A well-written employee handbook is one of your most powerful tools when an unfair dismissal claim arises. It should reflect both your internal policies and the legislative framework (Fair Work Act, NES, applicable modern award). Make it comprehensive but practical — and structured so it can adapt as your business grows.

Key Performance Indicators (KPIs) give both employer and employee an objective measure of success. They prevent the dreaded “you should have known” conversation by making expectations black and white. If an employee is underperforming, KPIs make it possible to have a fair, evidence-based discussion rather than a subjective one.

If it isn’t written down, it didn’t happen. Every performance conversation, warning, complaint, and disciplinary meeting should be documented — ideally with an impartial witness present. Update HR files consistently. When (not if) a claim arises, your records become your single biggest defence.

Don’t assume. Investigate. Whether you handle it internally or engage an external investigator, gathering facts before making a decision is essential. The Fair Work Commission will ask whether your reason for dismissal was valid — and “I thought so” doesn’t cut it.

Before deciding to dismiss someone, give them a real chance to explain themselves and improve. This means putting concerns in writing, holding a meeting, allowing a support person, and giving reasonable time for improvement. The Fair Work Commission specifically considers whether the employee was notified of the reason and given an opportunity to respond.

Even when the reason for dismissal is valid, the process can still make it unfair. This is what’s known as procedural fairness — and it’s where many small business dismissals come undone. A dismissal can be fair in substance but harsh or procedurally unfair in execution, and that’s enough for the Commission to rule against you.

Unlawful termination is different from unfair dismissal. It occurs when an employee is dismissed for one or more prohibited reasons, including:

• A protected attribute (race, colour, sex, sexual orientation, breastfeeding, gender identity, intersex status, age, mental or physical disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction, or social origin)
• Experiencing family and domestic violence
• Temporary absence from work due to illness or injury (with a medical certificate)
• Trade union membership, non-membership, or industrial activities
• Acting as an employee representative
• Being absent during parental leave
• Engaging in voluntary emergency management activities
• Filing a complaint or participating in legal proceedings against the employer

All employees are protected from unlawful termination, regardless of how long they’ve worked or the size of the business. Applications must also be made within 21 calendar days.

Generally, an employer must not terminate employment without giving the employee written notice of their last day of work. You can either let the employee work through their notice period, or pay it out (pay in lieu of notice).

The required notice period depends on the employee’s age, employment type, and length of continuous service. The NES sets out minimum notice periods, but contracts and awards may require more.

When the employment relationship ends, employees should receive the following in their final pay:

• Any outstanding wages or remuneration
• Pay in lieu of notice (if applicable)
• Accrued but unused annual leave and long service leave
• Balance of any time off in lieu (TOIL) that has accrued but not been taken
• Redundancy pay (if eligible)

Important: From 1 January 2025, the intentional underpayment of wages — including deliberately withholding entitlements owed on termination — is a criminal offence in Australia. This makes correct final pay calculations more critical than ever.

Redundancy happens when an employer no longer needs the employee’s job to be done by anyone, or when the employer becomes insolvent or bankrupt. The position itself becomes redundant — not the employee.

Common reasons for genuine redundancy include:

• New technology replacing the role
• Reduced sales, production, or business activity
• Business closure
• Relocation interstate or overseas
• Restructure following a merger or takeover

Redundancy Pay Under the NES

Employees with at least one year of continuous service who work for an employer with 15 or more employees may be entitled to redundancy pay under the NES — up to a maximum of 16 weeks’ pay, depending on length of service.

Who Doesn’t Get Redundancy Pay?

• Employees with less than 12 months’ continuous service
• Employees on a set period or seasonal contract
• Employees terminated for serious misconduct
• Most casual employees
• Trainees engaged only for the length of a training agreement
• Apprentices
• Most employees of small businesses (fewer than 15 employees)

Genuine Redundancy vs Unfair Dismissal

A genuine redundancy is not unfair dismissal — but the bar is real. To be a genuine redundancy:

• The job genuinely doesn’t need to be done by anyone
• The employer followed any consultation requirements under the award or enterprise agreement
• There was no reasonable opportunity to redeploy the employee elsewhere in the business

If any of these fail, the dismissal can be challenged as a disguised performance dismissal — even if it was labelled a “redundancy.”

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If a business goes into liquidation or becomes insolvent, employees may be able to access unpaid entitlements through the Fair Entitlements Guarantee (FEG), including:

• Up to 13 weeks of unpaid wages (capped at the FEG maximum weekly wage)
• Annual leave
• Long service leave
• Up to 5 weeks pay in lieu of notice
• Up to 4 weeks redundancy pay per full year of service

FEG does not cover superannuation, bonuses, irregular commissions, or reimbursements.

AI tools (including ChatGPT, Copilot, and others) have become a popular shortcut for answering HR questions. They can be useful for general knowledge, summarising legislation, or drafting a first pass at a letter — and we use AI in our own workflows.

But dismissal is not a general knowledge question. It’s one of the highest-risk decisions a business owner will ever make.

AI doesn’t know:

• The specific history between you and your employee
• The cultural and operational realities of your business
• Whether your documentation will actually stand up at the Fair Work Commission
• The nuances of the modern award that applies to the role
• Whether the employee has a protected attribute you haven’t considered
• Whether your “valid reason” is genuinely valid in the eyes of the Commission

AI also can’t sit in a meeting with you, read the room, push back when you’re making an emotional decision, or take accountability when something goes sideways. By the time you’re in front of the Commission, “ChatGPT told me it was fine” won’t help you.

Use AI for context. Use a human expert for decisions. The cost of a one-hour consultation is dramatically less than the cost of an unfair dismissal payout — which can be up to 26 weeks of the employee’s pay, plus legal fees, plus the stress of a 12-month dispute.

The Small Business Fair Dismissal Code is a set of simplified dismissal rules that apply to businesses with fewer than 15 employees. If a small business employer can show they followed the Code, the Fair Work Commission will generally find the dismissal was fair. The Code includes a checklist covering things like having a valid reason, giving warnings, allowing a support person, and keeping written records. Following the Code is your strongest protection against an unfair dismissal claim — but you must be able to prove you followed it with documentation. A verbal “I followed the Code” won’t hold up.

Employees must complete a minimum employment period before they can lodge an unfair dismissal claim:

• 12 months if they work for a small business (fewer than 15 employees)
• 6 months for all other businesses

This gives small business owners a longer window to assess new hires. They must also be covered by a modern award or enterprise agreement, or earn below the high-income threshold (which is indexed each financial year on 1 July). Employees must lodge their unfair dismissal application with the Fair Work Commission within 21 calendar days of the dismissal taking effect.

No — this is one of the most common myths in Australian workplaces. There’s no legal rule requiring three warnings (or even one). However, the Fair Work Commission will consider whether the employee was previously warned about unsatisfactory performance when deciding if a dismissal was harsh, unjust, or unreasonable. In practice, this means giving employees a genuine opportunity to fix performance issues before terminating their employment is almost always a good idea. Warnings should be in writing, clearly state the issue, explain what improvement is expected, set a reasonable timeframe, and be signed and dated. Without this paper trail, a “first and final warning” can look like a setup at the Commission.

These two terms get confused all the time — but they’re very different:

• Unfair dismissal is when a dismissal is harsh, unjust, or unreasonable. It focuses on the process and substance of the dismissal (e.g. was there a valid reason, was the employee warned, did they get a chance to respond).
• Unlawful termination is when an employee is dismissed for a prohibited reason — such as their race, gender, pregnancy, religion, age, disability, family responsibilities, or for exercising a workplace right.

Unfair dismissal applies only to eligible employees who’ve completed the minimum employment period. Unlawful termination protections apply to all employees, regardless of length of service or business size. Both types of claim must be lodged within 21 days.

Procedural fairness (sometimes called “natural justice”) is the process you follow when dismissing someone. Even when the reason for dismissal is valid, a poor process can make the dismissal unfair. The key elements of procedural fairness are:

• Clearly identifying the issue and giving it to the employee in writing
• Allowing the employee a genuine opportunity to respond
• Permitting a support person at any meetings (and not unreasonably refusing one)
• Genuinely considering the employee’s response before making a final decision
• Documenting every step

Skipping any of these steps is one of the most common reasons small business dismissals get overturned at the Fair Work Commission — even when the underlying reason was completely valid.

Yes — in some circumstances. This is called constructive dismissal. It happens when an employee resigns, but only because the employer’s conduct effectively forced them to. Examples include unilaterally cutting pay or hours, demoting someone without justification, creating a hostile work environment, or telling someone “resign or be fired.” If the Fair Work Commission finds the resignation wasn’t genuinely voluntary, the employer can be treated as having dismissed the employee — and all the usual unfair dismissal rules apply. Be especially careful with “resign or we’ll terminate” ultimatums — these are a classic trigger for constructive dismissal claims.

A redundancy is genuine when:

1. The employer no longer needs the employee’s job to be done by anyone (because the role itself is no longer required)
2. The employer has met any consultation obligations under the relevant award or enterprise agreement
3. It would not have been reasonable to redeploy the employee within the business or an associated business

If any of these elements are missing, the redundancy is not genuine, and the employee can lodge an unfair dismissal claim. A common mistake is making someone “redundant” and then hiring a replacement to do the same job under a different title. The Fair Work Commission sees through this, and the penalties can be significant.

Need help – check out our Redundancy Sprint — Tailored Templates + Expert Walk-Through

Generally no. Under the National Employment Standards, businesses with fewer than 15 employees are exempt from paying redundancy pay (with some exceptions — for example, if a specific award or registered agreement requires it). However, small businesses still need to:

• Give proper written notice of termination (or pay in lieu)
• Pay all accrued entitlements (annual leave, long service leave, outstanding wages)
• Follow a genuine redundancy process to avoid unfair dismissal claims

The exemption is from redundancy pay only — not from the obligation to follow the right process.

When employment ends, the final pay must include:

• All outstanding wages and remuneration owed
• Pay in lieu of notice (if applicable)
• Accrued but unused annual leave
• Long service leave (if eligible under state legislation)
• Any time off in lieu (TOIL) balance that hasn’t been taken
• Redundancy pay (if eligible under the NES or relevant award)

From 1 January 2025, the intentional underpayment of wages — including deliberately withholding entitlements on termination — is a criminal offence in Australia. This means getting final pay right isn’t just an HR issue anymore; it’s a legal risk that can result in criminal prosecution. If you’re unsure about calculations, get them checked.

This is high-risk territory. Dismissing an employee while they’re on sick leave, workers’ compensation, or absent due to illness or injury can expose your business to claims of unlawful termination, adverse action, and disability discrimination. The Fair Work Act protects employees from dismissal due to temporary absence from work because of illness or injury (supported by a medical certificate). There are limited exceptions — for example, if the absence has extended beyond a reasonable period — but every case is highly fact-specific. Never make a dismissal decision in these circumstances without expert advice. The penalties for getting this wrong include compensation, civil penalties, and reputational damage.

The maximum compensation the Fair Work Commission can award in an unfair dismissal claim is 26 weeks of the employee’s pay, capped at half the high-income threshold (currently around $87,000+, indexed annually). But the real cost is much higher when you add:

• Legal and representation fees (often $5,000–$20,000+)
• Time spent preparing for conciliation and hearings (typically 20–60 hours)
• Lost productivity and team distraction
• Reputational damage, including to your ability to recruit
• The stress of a 6–12 month dispute hanging over your business

Most claims settle at conciliation for between $4,000 and $20,000 — but the prevention cost is a fraction of that. A single Dismissal Sprint costs less than the cheapest unfair dismissal settlement we’ve ever seen.

You can use AI as a starting point — for understanding concepts, summarising legislation, or drafting a first pass at a letter. But dismissal is not a general knowledge question, and AI has serious limitations:

• It doesn’t know your business, your team, or the specific employee
• It can’t read the modern award that applies to the role
• It can’t review your documentation to see if it actually stacks up
• It doesn’t pick up on protected attributes or hidden risks
• It can’t sit in the dismissal meeting with you
• It won’t be there at the Fair Work Commission

AI also confidently produces incorrect information, especially around state-based long service leave, recent legislative changes, and award interpretation. By the time you discover the error, the dismissal has already been delivered — and it can’t be undone. Use AI for context. Use an HR expert for decisions.

Fresh HR Insights specialises in helping Australian small business owners navigate dismissals fairly, lawfully, and confidently. Our Termination Sprint  is designed for exactly these situations — focused, practical, expert-led support to get you through the process without the panic. We work with businesses across the Gold Coast, Brisbane, South East Queensland, and Australia-wide.

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Real HR experts. Real-world experience. Plain English advice. Before you make a decision you can’t take back.