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Terminating an employee: what employers need to know

By Mollie Tracey

Terminating an employee’s contract can be necessary – but mismanaging it can cost your business in legal fees, penalties and reputation.  

Whether you’re dealing with underperformance, misconduct or redundancy, it’s critical to get the process right. 

Here’s what every employer should know before ending the employment relationship. 

If you have questions about employee terminations, contact our experts.   

Grounds for termination 

Employers can lawfully terminate an employee for several reasons, provided the decision is fair, justified and in line with the employment contract and applicable industrial instruments. Common grounds include: 

  • Poor performance – where the employee has not met reasonable performance expectations, despite being provided with support and an opportunity to improve. 
  • Misconduct – including breaches of workplace policies, unsafe behaviour or serious misconduct such as theft or sexual harassment. 
  • Redundancy – including restructure, business downturn or significant role changes. 
  • Mutual agreement – where both parties agree to end the employment relationship. 

The reason for termination should always be clearly defined and supported by evidence.  

Without a fair and lawful reason for termination, the employee may have grounds for an unfair dismissal or general protections claim.  

Even where a valid reason exists, employers must carefully consider how they approach the decision and ensure it stands up to scrutiny. 

Male packing up his desk after having his employment terminated.

Related reading 

Workplace toolkits and guides 

Workplace training 

What to consider before you terminate someone's employment 

Before deciding to terminate an employee’s employment, it’s important to step back and review the full picture. 

Serious misconduct can warrant the employer to exercise summary dismissal (instant termination, without notice).   

 Depending on the reason for termination (excluding serious misconduct), ask yourself: 

  • Have concerns been raised with the employee and properly explained? 
  • Has the employee had an opportunity to respond and improve? 
  • Have the issues been documented and addressed consistently across the business? 
  • Are there any alternatives to termination, such as a formal warning, demotion or performance management plan? 

Employers should also consider the potential risks of terminating an employee who has recently taken protected leave, made a complaint or exercised a workplace right. 

Termination process and procedure 

Regardless of the reason for termination, a fair and lawful process must be followed. This typically includes: 

  • Outlining the issue to the employee and the potential consequences. 
  • Giving the employee a chance to respond, with a support person present if requested. 
  • Considering their response before making any decision. 
  • Documenting the process and keeping detailed records of all communication and outcomes. 

Termination FAQs – answered by our experts 

Here, we answer these questions:  

  • Can you terminate an underperforming employee during probation?  
  • How much notice must you give within a six-month probation? 
  • What if an employee doesn’t show up and doesn’t notify you? 
  • What if an employee often fails to notify you when sick? 

If you decide to proceed with termination, issue a written termination letter outlining the reason for dismissal, the final working day and any entitlements owed. 

Legal risks to avoid 

Termination decisions can lead to claims under unfair dismissal, general protections or discrimination laws if the process is not handled correctly. Common employer missteps include: 

  • Failing to follow a procedurally fair process. 
  • Dismissing an employee based on discriminatory grounds such as age, gender or disability. 
  • Retaliating against an employee for making a complaint or exercising a legal right. 
  • Breaching the terms of an employment contract or applicable award. 
  • Misclassifying a redundancy or constructive dismissal. 
  • Pressuring an employee to resign. 
  • Accepting a resignation ‘in the heat of the moment’ without allowing the employee time to reflect on their decision after a difficult conversation. 

If there is any uncertainty, it’s best to seek advice before taking action. 

Legal risks checklist for terminating employees 
Do  Don’t 
Follow a procedurally fair process – give employees a chance to respond before making a decision and be sure your procedures on this are compliant and consistently followed.  Terminate without proper investigation or without giving the employee an opportunity to respond. 
Clearly document all steps, discussions and outcomes.  Dismiss on discriminatory grounds (e.g. age, gender, disability, race). 
Base decisions on lawful, non-discriminatory reasons aligned with contracts and awards.  Retaliate against an employee for raising concerns or exercising a legal right. 
Consider potential risks if the employee has recently exercised a workplace right (e.g. made a complaint or taken protected leave).  Misclassify a termination (e.g. calling it a redundancy without following redundancy requirements). 

How we can help 

CCIWA’s Employee Relations Helpline can support you through every step of the termination process.  

Whether you’re managing underperformance, investigating misconduct or facing structural change, our team can provide guidance, compliant documentation and practical advice to help reduce risk and protect your business. 

To speak to one Business Law WA’s employment lawyers, please contact the team at [email protected] or 08 9365 7746. 

Our Employee Relations Helpline, together with our HR & Workplace Relations Consultancy, can also offer timely, expert support and even run internal workplace processes on your behalf. Contact us on 08 9365 7660 or at [email protected]. 

 

CCIWA Members receive a discounted rate on Business Law WA's legal services and free unlimited use of our Employee Relations Helpline. Not a Member? No problem, our team can support you, too! Get in touch via 1300 422 492 or [email protected] 

This article is authorised by Business Law WA, an incorporated legal practice and wholly owned subsidiary of CCIWA. The contents of this article is general in nature and is not legal or professional advice and should not be relied upon as such.