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Ending employment

by Angus Jones
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OK, you have to fire someone, let them go, end their employment. Maybe one of your key staff has resigned. This can be an emotional exercise on both parts. In this guide we will cover ending employment, what is important for you to understand around entitlements and how to protect yourself from unfair dismissal claims.

Ending employment is an employee’s departure from a job and the end of an employee’s time with an employer. Termination may be voluntary on the employee’s part, or it may be at the hands of the employer.
Unfair dismissal is when an employee is dismissed from their job in a harsh, unjust or unreasonable manner.

WHY will someone leave your employment?

The most common reasons employment ends are:
  • resignation
  • redundancy
  • termination or dismissal

Resignation is when someone decides to leave on their own accord.  It is their decision and you cannot reject a resignation.  The most common reasons for people to leave are insufficient pay or unfair pay practices, lack of honesty/integrity/ethics, poor manager, lack of work-life balance, and unhealthy/undesirable culture.

Redundancy occurs when an employer either becomes insolvent or bankrupt or the job function is no longer needed. This is a tough decision especially if you are letting go of a hard-working and loyal employee.

Dismissal is when you let someone go for poor performance, conduct or changes to operational requirements.

WHAT is important to understand about resignation, redundancy & dismissal?

There are different rights, obligations and legislation that come as a result of ending employment.

Your obligations as an employer will depend on whether you are under the state or national industrial relations system.

Notice periods

You must provide a notice period to an employee when ending employment except for some cases of dismissal. The length of notice will vary based on their length of service, type of employment, award, agreement or employment contract, and age. You can have the choice to let the employee work their notice period or you can pay them out (known as pay in lieu of notice). If you pay them out, they must be paid the same amount as if they had worked to the end of the notice period.

During this notice period, the employee may take annual leave only if you approve it and sick leave with sufficient evidence.

Notice periods do not apply to employees who are: casuals, employed for a specific period or task, do seasonal work, fired because of serious misconduct (such as engaging in theft, fraud or assault), and daily hire working in the building and construction or the meat industry.

Employee entitlements

You must pay an employee all their entitlements when employment ends. These may include:

  • outstanding wages
  • accumulated annual leave
  • accrued or pro-rata long service leave
  • redundancy pay
Genuine Redundancy

Some businesses have wrongly used redundancy to unfairly dismiss an employee. According to Fair Work Australia:

A genuine redundancy is when:

  • the person’s job doesn’t need to be done by anyone
  • the employer followed any consultation requirements in the award, enterprise agreement or other registered agreement.

When an employee’s dismissal is a genuine redundancy the employee isn’t able to make an unfair dismissal claim.

A dismissal is not a genuine redundancy if the employer:

  • still needs the employee’s job to be done by someone (eg. hires someone else to do the job)
  • has not followed relevant requirements to consult with the employees about the redundancy under an award or registered agreement or
  • could have reasonably, in the circumstances, given the employee another job within the employer’s business or an associated entity.
Redundancy Pay

If someone is made redundant, they will be entitled to redundancy pay and special taxation rates will apply to those payments. https://www.fairwork.gov.au/ending-employment/redundancy/redundancy-pay-and-entitlements
https://www.ato.gov.au/Individuals/Working/Working-as-an-employee/Leaving-your-job/Redundancy-payments/

Unfair dismissal

You must have appropriate policies and procedures in place to manage employee performance. Terminating or dismissing an underperforming employee must be done in a manner that is fair, reasonable, and just.

HOW do you ensure you have terminated an employee correctly?

Small businesses with fewer than 15 employees have greater abilities to end employment via dismissal. The Small Business Fair Dismissal Code provides a framework for dismissal to ensure the procedure is fair. It also provides small business owners with some level of protection against unfair dismissal claims.

Under the Code an employer can dismiss an employee without notice for serious misconduct includeing theft, fraud, violence and serious breaches of occupational health and safety procedures.

In other cases, the small business employer must warn the employee a reason that he or she is at risk of being dismissed if there is no improvement. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to the Fair Work Commission, including evidence that a warning has been given. Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.

The small business employer must provide the employee with an opportunity to respond when a warning is given and allow the employee a reasonable chance to rectifying the problem. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.

An employee who is on a probation period is not likely to have worked the minimum period to qualify to make an unfair dismissal claim. The Fair Work Act 2009  indicates that an employee must be employed for a minimum of six months, or 12 months if the employer is a small business with fewer than 15 employees to make an unfair dismissal claim.

More details and a checklist can be found here. https://www.fairwork.gov.au/ArticleDocuments/715/Small-Business-Fair-Dismissal-Code-2011.pdf.aspx

Those businesses with more than 15 employees’ details around unfair dismissal can be found by visiting Fair work Australia. https://www.fairwork.gov.au/ending-employment/unfair-dismissal

HINTS ending employment

You should always treat people with respect and simply put yourself in their position and treat them how you would expect yourself to be treated irrespective of the circumstances.

An exit interview can be a great way to understand more about your business. This could help you measure morale, see what needs improving, and understand how well they were managed.

If someone is leaving for a better opportunity be happy for them and thankful for how they have helped you to date.  Be proud that you may have helped them to the next step.

SUMMARY –  ending employment via dismissal

People who leave by their own accord or others that you must remove have certain entitlements. The Small Business Fair Dismissal Code provides a fair framework allowing greater abilities to end employment via dismissal.

It is critical you perform this process correctly and follow the rules.  If you are not experienced in this area we advise speaking with an employment lawyer or at the very least visit the Fair Work website for further clarification. https://www.fairwork.gov.au/ending-employment

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