Employee Termination

Best practice guide to employment termination

Employee dismissals and terminations are an unfortunate but inevitable part of doing business. It can be an emotionally charged and draining process as well as risky – for both the employee and the employer. Regardless of the size of your business or how long it has been running, every business leader and manager has to do it at some point in their business lives. This is why we’ve put together this simple three step guide to exiting staff. 

Get it right and save yourself the costly pitfalls of getting it wrong. Avoid unfair dismissal, unlawful termination, and general protections cases – all of which, on top of being financially detrimental, cost a lot of energy and time, and interfere with efficient and successful business performance.

STEP 1 – CHECK YOUR WORKPLACE POLICIES AND INSTRUMENTS

The specific employment termination procedure you must follow might be prescribed in detail in your employment contracts, organisational policy or an applicable Enterprise Agreement. If so, make sure you know what the prescribed procedure is and understand what you need to do. Missing any of these steps can open you up to a claim.

If you don’t have a prescribed procedure, the following steps will serve as a good general guide and can be used as the foundation of your own employment termination checklist.

Note that these steps will not be relevant in the case of summary termination or redundancies, and you should have a look at our ‘Redundancy’ blogs, our guides on ‘Performance Management and Disciplinary Meetings’ or contact us for advice for best practice guidance in these cases.

STEP 2 – HAVE THE CONVERSATION

If you’ve reached the point where you’re considering terminating someone’s employment (and it’s not because of redundancy or conduct justifying summary dismissal), the first step should be to notify the employee of your concerns about their performance and/or conduct and give them an opportunity to respond. Ideally, this would be via a conversation that is followed up in writing afterwards. The conversation could go something along the lines of – we have observed or become aware of [x], we are considering doing [y] and we would like to give you the opportunity to input into the decision.

The importance of this step has been reiterated by the Fair Work Commission time and time again. It is a step that enables you to ensure that you have afforded the employee “procedural fairness” before making an adverse decision about their employment. It gives an employee the opportunity to “show-cause” as to why you shouldn’t make an adverse decision about their employment and helps you make sure you make the right decision.

During this step, you may find that the employee is able to explain the reason for their underperformance or poor behaviour or demonstrate how they will be improve to your satisfaction such that a dismissal is no longer warranted. Alternatively, it might alert you to a key piece of information (good or bad) that you were not aware of. This step helps ensure you have all the information you need to make a decision that is fair, reasonable and justifiable later.

In many instances, it is advisable to document this step in a ‘show cause’ letter, but an email can suffice depending on the circumstances. The important thing to ensure is that you are complying with your obligations to give the employee notice of the ‘allegations’ against them and allowing the employee to respond before you make the decision to terminate or not. This notice will typically set out the employee’s alleged actions (or inaction as the case may be) in appropriate detail. It also usually invites the employee to meeting and tells them what to expect. The letter also reinforces the point that termination is a real possibility if the employee cannot provide adequate answers.

The meeting itself will predominantly be a forum for you as the employer to reiterate your position on the employee’s conduct, and for the employee to explain themselves.

STEP 3 – CONSIDER THE EMPLOYEE’S RESPONSE

Once a discussion has taken place, take the time to consider what the employee has revealed about their conduct or performance, and determine whether what the employee has said is adequate to explain their inappropriate conduct or lacklustre performance. Have they satisfied you, or shown you, that they want to stay on the team and are now going to play by the rules? Is there some other enquiry you need to make or do you have all of the information you need?

STEP 4 – TERMINATION LETTER AND MEETING

If you have taken the time to consider the employee’s explanation and you consider termination to be the only viable option, you should draft a termination letter. This serves as notice for the purposes of your contractual obligations (make sure you know what they are!) and usually includes any details about termination payments.

As a guide, the letter should set out:

  1. the fact that the employee has been terminated;
  2. when they should expect to receive their final pay (including any accrued entitlements); and
  3. any details regarding support programs that the employee may have access to.

Ideally this letter would be presented to the employee at a meeting, where you could verbally deliver the news before handing them the letter. However, this may not always be appropriate or practicable.

CONCLUSION

Addressing the question of ‘how do I terminate an employee?’ doesn’t have an easy or simple answer, and there are many things to consider. This includes whether your procedure is legally sound and whether you’re meeting all your legal and other obligations. However, following this short, sharp (but highly effective) three-step employee termination procedure, is a good start.

NEED SPECIALIST HELP?

At Workplace Wizards, we can assist you with employee terminations, guiding you through the termination process, minimising legal risks and reducing stress along the way. Call us on 03 90876949 or email us at support@workplacewizards.com.au, and a one of our consultants can help you out!

Also, feel free to have a look at our other blogs in this series – ‘Wage Compliance’, ‘Award Interpretation’ and ‘Understanding Terms & Conditions of Employment’ – which outline an employer’s legal rights and obligations under the Fair Work Act 2009 (Cth), Small Business Fair Dismissal Code (where relevant), and the information you need to know before starting the dismissal process.

We also have a FREE ‘How To Guide’ on the best practice for conducting exit interviews and Resource Pack on ‘How to Fairly Dismiss an Employee’ (which includes all the letters and tools you will need in your next employee termination!).

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