Notice of Termination

Minimum Notice Periods

The Fair Work Act 2009 sets out the minimum notice periods an employer must give when ending an employee's employment. These rules apply to most full-time and part-time workers. Casual employees generally do not get notice of termination unless their employment agreement or award states otherwise.

The amount of notice depends on how long the person has worked for the business. The table below shows the standard notice required.

Additional Notice for Employees Over 45

You must provide an extra week of notice if the employee is 45 years old or older and has completed at least two years of continuous service with the business. This is in addition to the standard periods shown in the table.

Notice and Annual Leave

Employers cannot force an employee to take annual leave during the notice period. The employee must be allowed to work out their notice, or be paid in lieu of that notice if a mutual agreement is reached to end the employment immediately.

Modern Awards and Enterprise Agreements

Some tradespeople and small business owners operate under specific Modern Awards or registered Enterprise Agreements. These industrial instruments might contain different notice periods that are more favourable to the employee. If a clause in your Award or Agreement provides more notice than the Fair Work Act 2009, you must follow the higher standard. Always check your specific Award, such as the Building and Construction General On-Site Award 2020 or the Electrical, Electronic and Communications Contracting Award 2020, to ensure compliance.

Payment in Lieu of Notice

In many cases, an employer can choose to pay the employee out for the notice period rather than having them work. If you choose this option, you must pay the employee their full base rate of pay for the hours they would have worked during the notice period. This includes shift loadings and allowances that are part of their ordinary pay. You cannot use accrued leave to cover the cost of the notice payment.

Summary for Employers

Failing to provide the correct minimum notice can result in a claim for unfair dismissal or a breach of the National Employment Standards. Ensure you calculate the employee's continuous service date correctly. Verify the employee's age to see if the extra week applies. Check your registered instruments. If you are unsure about the calculation or the terms of your Award, seek advice from the Fair Work Ombudsman or a qualified workplace relations professional before issuing the termination letter.

Calculating Final Pay

To calculate the correct final pay, you must determine the employee's final rate of pay. For tradespeople and employees under modern awards, this is usually the base hourly rate plus mandatory allowances. You should check the relevant modern award or registered agreement to identify which allowances must be included in the final rate. Do not include discretionary bonuses or overtime payments unless specifically required by the award.

Annual Leave Loading

When you cash out annual leave, you must include annual leave loading. This is usually 17.5% of the leave base rate. Under the Fair Work Act 2009, you can only cash out annual leave if a registered agreement allows it or the award contains a specific cashing out term. The payment must be the same as what the employee would have received if they took the leave, including the loading.

Long Service Leave

Long service leave calculations differ between states and territories. You must refer to the specific Long Service Leave Act applicable to your location. In most states, an employee becomes entitled to long service leave after 10 years of service. However, if you terminate an employee between 7 and 10 years, you may still be liable for a pro-rata payment. This is mandatory if the termination is due to redundancy, illness, incapacity, or death. In some jurisdictions, pro-rata payment is required for any termination after 5 years. Check the state act to calculate the correct weeks of pay owed.

Redundancy Pay

Redundancy pay is mandatory under the National Employment Standards (NES) for businesses with 15 or more employees. The amount depends on the employee's years of continuous service. The scale starts at 4 weeks for 1 year of service and increases by 2 weeks for each additional year, up to a maximum of 16 weeks for 9 years or more. You do not pay redundancy pay for continuous service of less than 1 year. Small businesses with fewer than 15 employees are exempt from paying redundancy pay under the NES, but you should always check your specific award for different rules.

Payment in Lieu of Notice

If you do not require the employee to work out their notice period, you must pay them in lieu of that notice. This is calculated based on the employee's ordinary hours of work over the notice period. Use the base rate of pay they would have earned if they had worked. Include compulsory loadings and shift allowances, but exclude overtime. If the employee takes annual leave during the notice period, pay them out that leave separately.

Summary of Steps

1. Identify the relevant Modern Award or Enterprise Agreement.
2. Determine the 'base rate of pay' including mandatory allowances.
3. Calculate the accrued annual leave balance and add 17.5% leave loading.
4. Check state or territory legislation for long service leave entitlements and pro-rata rules.
5. Verify redundancy eligibility based on business size and years of service using the NES scale.
6. Calculate payment in lieu of notice using the ordinary hourly rate.

Summary Dismissal for Serious Misconduct

Under the Fair Work Act 2009 (Cth), an employer has the right to dismiss an employee immediately without notice if they engage in serious misconduct. This is known as summary dismissal. In the trades and small business sector, situations often arise that require swift action to protect safety, property, and the reputation of the business. However, you cannot simply sack a worker on the spot without following the correct legal definitions and procedures.

What is Serious Misconduct?

The law defines serious misconduct as conduct that causes serious and imminent risk to the reputation, viability, or profits of the employer's business, or the health or safety of a person. It also includes deliberate behaviour that is inconsistent with the continuation of the employment contract.

For a dismissal to be legally sound, the behaviour must be serious enough to justify terminating the employment relationship immediately. Minor mistakes, occasional lateness, or poor performance generally do not count as serious misconduct and usually require a performance management process rather than instant dismissal.

Common Examples

While every situation is different, the Fair Work Act and Fair Work Commission decisions consistently identify certain behaviours as serious misconduct. Common examples relevant to trades and small businesses include:

• Theft or fraud: Stealing cash, tools, materials, or client property. Falsifying timesheets or expense claims also falls under this category.
• Violence: Physical assault or fighting at the workplace or while representing the business.
• Intoxication: Being drunk or under the influence of illegal drugs at work, especially if it creates a safety risk on a construction site or in a workshop.
• Refusal to follow lawful and reasonable instructions: For example, a tradie refusing to wear mandatory safety gear or operate machinery according to safety standards.
• Harassment or discrimination: Severe bullying, sexual harassment, or discriminatory behaviour towards colleagues or clients.

Notice and Pay

If you dismiss an employee for serious misconduct, you are not required to provide notice or pay in lieu of notice. You also generally do not have to pay out accrued annual leave or long service leave, though you must pay them for any hours worked up to the time of dismissal.

The Importance of Evidence

Even though notice is not required, you must still have a valid reason based on facts. If an employee makes an unfair dismissal claim, the Fair Work Commission will scrutinise your decision. You cannot rely on hearsay or suspicion. You must be able to prove the misconduct occurred.

Before terminating employment, conduct a thorough investigation. Gather witness statements, review CCTV footage, check timesheets, or secure physical evidence. You should also meet with the employee to give them a chance to respond to the allegations. This procedural fairness is critical. If you rush the process and get it wrong, you may face an unfair dismissal claim, reinstatement orders, and compensation claims.

Small Business Fair Dismissal Code

If you run a small business, defined as having fewer than 15 employees, you must follow the Small Business Fair Dismissal Code when dismissing an employee. Adhering to this checklist is a defence against an unfair dismissal claim under the Fair Work Act 2009.

1. Provide a valid reason You must have a valid reason for the dismissal related to the employee's capacity or conduct. Before you make a final decision, you need to warn the employee honestly. This warning must be in plain English. It should state that the employee is at risk of losing their job if their performance or conduct does not improve.

2. Give the employee a chance to respond You must provide the employee with a reasonable opportunity to respond to the warning. This is a critical step under the Code. For performance issues, set aside time for a private meeting to discuss the warning. Listen to their side of the story. For serious misconduct, you must still allow them to explain their actions before you terminate their employment, unless it is impractical to do so. If you do not provide this opportunity, the dismissal will likely be found unfair by the Fair Work Commission.

3. Maintain a record Keep a written record of the process. You should document the warning provided to the employee, the date of the discussion, and the employee’s response. While the Code does not strictly require a signed admission of guilt, keeping clear notes proves you followed the correct process. If a claim is made, you can rely on this checklist as evidence that the dismissal was not harsh, unjust, or unreasonable.

Summary of obligations To ensure compliance, tick these boxes before terminating employment:

• Confirm the business has fewer than 15 employees.
• Identify a clear reason related to the employee's conduct or capacity.
• Provide a specific warning that their job is at risk.
• Allow a reasonable chance for the employee to improve or explain their actions.
• Document every step of the process.

Ignoring this Code removes your protection against unfair dismissal claims. Always seek advice from the Fair Work Ombudsman or a legal professional if you are unsure about the process.

What is Redundancy

Redundancy happens when an employer no longer needs the job done by an employee to be performed by anyone. This usually occurs due to changes in the business structure, a downturn in work, or technological improvements. It is important to understand that redundancy is about the role, not the person. The decision must be genuine and not used as a cover for dismissal based on performance or conduct.

Redundancy Pay Scale

Under the Fair Work Act 2009, employees with a continuous service period of at least 12 months are entitled to redundancy pay. The amount is calculated based on the employee's base rate of pay for their ordinary hours of work. The pay scale operates on a sliding scale depending on how long the employee has been with the business.

The scale is as follows:

• At least 1 year but less than 2 years: 4 weeks pay
• At least 2 years but less than 3 years: 6 weeks pay
• At least 3 years but less than 4 years: 7 weeks pay
• At least 4 years but less than 5 years: 8 weeks pay
• At least 5 years but less than 6 years: 10 weeks pay
• At least 6 years but less than 7 years: 11 weeks pay
• At least 7 years but less than 8 years: 13 weeks pay
• At least 8 years but less than 9 years: 14 weeks pay
• At least 9 years but less than 10 years: 16 weeks pay
• At least 10 years: 12 weeks pay

Note: The pay reduces to 12 weeks after 10 years of service because long service leave entitlements generally become available at this stage.

Small Business Exemption

Small businesses may not have to pay redundancy pay. A business is classified as a "small business employer" under the Fair Work Act 2009 if it employs fewer than 15 employees. The counting of 15 employees is calculated on a simple headcount of all employees employed on a full-time or part-time basis. This figure also includes casual employees employed on a regular and systematic basis.

If your business falls into this category, you are exempt from paying the redundancy amounts listed above. However, you must still provide the employee with the minimum notice period required by the National Employment Standards.

Other Important Considerations

Check any applicable Modern Award or Enterprise Agreement. Some Awards contain different redundancy provisions that might offer better entitlements for the employee, and you must adhere to the higher standard. , you cannot use an employee's accrued annual leave or long service leave to cover the cost of the redundancy payout unless specifically agreed to in writing.

If you cannot afford to pay the redundancy amount due to severe financial hardship, you may apply to the Fair Work Commission for a reduction. The Commission will only grant this if paying the full amount would lead to the bankruptcy of the business.