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How to Terminate an Employee and Live to Tell the Tale

1. Employee Backdrop in Australia

The whole arena of Industrial Relations and the interaction between employer and employee is conducted within the complex framework of various statutes, state and federal, regulations and rulings and common law. Unlike 'tort' law (a civil wrong such as negligence) the practice of Industrial Relations has many interlocking precepts and requirements that make it difficult for the small business practitioner to apply without assistance.

2. Terminating an Employee

When considering the termination of an employee you should give careful consideration to the possible future consequences and ensure that your actions are within the law. I the heat of the moment do not make a decision that could affect you or your business long term. Take advice.

A date with the Industrial Relations Commission can be expensive, time consuming and stressful.

2.1 Industrial Relations Acts - State

Most State Acts in Australia place responsibility on the employer to ensure that termination of an employee was connected with, the capacity, performance or conduct of the employee; or the operational requirements of the employer's business.

2.2 Federal - Workplace Relations Act 1996

The Workplace Relations Act 1996 provides legislative requirements regarding unfair termination of employment for Federal Employers and Employees. Grounds for unlawful termination are where the termination was harsh, unjust or unreasonable.

3. Terminating an Employee

In most Industrial Relations Commissions claims the sad fact is that much of your defence will relate on how well you followed proven human resource policies, procedures and determinations of the Commission. Terminating an employee's employment in haste, not following proven human resource policies and procedures will likely result in the commission finding against you in favour of your employee

Off paramount importance is your ability to keep diary notes and documentation supporting your 'actions'.

If you have any doubt over the process you should take ADVICE from a professional. The law can be quite harsh and unforgiving. In Australia you can be fined up to 50% of the employees' salary plus costs n the worst case. The current threshold for a hearing by the Commission is $90,400. This means in a worst case you could be ordered to pay $45,200 plus the employees' costs plus your own costs - not a good day out.

The following steps are a guideline as to the minimum you should follow:-

3.1 Counselling / Correction

Speak informally with the employee informing them that this is a counselling meeting and that wish to speak with them about their behaviour and/or performance and that you welcome their explanation. Document the meeting.

3.2 First Written Warning

Provide the employee with a written outline of the first warning detailing the issues of performance, expected changes, timelines and review date.

Let the employee provide an explanation.

3.3 Second Written Warning

Provide the employee with a written outline of the second written warning linking it to the first warning. Detail the issues of performance, expected changes, timelines and review date and spell out the consequences may get serious if change does not happened.

Let the employee provide an explanation.

If their explanation is reasonable you may wish to provide them with some assistance.

3.4 Final Written Warning

Receiving a final written warning is a serious event. In this letter you need to outline the process that has occurred to date; counselling, first and second warning and advise the employee that termination may be imminent should performance and behaviour not be resolved. Set out expectations, guidelines, performance outcomes, goals and any relevant factors and a review date.

3.5 Show Cause Letter

A show cause letter requests the employee to advise you in writing why their employment should not be terminated immediately or in a set time (48 hours). If it is for an offence such as proven stealing or dishonesty as an employee, you may terminate their employment after a verbal request to the employee and a verbal response from them AND ensuring that they had an opportunity to provide you with their side of the story.

3.6 Interview and Termination

Call the employee in and let them know you have taken the decision to terminate their employment. In the letter state the reason why and how you have arrived at this decision and lay out their termination entitlements.

3.7 Post Termination

Once the employee has left the premises ensure that computer permissions have been changed and where appropriate advise other employees and in some cases valued clients.

4. The Process

While the process may seem long and arduous the penalties can be substantial; act in haste and repent at leisure.

In any good organisation there are proven strategies in place that should circumvent going down this path. That being said it is inevitable that this process is likely to occur within your business lifetime. If termination becomes a potential reality; seek help.

More information available at

Philip (Phil) Lye is Director of Biz Momentum providing professional services in employee relations (HR / IR Matters), training your people to work with you, 'coaching you' to be a better executive and commercial business consultation.

Phil is a 'keynote-speaker' who speaks with passion on subjects like 'kindness and the bottom line', 'last one standing', 'down and outers and up and outers', 'more from less on your bottom line' as well as a diverse range of other topics.

Phil started his working career as the 'postage clerk' in banking and finance rising through various business opportunities to CEO and CFO of two companies before leaving to start his own business in 2002.

Phil holds qualifications in Accounting, Leadership, Human Resource Management & Industrial Relations. Though a qualified accountant, he chooses not to be in general practice.

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