When terminating an employee, different rules may apply if you run a small business (that is, the business, and any of its associated entities only have 15 or less employees). If your company is a small business, it must comply with the Small Business Fair Dismissal Code.

A small business employer can dismiss an employee if:

  1. they have a valid reason (based on the employees conduct or capacity);
  2. the employee has been warned in writing;
  3. they have provided the employee with an opportunity to respond in writing, and a reasonable chance to rectify the problem.

If an employee has engaged in ‘serious misconduct’, a small business employer can dismiss an employee without notice or warning when the employer has reasonable grounds to believe the employee was guilty of the serious misconduct after conducting a thorough investigation.

If an employee goes to the Fair Work Commission and makes an Unfair Dismissal application, the employer must provide evidence that they have complied with the Small Business Fair Dismissal Code.

Other things to consider: Should I give the employee ‘notice’?

Unless you are terminating an employee for ‘serious misconduct’ (as defined by the law), you must give an employee, at the very least, the minimum notice provided by the National Employment Standards.  However, if an employee is covered by a contract of employment, modern award or enterprise agreement, you must comply with the notice period set out in those instruments. You must also remember that an employee over the age of 45 will be entitled to a weeks more notice than provided for in the National Employment Standards. Employers should give the employee a termination letter as written notice of the termination of their employment (don’t forget to keep a copy of this letter for the employee’s personnel file).

When an employee is given their termination letter, they may:

  1. choose to work out their notice period (work as normal);
  2. agree with their employer to be paid in lieu of notice (instead of working, the employee will be paid for the notice period)
  3. be directed to go on ‘garden leave’ – this means that the employee is instructed to stay away from work during the notice period, but is still paid and may be directed to perform some duties
  4. Not work out their notice period, but forfeit their entitlements.