Employment Hero

Guide to Correct Employee Termination Procedure

Firing an employee is one of the most stressful things you’ll ever have to do as a boss. It’s also something that is very difficult to defend. In fact, while claims for unfair dismissals skyrocketed in 2015-16, employers achieved successful outcomes in fewer than 40% of these cases. Make no mistake, if you have to fire an employee, it’s critical to get all your ducks in a row first and adhere to a strict employee termination procedure.

Whether you’re dealing with a poor performer or someone who behaves poorly at work, you need to give your employees every opportunity to respond and improve before you fire them.

Performance management and the employee termination procedure

If you’re facing the daunting situation of having to fire an underperformer, it’s important not to act rash. You need a measured response. So, first, take a look at Fair Work Australia’s best practice guide on managing underperformance.

The procedural fairness aspects of the process mean that you must give the employee every opportunity to lift their game and meet the expected standards. To keep you on track, here’s a 14-step checklist from FWA:

Performance management checklist

  1. Ensure employees clearly understand what is expected of them
  2. Clearly identify and then assess the problem
  3. Organise a meeting with the employee to discuss the problem
  4. Allow the employee to bring a support person to the meeting
  5. Conduct the meeting in a private, non-threatening, location
  6. Define and explain your concerns to the employee
  7. Give the employee a genuine opportunity to respond before considering your actions
  8. Where an employee’s performance is suffering due to the employee’s personal circumstances, refer the employee to professional help or counseling
  9. Clearly outline the improvement required and the consequences of continued poor performance
  10. Devise a solution with the employee to improve performance
  11. Develop an action plan which includes performance improvement milestones and time frames for further review
  12. Schedule another meeting to review the employee’s performance against the agreed action plan
  13. Document all discussions, including actions to be taken
  14. Monitor the employee’s performance and continue to provide feedback

Once you’ve been through this process and seen no sign of the employee’s performance improving to the agreed standard, you can terminate their employment. Simply organise a private meeting to explain your actions.

It’s also essential that you explain the sudden absence of the employee to their team. You don’t need to go into details. Make sure you address the matter with staff promptly to avoid morale-zapping gossip.

Employee termination procedure for small businesses

For smaller businesses, specifically those with fewer than 15 employees, you are given a little more breathing room by way of the Small Business Fair Dismissal Code.  But, you still need to be cautious around the employee termination procedure.

The Code explains:

  • when it’s fair to dismiss an employee
  • your responsibilities as an employer
  • what you need to prove if your employee makes a claim for unfair dismissal

To qualify as a small business and use the Code, calculate the number of employees in your business. Based on a simple headcount of all employees including full-time, part-time and casual staff who are employed on a regular and systematic basis. You must also include any employees of an associated entity, including those based overseas.

Summary Dismissal

In matters where you believe an employee is guilty of serious misconduct, you can dismiss the employee without warning as long as you follow the Small Business Fair Dismissal Code. In general, serious misconduct applies to the sort of things that you’d report to the police, such as theft, fraud and violence, as well as serious breaches of occupational health and safety procedures.

Other Dismissals

When the issue relates to underperformance rather than misconduct, it’s important that you try to address the performance issues, before taking action. This involves providing the employee with the opportunity to respond to the warning, and giving them a chance to rectify the problem. One solution might involve providing additional training and ensuring the employee knows what’s expected of them.

In the event that you do dismiss an employee for poor performance, and that employee lodges an unfair dismissal claim, your due process will come under scrutiny. Fair Work Australia will examine whether you warned the employee about their under-performance, and gave them a reasonable opportunity to respond. By showing that the dismissal was in accordance with the Small Business Fair Dismissal Code, you’ll be able to successfully defend a claim for unfair dismissal.

Employee Termination Procedure Checklist

To help you comply with the Small Business Fair Dismissal Code, the government has created a Checklist that you can download from the Fair Work Australia website.

This invaluable resource sets out ten questions to help you assess and record your reasons for dismissing an employee. Be sure to read the Code before completing the Checklist, as the procedural obligations are an important factor in complying with the Code.

More help on dealing with poor performers

If you’re having trouble with managing performance, or are dealing with poor behavioral issues and toxic employees, don’t go it alone. Get on the front foot by downloading our free guide on How to Manage a Toxic Employee.

A banner directing readers to download the Employment Hero guide on toxic employees. This guide will give you more information on Employee termination procedures

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