Ending Employment

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www.industrialrelations.nsw.gov.au

An employment relationship can end for a number of reasonsincluding when:

• an employee resigns• a fixed-term employment contract concludes• a position becomes redundant• an employee is dismissed for poor performance or

misconduct• an employee is dismissed on-the-spot for extremely serious

misconduct, which is referred to as a summary dismissal.

This publication describes the different ways employers andemployees can end the employment relationship andprovides a guide to help you manage the process.

ResignationAn employee who wishes to resign may do so verbally.However, to avoid any misunderstanding, the employeeshould be requested to confirm their resignation in writing,clearly indicating the date of resignation. If the employeerefuses to do so, you should officially accept the resignationin writing, including the details stated in the employee’sverbal resignation.

Notice requiredMost awards require the employee to provide theemployer with some notice of their intention to resign.Notice periods and conditions vary from award to award.Make sure you check the relevant award to ensure youunderstand what is required when an employee wants toresign from your organisation.

Where an employee fails to give the required notice theymay forfeit their wages for that period. This amount cannot

be deducted from any other money or entitlements owing

to the employee without their written consent. This includes

entitlements such as annual leave.

Notice periods not covered by awards should be set out

in individual employment contracts or negotiated withthe employee.

End of fixed-term contractsFixed-term contracts stipulate employment for a specific

period of time or for a particular task or project. Such

contracts should contain the terms and conditions of

employment including the date the contract concludes and

notice periods required by the employer or employee.

It is good practice to remind your employee of the pending

completion of their contract. Before ending the employment

contract you should provide a written statement, indicating

when and why the contract is concluding.

Notice requiredThe contract of employment should stipulate the requirednotice periods. The contract should also cover circumstancesthat would allow the contract to be terminated earlier byeither party.

If you and your employee agree to extend or amend theoriginal contract it should be agreed in writing and signedby both parties.

What are awards?Awards are documents that set out the legal minimum pay and conditions for employees in particular workplaces,organisations, industries or occupations, even if they are salaried employees.

For more information about notice periods or to find out the award that covers your employees visit the Office of IndustrialRelations website at www.industrialrelations.nsw.gov.au or phone 131 628.

Scale of Severance Payments

Continuous Service Under 45 Over 45years of age years of ageWeekly Pay Weekly Pay

Less than one year Nil Nil

1 year but less than 2 years 4 weeks 5 weeks

2 years but less than 3 years 7 weeks 8.75 weeks

3 years but less than 4 years 10 weeks 12.5 weeks

4 years but less than 5 years 12 weeks 15 weeks

5 years but less than 6 years 14 weeks 17.5 weeks

6 years or more 16 weeks 20 weeks

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RedundancyRedundancy occurs when the work performed by an

employee is no longer required to be done by anyone.

This can happen because:

• the job is replaced by technology

• the business is restructured and the job no

longer exists

• you can no longer afford to retain the employee due

to economic circumstances.

Most awards require you to consult with your

employees or their representatives if redundancies

occur as a result of restructuring in the workplace.

Opportunities to discuss the changes and ways to

avoid redundancy such as retraining or redeployment

should be considered.

Notice requiredMost awards contain notice provisions whereredundancies occur. Check the relevant award asthe notice period and conditions vary from awardto award.

TipWhen a fixed-term contract is due to expire it isnecessary to enter into a new contract. If yousimply roll over the existing contract, you may beestablishing an ongoing employment relationshipthat has no determined expiry date.

Example:In October 2001 the Industrial Relations Commission(IRC) allowed a Rail Infrastructure Corporation (RIC)employee to proceed with an unfair dismissal claimafter ruling that their fixed-term contract was poorlydrafted by the organisation and that it could beinterpreted as open-ended.

The RIC fixed-term contract stated ‘You are offeredtemporary employment as an infrastructure worker1A(3) at Lidcombe. Your temporary employmentwill be for a maximum duration of six monthsleading to a permanent appointment throughsatisfactory performance by you but in any event,the temporary employment may be terminated byRSA (Rail Services Authority) at any time on givingtwo weeks notice or payment of two-week salary inlieu of notice.’

The IRC found the wording of the contract to beambiguous and so poorly drafted that it nullifiedthe perceived intent of the term ‘temporaryemployment’ and gave the expectation that thecontract was open-ended.

Redundancy paymentsMost NSW awards provide a scale of minimumseverance payments to be made to permanentemployees where their employer has 15 or more staff.This schedule is based on the redundancy provisions ofthe Employment Protection Act 1982. Where the awardor agreement stipulates a greater entitlement than theAct, you must pay the greater amount.

Employers are generally exempt from this provision ifthey have less than 15 employees.

DismissalYou must have a valid reason for dismissing an employee.The reason must be based on:

• poor performance

• misconduct

• extremely serious misconduct, resulting in on-the-spot

termination (summary dismissal).

Dismissal for poor performance andmisconductIf the employee is being dismissed because of poorperformance, their work history must justify your action.You must ensure the employee understands why you arenot happy with their performance or behaviour. Theyshould also be given the opportunity to respond andimprove their performance. It is important that the finalwritten warning to the employee indicates that they couldlose their job if their performance or attitude does notimprove.

If a breach of company policy can lead to dismissal, it mustbe clear to employees. You also need to ensure that eachemployee reads and understands the policy.

If an employee is being dismissed for misconduct, youshould get legal advice or contact your employerorganisation. Ensure that the employee understands thereasons for termination. It can save problems later if thishas been made clear.

Sample letter of warningDate

Dear {employee’s name}

Re: {First/second/third} written warning

This is your {first/second/third} official warning in relation to{insert performance/behaviour related issue}.

(If second or third warning) This warning confirms the counselling/disciplinary meeting that was held on {date} and a prior writtenwarning on {date} given in relation to this issue.

(If second or third warning) Since the previous warnings andmeetings, your {insert performance/behaviour} has not improved.

Continued {poor performance/behaviour} or failure to improve willresult in a review of your employment.

This review may result in the termination of your employment ifyour performance/behaviour does not improve. As discussed, it isexpected that your performance/behaviour will be improved by{include details of agreed improvements}.

Your {performance/behaviour} will be reviewed on {date}. Thiswarning will be placed on your personnel file.

If you would like to discuss this matter further, please do nothesitate to contact me.

SIGNED:

Do I need to give three warnings for poorperformance or misconduct?Unless specifically stated in an award or agreement you do not

have to give three warnings (written or otherwise). However,

you should give your employee opportunities to improve their

performance without having to issue a large number of open-

ended warnings. In general, three warnings would be

considered adequate.

The employee must understand the consequences if their

performance or conduct does not improve.

You should have a consistent policy which you apply toall employees.

• was the employee aware that their actions or behaviour

would lead to instant dismissal?

• has the employee been given a chance to explain what

happened?

• did I act promptly when the incident occurred?

• would an impartial person, that is, someone not involved,

agree that the employee’s conduct was seriously improper?

• have I followed proper policy and procedure and verified

that the alleged misconduct actually took place and by

this person?

You should not proceed with a summary dismissal if youanswered ‘no’ to any of these questions.

In a summary dismissal you have the right to dismiss anemployee without notice, or payment in lieu of notice.

Understanding the decisionis finalIn any termination of employment the employee shouldunderstand the decision is final.

Sample dismissal letter{Date}

Dear {Employee’s name},

Termination of employment

Your {performance/behaviour} has been reviewed throughdisciplinary meetings held on {insert dates} and written warningsdated {insert dates}.

During these interviews and warnings your {performance/behaviour} was reviewed in the following manner:

{Insert details}

Assistance was also provided by {include any assistance ortraining offered if appropriate}.

Although I/we have given you every opportunity to improve your{performance/behaviour} I/we have seen no sign of anysignificant improvement.

Accordingly this is to advise that your employment with {businessname} will be terminated on {insert date}.

You will be paid an amount in lieu of notice in accordance withyour entitlements. Your full payment will be detailed in the finalpayslip that will be forwarded to you shortly.

Yours sincerely,

{Your name/name of relevant person}

Written notice of terminationIn all of the above circumstances it is better to give writtennotice of the termination, including an explanation of why itis occurring.

Notice requiredMost awards require you to provide the employee with somenotice of your intention to terminate their employment. Checkthe relevant award as the notice period and conditions varyfrom award to award.

Summary dismissalSummary dismissal is instant or ‘on-the-spot’ termination,usually reserved for extremely serious misconduct by anemployee.

When considering summary dismissal, ask yourself thefollowing questions:

Ending Employment

Ending Employment

Sample certificate or letter of service{Date}

{Employer’s Address}

To whom it may concern

This is to certify that {name of employee} worked as a{job classification} doing {a brief description of the workundertaken by the employee} from {date of employment}to {date of termination}.

Yours sincerely

{Signed by employer}

Example:An employee of a hotel was found by the IRC to havebeen constructively dismissed after her hours werereduced from 38 to only nine hours per week. At the timeof termination, this employee had been working for thehotel for eight years, with hours ranging from 38 to 50per week. A new manager reduced her hours to 13 perweek on a three month trial period.

During the trial period the employee spoke to themanager on several occasions asking for more hours.After refusing to increase her hours he reduced themeven further to only nine hours per week. The employeedecided she could no longer tolerate the conditions inwhich she was working and so resigned from herposition. The IRC found that the employee had noalternative but to resign and that this resignation was aconstructive dismissal. The employee was compensatedfor the dismissal, and awarded in lieu of reinstatement anamount of 20 weeks pay, based on an average of 38hours worked each week.

Constructive dismissalA ‘constructive’ or ‘forced’ dismissal occurs whenconditions are unfairly applied to employees whichforce them to resign. This includes:

• telling the employee to ‘resign or be dismissed’• changing an employee’s responsibilities or duties so

that their contract of employment changes• changing working arrangements such as start and

finish times, days and other hours worked.

The employee may later prove that your actions were athreat of dismissal and as a result they may be foundnot to have resigned but to have been dismissed.

Documentation requiredYou should also provide the employee with a certificateof service, or Centrelink separation certificate, indicatingthe period of employment, job classification and type ofwork undertaken. You are also required to provide agroup certificate for taxation purposes within 14 daysof the date of the termination.

Unfair dismissalThe NSW Industrial Relations Act 1996 allows anemployee to apply for unfair dismissal if they believe theiremployment was unfairly threatened or terminated. Thisincludes casual employees in many circumstances, wherethere has been regular systematic work for at least sixmonths with an expectation of on-going employment.

A dismissal is unfair when it is ‘harsh, unreasonable orunjust’. In dealing with a claim, the IRC may take intoaccount whether:

• a reason for the dismissal was given• the applicant was given an opportunity to give an

explanation or to justify his or her reinstatement orre-employment

• a warning of unsatisfactory performance was given.

The IRC may also take into account other matters itconsiders relevant.

Unlawful dismissalUnlawful dismissal occurs when an employee isdismissed for any of the following reasons:

• taking time off work because of illness or injury• being a member of a trade union or participating in

union activities outside working hours or with theemployer’s consent during working hours

• wanting or not wanting to be a member of a union• seeking election, or being elected representative of

the employees• filing a complaint against the employer or another

employer about non-compliance with any laws orregulations

• participating in legal proceedings against theemployer or another employer

• taking or planning parental leave• taking time off work to meet family responsibilities• taking time off work to participate in voluntary

emergency service activities, where the absenceis reasonable

• falling pregnant or during pregnancy• if the decision is based on an employee’s race, colour,

sex, sexual preference, physical or mental disability,marital status, age, ethnicity or religion.

Further information is contained in the OIR brochureUnfair Dismissals. For a copy visit the OIR website atwww.industrialrelations.nsw.gov.au or phone 131 628.

Useful contacts• Your employer association (if you are a member)• Office of Industrial Relations at

www.industrialrelations.nsw.gov.au or on 131 628• Your legal adviser• If you are ending the employment of an apprentice or

trainee: Department of Education and Training atwww.det.nsw.edu.au or on 132 811

• Industrial Registry, 50 Phillip Street, Sydney, atwww.lawlink.nsw.gov.au/irc or on (02) 9258 0866

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Ending fixed-term contracts

Remind employee when the contract is approaching completion date

Check contract for notice period required

Enter into a new contract if employment is to continue

Redundancy

Consult employees if redundancies occur – refer to the relevant award

Check the relevant award, agreement or contract for notice periods

Pay redundancy severance entitlements if applicable

Payment of entitlements

Check notice period required in relevant award, agreement or contract

Check payment in lieu-of-notice in the relevant award, agreement or contract where applicable

Pay for annual leave not taken

Pay for long service leave, if applicable

Check the relevant award for annual leave loading payments

Pay bonuses, commission or incentive payments where applicable

Do not pay out sick leave

Pay entitlements on the last day of work or the next pay day – check the relevant award

Other

Provide Centrelink separation certificate

Provide certificate or letter of service where requested or as indicated in the award

Provide group certificate for taxation purposes within 14 days of the date of the termination taking effect

Employee responsibilities

Give appropriate notice, preferably in writing, clearly indicating the date of resignation

Check the relevant awards, agreement or contract for notice periods

Fulfil all duties during notice period

Forfeit pay from outstanding wages in-lieu of notice

Return the employer’s property (e.g. car, mobile phone, uniform, equipment, security passes/keys)

Ending Employment

Disclaimer: This publication is intended to be a general guide only. All due care has been taken in its preparation, and the information is believed to be current at thedate of publication. For further information check the OIR website at www.industrialrelations.nsw.gov.au or call the OIR on 131 628.

April 2005. Printed on recycled paper.

Other titles in the Employment Essentials series• Recruitment• Managing Performance• Workplace Policies and Procedures• Managing People

• Introducing Workplace Flexibility

Other Office of Industrial Relations servicesAwards OnlineNSW Awards Online is a free service on the OIR website thatprovides easy access to information on industrial awards. You’llfind all major NSW private industry awards on the site, withdetails of pay rates, award conditions and leave entitlements.You can also download a copy of the awards.

Check Your PayCheck Your Pay is an online service that helps you calculatewages, allowances, penalties, leave and other entitlements. Youcan check your pay against actual hours worked and includeallowances, penalties and loadings for specific pay periods. Youcan also generate time sheets. This tool is currently designedfor people working in restaurants, shops, hair and beautysalons or in clerical and administration jobs. Other awards willbe added over time.

Pay Rate UpdatesPay Rate Updates offer you instant email alerts on changes toNSW pay rates, leave and other award entitlements. It is aquick, free and easy way to stay informed and anyone canregister with the service through the OIR website.

Award Subscription ServiceThe OIR Award Subscription Service is another way to stayposted on current award conditions for major awards. For asmall annual subscription fee the OIR will send you advice onany changes to your award by mail. To subscribe, emailsubscriptions@oir.commerce.nsw.gov.au or phone theOIR on 9020 4651.

MAKING NSW WORKPLACES FAIRFOR EMPLOYEES AND EMPLOYERS.

Need more information?Email: win@oir.commerce.nsw.gov.au

www.industrialrelations.nsw.gov.au

Office of Industrial RelationsNSW Department of Commerce

Telephone: 131 628

Small Business Workshops and SeminarsThe OIR offers a series of workshops and seminars to helpsmall businesses develop practical strategies for managing awide range of employment issues. OIR seminars cover issuessuch as employment rights and responsibilities, recruitmentand termination procedures and techniques for managingstaff performance.

The OIR also runs award-specific workshops to giveemployers a thorough understanding of the award for theirworkplace and their obligations to staff.

Seminars are held regularly across NSW. For dates andlocations visit the OIR website. To register or to receive ourseminar program brochure please call 9020 4612. In-houseseminars tailored for your business can also be arranged.

Sample pay slipsOnline sample pay slips on the OIR website help employersmaintain correct wage records and issue pay slips thatcomply with State and Federal requirements.

Your Workplace OnlineYour Workplace Online is a free electronic monthly newsletteremailed to subscribers, advising of changes to industrialrelations that affect workplaces in NSW. This newsletter keepsemployers up-to-date with award information, OIR inspectoractivities, key legislative changes, important test cases andother developments in industrial relations. To subscribe seethe OIR website.

PublicationsThe OIR has a wide range of plain English brochures on basicemployment rights and responsibilities, some in communitylanguages. We also publish best practice guides, industry-specific handbooks and e-newsletters. Our publications areavailable on our website or you can pick up a copy from yournearest OIR contact centre.

Visit the OIR website at www.industrialrelations.nsw.gov.au