
2. Promote flexible working arrangements that benefit both employers and employees
3. Provide mechanisms for resolving workplace disputes and grievances in a fair and efficient manner
4. Protect employees from unfair dismissal and ensure they are treated fairly in the workplace
5. Encourage productive and economically beneficial workplace relations that contribute to Australia’s economic performance

Key components of the Fair Work Act

National Employment Standards (NES)

The National Employment Standards (NES) are 11 minimum employment entitlements that have to be provided to all employees. 

These standards cover areas such as maximum weekly hours, requests for flexible working arrangements, parental leave, annual leave, personal/carer’s leave, community service leave, long service leave, public holidays, notice of termination and redundancy pay, and the provision of a Fair Work Information Statement.

Modern Awards

Modern awards set out minimum terms and conditions of employment for various industries and occupations, supplementing the NES. They cover aspects like pay rates, working hours, breaks, allowances, and overtime. Employers must ensure that their employment practices align with relevant modern awards.

Enterprise Agreements

These are collective agreements made at the enterprise level between employers and employees (or their representatives). Enterprise agreements must meet or exceed the minimum terms and conditions set out in the NES and relevant awards. They are subject to approval by the Fair Work Commission, ensuring they meet the “better off overall test” (BOOT) for employees.

Unfair Dismissal Protections

The Act provides protection against unfair dismissal, ensuring that employees are not terminated without a valid reason or without being given a fair opportunity to respond to allegations. The Fair Work Commission handles claims of unfair dismissal and can order remedies such as reinstatement or compensation.

Adverse action and general protections

The Fair Work Act includes provisions against adverse action, which protects employees from being discriminated against, victimised, or unfairly treated for exercising their workplace rights, such as making a complaint about their employment conditions or participating in union activities.

Fair Work Ombudsman

The Fair Work Ombudsman is responsible for enforcing compliance with the Fair Work Act. This includes providing advice and education to employers and employees, investigating complaints, and taking enforcement action when necessary.

Fair Work Commission

The Fair Work Commission is Australia’s national workplace relations tribunal. It is responsible for maintaining a safety net of minimum wages and employment conditions, as well as dealing with disputes, approving enterprise agreements, and handling unfair dismissal claims.

Types of termination

Terminating an employee can arise from various circumstances, each requiring a different approach and adherence to legal guidelines. Here are the primary types of termination ⬇️

• Termination with notice: Involves providing the employee with a notice period before their employment ends. The length of the notice period is typically based on the employee’s length of service and may be stipulated in the employment contract
• Summary dismissal: Used in cases of serious misconduct, where the employee can be dismissed without notice. Examples of serious misconduct include theft, fraud, violence, and serious breaches of workplace policies
• Redundancy: Occurs when the position is no longer required, and the employee’s role is eliminated. Redundancy must be genuine, and employers must follow specific processes, including consultation with employees and offering redundancy pay

Notice periods

When terminating an employee, providing appropriate notice is crucial to comply with legal requirements and maintain a fair process. Notice periods vary depending on the length of service and the terms outlined in the employment contract. Here’s what you should consider when it comes to notice periods ⬇️

Minimum notice periods

These are based on the employee’s length of service and are outlined in the Fair Work Act. For instance:

• Less than 1 year of service: 1 week notice
• 1 to 3 years of service: 2 weeks notice
• 3 to 5 years of service: 3 weeks notice
• Over 5 years of service: 4 weeks notice
• Employees over 45 years old who have completed at least 2 years of continuous service are entitled to an additional week of notice

Payment in lieu of notice

If immediate termination is necessary, employers can provide payment instead of a notice period. This payment should be equivalent to the amount the employee would have earned during the notice period.

Grounds for termination

Different situations call for different termination grounds, each requiring a tailored approach to ensure legality and fairness. Here are the primary grounds for termination 👇

• Unsatisfactory performance: Termination due to poor performance is a structured and careful process. It starts with identifying and documenting instances of underperformance. Regular performance reviews are crucial as they provide continuous feedback and set clear expectations. It’s also important to give the employee opportunities to improve, offering support and guidance along the way. This ensures that the employee is aware of their performance issues and has a fair chance to address them
• Misconduct: Misconduct can vary from serious issues that warrant summary dismissal, such as theft or violence, to more general misconduct like repeated breaches of company policies. Addressing misconduct requires clear and thorough documentation, along with adherence to disciplinary procedures
• Redundancy: When a role is no longer required due to business changes, such as restructuring or technological advancements, redundancy becomes the appropriate course of action. This process should be handled with sensitivity and care. It’s crucial to ensure the redundancy is genuine and to follow all legal processes, including employee consultation and providing redundancy pay
• Breach of contract: Employees who violate contractual terms, such as confidentiality agreements or non-compete clauses, may face termination. This process requires clear evidence of the breach and a thorough understanding of the contract terms
• Inability to perform: Sometimes, despite support and opportunities for improvement, an employee may be unable to meet job requirements. In such cases, termination follows a careful performance management and assessment process. This ensures that the decision is justified and fair, providing clear documentation of the steps taken to support the employee before reaching this conclusion

Procedural fairness

Procedural fairness involves several key elements that contribute to a fair and transparent termination process.

The grounds of termination have to be explicitly communicated to the employee. Clear reasons allow the employee to understand the basis and minimise the potential for misunderstandings.

Secondly, documenting warnings and counselling sessions is essential. This documentation serves as a clear record of the steps taken to address issues, showing that the employee was given ample opportunity to rectify their performance or behaviour.

Lastly, allowing the employee to respond to allegations or reasons for termination is a critical aspect of procedural fairness. This step ensures that the employee’s perspective is considered and provides a platform for them to present their side of the story. 🧑

How to Prepare for Employee Termination

Performance reviews

Regular performance reviews are fundamental to effective employee management and development. These reviews provide continuous feedback, set expectations, and identify areas for improvement, encouraging a transparent environment where employees clearly understand their standing. 👍

During these sessions, managers should discuss specific performance metrics, achievements, and areas needing improvement. This practice not only highlights the employee’s strengths and contributions but also addresses any issues proactively before they escalate into major problems. 

Moreover, performance reviews should be documented meticulously to create a historical record of the employee’s performance, which can be invaluable during the termination process if it becomes necessary.

Documented warnings

Issuing formal warnings and conducting counselling sessions are critical when performance or behaviour issues arise. This process involves communicating the specific issues to the employee, offering guidance on how to address them, and setting clear expectations for improvement. Documentation of these warnings and counselling sessions is crucial for several reasons. 

Firstly, it provides a clear and unbiased record of the steps taken to address the issues, demonstrating that the employer has given the employee ample opportunity to improve. Secondly, it protects the employer legally by showing that the termination decision was based on documented evidence of ongoing issues and not taken lightly or without cause. 

Each warning should cover:

• Specific issues: Clearly detail the performance or behaviour problems
• Expected changes: Outline what needs to improve
• Timeline: Provide a reasonable timeframe for these improvements
• Consequences: Explain what will happen if the expectations aren’t met

Opportunities for improvement

Providing clear and achievable opportunities for improvement is key to showing your commitment to an employee’s development and making termination a last resort. This process involves creating a structured performance improvement plan (PIP) that’s tailored to address the employee’s specific challenges.

A PIP should:

• Clearly outline the areas where performance or behaviour needs to improve
• Establish goals that are attainable and can be measured over time
• Offer tools, training, or mentorship to help the employee succeed

Regular check-ins to monitor progress and offer additional guidance are also important. This approach shows that the employer is invested in the employee’s success and is taking concrete steps to help them improve. It also ensures that if termination becomes necessary, it is clear that it was only after the employee was given every reasonable opportunity to succeed. 

Guide to Writing a Termination Letter

Essential elements of a termination letter

Employee’s details and the date

• Employee’s full name: Always start the letter by addressing the employee by their full name to ensure there is no ambiguity. This establishes a formal and respectful tone
• Position: Mention the employee’s position within the company. This helps contextualise the decision and provides clarity on the role being terminated
• Date: Include the date the letter is written and issued. This is crucial for legal documentation and clarity regarding the timeline of the termination process

Example:

“Dear [Employee’s Full Name],

We regret to inform you that your employment as [Employee’s Position] with [Company Name] will be terminated effective [Date].”

Reasons for termination

• Specific reasons: Clearly state the specific reasons for the termination. This could range from performance issues, misconduct, redundancy, or other valid reasons
• Reference prior warnings: Reference any prior warnings, performance reviews, or counselling sessions. This demonstrates that the decision was not made arbitrarily and that the employee was given opportunities to rectify the issues
• Be objective and professional: Maintain a professional tone and avoid personal or emotional language. The explanation should be based on facts and documented evidence

Example:

“This decision has been made due to your continued unsatisfactory performance despite multiple performance reviews and improvement plans. Specific areas of concern include [list specific issues].”

Notice period and last working day

• Notice period: Specify the length of the notice period if applicable. If the termination is effective immediately, clearly state this
• Exact last working day: Include the exact date of the employee’s last working day. This provides a clear end point for their employment and helps in transitioning responsibilities
• Legal compliance: Ensure that the notice period complies with legal requirements and company policies. The Fair Work Act 2009 in Australia, for example, outlines minimum notice periods based on the length of service

Example:

“You are entitled to a notice period of [X weeks]. Your final working day will be [Date]. Alternatively, your termination will be effective immediately, and you will receive payment in lieu of notice.”

Entitlements and final pay details

• Outstanding salary: Include the amount of outstanding salary up to the final working day
• Accrued leave: Detail any accrued but unused leave entitlements, such as annual leave or long service leave
• Bonuses and benefits: Mention any bonuses or other benefits that the employee is entitled to receive upon termination
• Payment in lieu of notice: If applicable, state the payment amount in lieu of notice and how it will be calculated

Example:

“Your final paycheck will include the following:

• Outstanding salary up to [final working day]

• Payment in lieu of notice (if applicable)
• Accrued entitlements, including annual leave and any other benefits

Your final paycheck will be processed and available on [Date].”

Introduction

When writing a termination letter, it’s important to begin with a clear and direct statement about the termination. This approach sets the tone and ensures the purpose of the letter is immediately understood.

For instance, you might say, “We regret to inform you that your employment with [Company Name] will end effective [Date].” This statement should be straightforward and leave no ambiguity about the letter’s intent, establishing a professional and respectful tone right from the start. While delivering difficult news, this clarity and professionalism help maintain a sense of respect and understanding.

Reasons for termination

When explaining the reasons for termination, it’s essential to be clear and straightforward. This helps avoid any confusion about the employee’s final working day and their rights during the notice period.

You might say, “Your employment will end immediately,” or, “Your employment will end after a notice period of [X weeks], with your last working day being [Date].” Clear communication here ensures the employee understands their status and the timeline of their departure.

Providing a detailed yet concise explanation of the reasons for termination is also critical. This section should reference specific incidents, documented performance reviews, and any prior warnings or counselling sessions. Be factual and objective, avoiding emotional or subjective language.

For instance, you could write, “Despite multiple warnings and performance improvement plans, your performance has not met the required standards. Specific issues include [list specific issues].” This approach makes the reasons for termination transparent and supported by documented evidence.

Notice period and final pay

When outlining the details of the notice period or payment in lieu, it’s important to be clear and empathetic. This ensures the employee understands exactly what they are entitled to receive, which can help ease the transition. This includes:

• Length of the notice period or payment in lieu: Specify how long the notice period is or the details of the payment in lieu
• Outstanding salary: Include the amount of salary owed up to the final working day
• Payment for accrued leave: Detail any payment for accrued but unused leave
• Other entitlements: Mention any other final benefits the employee is entitled to

For example, you might write:

“You are entitled to a notice period of [X weeks]. Your final working day will be [Date]. Your final paycheck will include your outstanding salary up to your final working day, payment in lieu of notice, and accrued entitlements, including annual leave. If you have any questions about your final pay, please feel free to reach out.”

Next steps

Providing clear instructions on the immediate steps the employee needs to take is crucial for a smooth transition. This includes:

• Return of company property: Specify the process and timeline for returning company property such as laptops, cell phones, keys, and ID cards. For example, “Please return all company property, including your laptop, cell phone, and any other equipment, by [Date].”
• Final paycheck and additional documentation: Inform the employee about when and how they will receive their final paycheck and any other necessary documentation. For example, “Your final paycheck will be processed and available on [Date].”

Support and contact information

Offering support during the transition period and providing a point of contact for any further questions demonstrates compassion and a willingness to assist during a difficult time. This can help maintain a positive relationship and reduce the stress associated with termination. Here are the key points to include:

• Point of contact: Provide the name and contact details of the HR representative or manager who can answer any questions the employee might have. For example, “If you have any questions or need support during this transition, please contact [HR contact name] at [HR contact details].”
• Offer of support: Indicate any support the company is willing to provide during the transition, such as outplacement services or career counselling. For example, “We understand this is a challenging time, and we are committed to supporting you during this transition. Please feel free to reach out for any assistance you may need.”

Best Practices for Delivering the Termination Letter

Delivering a termination letter is a sensitive task that requires careful planning and execution to ensure the process is handled with respect, clarity, and legal compliance. Here are the best practices to follow ⬇️

Termination meeting

The termination meeting should be conducted in a private and discreet setting to maintain confidentiality and respect for the employee’s dignity. Make sure to pick a place where you can speak privately, like a quiet office or a reserved meeting room. Avoid common areas where others might overhear the conversation.

Realise that this news can be a big shock. Allow the person some time to absorb what you’ve said and let them ask any questions. It’s important to pause when needed and be ready to explain things more than once to ensure they understand.

Having a member of the HR team present during the termination meeting can help ensure the process is conducted professionally and according to company policy. Additionally, a support person can provide emotional support to the employee and serve as a witness to the conversation. This practice helps in maintaining transparency and fairness.

Handling the aftermath

After the termination meeting, it is crucial to coordinate the return of any company property the employee might have, such as laptops, cell phones, keys, ID cards, and other equipment. Make sure to give the employee straightforward instructions on how and when to return company items. Providing a checklist can be really helpful to ensure nothing gets missed.

Helping the employee with their next steps can make a big difference. This might include offering outplacement services, career counselling, or writing a reference letter. Showing genuine care and support during this time not only helps the employee but also reflects well on your company’s reputation. It shows that you value your people, even when they’re leaving.

Common mistakes to avoid in the termination process

One of the biggest mistakes is not providing clear and specific reasons for the termination. Ambiguity can lead to misunderstandings and even legal challenges. Make sure the reasons for termination are well-documented, factual, and communicated clearly.

Lack of documented warnings and counselling

Terminating an employee without prior documented warnings and counselling sessions can seem unfair and arbitrary. It’s crucial to keep a record of all performance reviews, warnings, and improvement plans to show that the employee was given ample opportunities to improve.

Failure to comply with the Fair Work Act and the Small Business Fair Dismissal Code

Failing to comply with legal requirements, such as those in the Fair Work Act and the Small Business Fair Dismissal Code, can lead to serious legal issues. Ensure that all termination procedures follow these regulations to protect both the company and the employee’s rights.

Handling Potential Claims

If an employee lodges an unfair dismissal claim, it is vital to take immediate and appropriate action. Here are the steps to follow 👇

• Review documentation: GGather all relevant documents, including performance reviews, warnings, counselling records, and the termination letter. Make sure these documents are well-organised and easy to access
• Engage legal counsel: Consult with legal experts to understand your position and the best course of action. Legal advice can help you navigate the complexities of the claim process and ensure you’re compliant with all legal requirements
• Prepare a response: Work with your legal team to prepare a detailed response to the claim, addressing all allegations and providing evidence to support the termination decision. Be factual and concise in your response
• Participate in mediation: Be prepared to participate in mediation or conciliation sessions as required by the Fair Work Commission. Approach these sessions with an open mind and a willingness to reach a fair resolution
• Implement learnings: Regardless of the outcome, use the experience to review and improve your termination processes. Ensure that all future terminations are handled with care, clarity, and full compliance with legal standards

Australian Employee Termination Letter Template

[Company Letterhead]

[Date]

[Employee’s Name]

[Employee’s Position]

[Employee’s Address]

Dear [Employee’s Name],

We regret to inform you that your employment with [Company Name] will be terminated effective [Date]. This decision has been made due to [specific reasons for termination].

As per your contract, you are entitled to a notice period of [length of notice period] or payment in lieu of notice. Your final working day will be [Date].

Your final paycheck will include the following:

• Outstanding salary up to [final working day]
• Payment in lieu of notice (if applicable)
• Accrued entitlements, including annual leave and any other benefits

Please return all company property, including your laptop, cell phone, and any other equipment, by [date].

If you have any questions or need support during this transition, please contact [HR contact name] at [HR contact details].

We wish you all the best in your future endeavours.

Sincerely,

[Your Name]

[Your Position]

[Company Name]

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