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Termination and Severance Policies

Learn about the legal processes for employee termination and severance in Australia

Notice period

In Australia, the Fair Work Act 2009 (Cth) outlines the minimum notice periods employers must provide employees during termination. These requirements can be further influenced by awards, registered agreements, and individual employment contracts.

Fair Work Act Minimum Notice Periods

The Fair Work Act specifies minimum notice periods based on an employee's length of service:

  • Less than one year: One week's notice
  • More than one year to three years: Two weeks' notice
  • More than three years to five years: Three weeks' notice
  • More than five years: Four weeks' notice

These minimums are a baseline, and awards or agreements can stipulate longer notice periods.

Notice Periods in Awards and Registered Agreements

Many industries in Australia are covered by awards which set out minimum employment conditions, including notice periods. An award can set a longer notice period than the Fair Work Act minimums.

Registered agreements, negotiated between employers and employee representatives, can also include provisions for notice periods. Similar to awards, these agreements can establish longer notice periods than the statutory minimums.

Notice Periods in Employment Contracts

Individual employment contracts can also specify notice periods. If the notice period stated in the contract is longer than the Fair Work Act minimum or any applicable award, the longer period takes precedence.

Additional Information

  • A notice period can include weekends and public holidays, but these days don't generally extend the notice period itself.
  • Employees can give notice of resignation at any time, without a mandated notice period, unless otherwise specified in their contract.

Severance pay

Severance pay, also known as redundancy pay, is a monetary entitlement for certain employees when their employment is terminated due to their position becoming genuinely redundant. The Fair Work Act 2009 (Cth) establishes the legal framework for severance pay in Australia.

Entitlement to Severance Pay

An employee is entitled to severance pay if their position is made genuinely redundant (i.e., their job is no longer required and is not replaced), they are a permanent employee (full-time or part-time), and they have worked for their employer for at least 12 months.

Exemptions from Severance Pay

Employees are not entitled to severance pay if they are employed by a small business with fewer than 15 employees, they are a casual employee, they were employed for a fixed term, or they were dismissed for reasons of serious misconduct.

Calculating Severance Pay

The amount of severance pay due to an employee depends on their length of continuous service with the employer. Here is the general schedule:

  • 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

Other Factors Affecting Entitlements

Awards and Registered Agreements may stipulate higher severance pay amounts than the Fair Work Act. Individual contracts may contain clauses relating to severance pay, potentially providing for more generous provisions than the legal minimums. Severance pay entitlement and calculations can be complex.

Termination process

Terminating an employee's employment in Australia requires employers to follow specific procedures to ensure the process is legal and fair. These procedures stem from the Fair Work Act 2009 (Cth), as well as relevant awards, agreements, and employment contracts.

Valid Reasons for Termination

Employers must have a valid reason for terminating an employee's employment. According to the Fair Work Act, valid reasons might include:

  • Performance: Unsatisfactory performance after the employee has been provided with reasonable warnings and opportunities to improve.
  • Conduct: Misconduct by the employee, including serious misconduct that warrants summary dismissal (termination without notice).
  • Redundancy: The employee's position is genuinely redundant, meaning the job is no longer required and is not replaced.
  • Operational Reasons: Changes in the operational requirements of the business that necessitate a reduction in the workforce.

Procedural Fairness

During the termination process, employers must adhere to the principles of procedural fairness. This includes:

  • Opportunity to Respond: Giving the employee a fair opportunity to respond to the reasons for termination and, if applicable, explore options for redeployment within the company.
  • Warnings: In the case of performance or conduct-based termination, providing the employee with formal warnings and a reasonable period to improve.

Unfair Dismissal

Employees are protected from unfair dismissals in Australia. A dismissal is considered unfair if:

  • It is harsh, unjust, or unreasonable.
  • It is not for a valid reason.
  • It does not follow a fair termination procedure.

Dismissed employees have 21 days to file an unfair dismissal claim with the Fair Work Commission.

Special Cases

  • Summary Dismissal: In the case of serious misconduct, an employer may terminate employment without notice. However, they must have a strong basis for summary dismissal and carefully consider the actions and their consequences.
  • Small Business Employers: Small businesses with fewer than 15 employees have slightly different rules regarding termination and unfair dismissal procedures.
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