In Hollywood movies and Netflix shows, ending an employment contract is as simple as yelling “You’re fired!”

In reality, it’s not this simple. Difficult situations can crop up with your team, so here are some steps to help you manage the risk assessment, comply with employment legislation and have those hard-to-have conversations.

1. Start with performance management

If you’re having ongoing problems with an employee in your business, you need to start by communicating with them. You might want to:

  • Make sure they understand what is expected of them and set a reasonable amount of time for them to improve.
  • Consider whether they might benefit from more training or more regular feedback.
  • Give them a chance to tell their side of the story and how this issue could be handled. For example, if they have some personal issues to deal with, some time away from work could be enough to handle the issues and return to work better than ever.

You need to let your employee know exactly what you expect – and let them know the next steps you will be taking if they don’t perform as expected within your business. Document everything and give your employee copies so they have a record of what kind of compliance you have discussed.

A common myth is that before you can end the employment of your employee you have to give them three formal warnings. There is no legal requirement to provide three warnings, however, every situation is different and it will depend on the circumstances as to whether several warnings are necessary. It is good practice for an employee to be warned that failure to reach the required work standard could result in termination.

Visit the Fair Work website for more information on managing employee performance.

2. Follow your industrial relations guidelines

If you take steps to manage your employee’s performance but things don’t improve, the next steps under the law will depend on whether you are under the state or national industrial relations system. You need to know how to handle employment legislation in a fair and legal way.

As an example, under WA state law (which would include most businesses unless you have an incorporated business model such as ‘Pty Ltd’), you can’t dismiss an employee if it could be considered ‘harsh, unfair or oppressive’.

There needs to be a valid reason for you to end someone’s employment, such as:

  • Your business model changes. If their role has become redundant or your business can no longer support this role, you’ll need to manage and document this redundancy appropriately.
  • They don’t have the capacity to do the job properly. First, you would need to manage and document their performance and give them further training or an opportunity to improve.
  • Their conduct is inappropriate. This might include serious misconduct, such as theft or fraud, being under the influence of drugs or alcohol at work, or damaging the reputation of your business.

If you have a valid reason to end someone’s employment in your business, document all of the evidence you have, including performance management reports and any warnings you have issued.

3. Know your employer obligations

If you decide to end someone’s employment contract with your business, generally you’ll need to pay them all of their entitlements. This might include:

  • outstanding wages
  • accumulated annual leave or long service leave
  • redundancy pay

Make sure you’re clear on exactly what they’re entitled to – and how that impacts your business – before you take action.

More information

Please remember, the information here on our blog is intended as a general guide only.

If you’re having problems managing the performance of one of your employees under the state industrial relations system, information about your obligations and unfair dismissal is available from the Department of Energy, Mines, Industry Regulation and Safety. If you are under the national industrial relations system, information about your obligations and unfair dismissal is available from the Fair Work Ombudsman.

Dispute resolution
17 April 2024