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Straighten up and fire right: A step-by-step of employee dismissal in your small business

Firing right in your small businessDo you have a clear roadmap to follow for termination of employment in your business?

Look, staff dismissal is not something you’ll ever truly get used to but it’s a skill that you must build in order to keep your business productive and legally protected.

If you don’t have a clear process in place for how to fire a team member, then you’ll need to fix that. Today. It is important to ensure that you can always meet your legal and personal obligations to your staff – even when you mean to end the employment relationship.

Our blog on 8 sanity checks to get you ‘off the fence’ about employee dismissal covered off the decision-making process, as well as how to give a problem team member that ‘one last chance’ – to set your mind at ease that firing them is right course of action.

This week, let’s look at the mechanics of employee termination: we’ll walk you through a basic employee termination procedure and give you a rundown of some simple (and high-level) steps you can take to help meet your legal obligations.

 

But first a disclaimer

We are not experts in employment law. The information included is not intended to replace formal legal advice. Please consult a lawyer for guidance about your particular case.

 

Step 1: Giving notice of dismissal

Best practice suggests that you do this in person. It is wise to have someone else from the business in the room with you during these discussions. If your business does not have a dedicated HR resource, another senior member of your team is the next best choice.

Let your employee know that they may have a support person in this meeting with them. They must understand, however, that if this support person happens to be a lawyer by training or profession, they are not allowed to act in that capacity during this meeting.

If meeting in person is not possible, you may hand-deliver the written notice at your employee’s last known address or send it via pre-paid post.

7 tips for having ‘the conversation’ the right way
  • Don’t blindside your employee – Let them know that the meeting is regarding their future at your business and that they may wish to bring a support person. Try to give 24 hours- notice of this meeting.
  • Explain the reasons for your decision – In most cases your employee will already know why you are firing them – it will either be the result of misconduct or a failure to improve performance in accordance with your development plan. (See our previous blog for ideas on how to creating a plan for improving performance). Redundancy is a bit different, because the employee is not at fault (see the below section on redundancy for more on this).
  • Listen to what they have to say in response – ‘procedural fairness’ dictates that your employee must be given the opportunity to respond to your allegations and intention to terminate their employment. They may or may not present you with valid reasons why they should not be fired (and you are not obligated to be convinced by them) but it is important to let them have their say.
  • Script it out – sometimes high-pressure situations make us forget important things we needed or wanted to say. Having an outline and a checklist handy can prompt your memory and take some of the pressure off.
  • Document everything – make sure that you have all details of the meeting (including who attended and what the agreed outcomes were) in writing. It will help to have a paper trail of all communication with your employee if you end up defending a case in front of the Fair Work Commission.
  • Prepare yourself for an emotional response – you can expect your employee to have a strong reaction, whether it is to get angry, shut down or even burst into tears. Hold a space for them to process the news and try to stay calm yourself. It’s ok to acknowledge their feelings and allow them to vent but don’t feel you have to put up with belligerence, threats or violence.
  • Allow them some dignity – time the conversation during lunch or at the end of the working day while there are the least number of other employees around. Encourage them to go home and take some time to gather themselves before they anything further.


NB: In cases where misconduct is the reason for firing your employee, it may be best to escort them from the premises to prevent loss of intellectual or physical company property.

 

Step 2: Preparing the paperwork

In most cases, at this point, you are required to provide your employee with written notice of the day of their termination of employment. You could also consider supplying a statement of service and an employment separation certificate.


Determining notice periods

Your employee can either work out their notice period or you can pay it out to them (known as ‘payment in lieu’).

If you pay an employee out their notice period, the amount they receive must reflect the full rate of pay for that period, including:

  • incentive-based payments and bonuses
  • loadings
  • monetary allowances
  • overtime or penalty rates
  • any other payments they would usually receive

 

The minimum notice periods are set out according to length of service:

Period of continuous service Minimum notice period
1 year or less 1 week
More than 1 year – 3 years 2 weeks
More than 3 years – 5 years 3 weeks
More than 5 years 4 weeks

 

NB: Employees over the age of 45 who have completed 2 or more years of continuous service must receive an additional week to the minimum notice periods outlined above.

Exemptions from notice

You are not required to give (or pay out) notice for employees who:

  • are employed in your business on a casual basis
  • are fired due to serious misconduct (ie fraud, theft, violence or serious breach of occupational health and safety)
  • are part of a training arrangement (other than an apprentice)
  • are a daily hire working in the building and construction or meat industry


NB: Always check the award agreements for your industry, as this will override the ‘minimum’ scenarios for notice periods and payments outlined above

 

Statement of Service

This is a document outlining your employee’s position with your business, their length of service and a quick summary of the work they performed.

Employee Separation Certificate

This is used by Centrelink to ensure that any government benefits or payments paid to your employee are correct according to their employment status with your business. You can find out more about submitting these online on the Human Services page.

 

Step 3: paying out entitlements

At the termination of the employment relationship, your employee should receive a final payment that includes the following entitlements:

  • any remaining remuneration still owing
  • any ‘pay in lieu’ of their notice period
  • any accrued annual leave/long service leave entitlements
  • the balance of any time off instead of overtime that the employee has accrued (but not yet taken)
  • any redundancy pay or entitlements if the employees has been made redundant and is eligible

You may deduct any leave ‘in advance’ that an employee has already taken but not yet accrued from their final pay.

NB: Failure to comply with your obligations under the relevant Commonwealth workplace laws carry a penalty of up to $63,000.


The difference between termination and redundancy

An employee may be made redundant when the business no longer requires a job to be performed. This may occur because of:

  • new technology
  • a slow-down in sales or complete closure of the business
  • a geographical relocation of the business
  • a restructure due to a merger or takeover

Since this loss of employment is through no fault of the employee, some businesses are required to provide a redundancy payment.

There are various rules and exceptions that apply according to the size of your business and what your industry award specifies. A comprehensive outline of redundancy for small business can be found on the Fair Work Ombudsman website.

 

What about unfair dismissal?

The Fair Work Ombudsman defines unfair dismissal as “when an employee is dismissed from their job in a harsh, unjust or unreasonable manner.”

The rules are adjusted slightly for small business owners (ie those employing less than 15 people).

Most notably, for an employee to claim unfair dismissal they must have been employed on a ‘regular and systematic basis’ (ie full time, part time or casual) for 12 months or more. After this period, a dismissal will be deemed ‘fair’ as long as the small business owner has acted in accordance with the Small Business Fair Dismissal Code.

NB: If you need support and advice on meeting your obligations, you can contact the Fair Work Infoline on 13 13 94.

 

All’s well that ends well

It may be one of the less pleasant parts of running a business but firing staff is a necessary skill. The basic procedure outlined above should provide you with a springboard for developing a tailored process and policy in accordance with the particular obligations and legal requirements of your industry. Ending the employment relationship as well as you can leaves you and your employee in the best possible position to move forward with dignity and learn as much as possible from the experience.

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