Office of Industrial Relations

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1 E M P L O Y M E N T E S S E N T I A L S Ending Employment Office of Industrial Relations An employment relationship can end for a number of reasons including when: an employee resigns a fixed-term employment contract concludes a position becomes redundant an employee is dismissed for poor performance or misconduct an employee is dismissed on-the-spot for extremely serious misconduct, which is referred to as a summary dismissal. This publication describes the different ways employers and employees can end the employment relationship and provides a guide to help you manage the process. Resignation An employee who wishes to resign may do so verbally. However, to avoid any misunderstanding, the employee should be requested to confirm their resignation in writing, clearly indicating the date of resignation. If the employee refuses to do so, you should officially accept the resignation in writing, including the details stated in the employee s verbal resignation. Most awards require the employee to provide the employer with some notice of their intention to resign. Notice periods and conditions vary from award to award. Make sure you check the relevant award to ensure you understand what is required when an employee wants to resign from your organisation. What are awards? Where an employee fails to give the required notice they may forfeit their wages for that period. This amount cannot be deducted from any other money or entitlements owing to the employee without their written consent. This includes entitlements such as annual leave. Notice periods not covered by awards should be set out in individual employment contracts or negotiated with the employee. End of fixed-term contracts Fixed-term contracts stipulate employment for a specific period of time or for a particular task or project. Such contracts should contain the terms and conditions of employment including the date the contract concludes and notice periods required by the employer or employee. It is good practice to remind your employee of the pending completion of their contract. Before ending the employment contract you should provide a written statement, indicating when and why the contract is concluding. The contract of employment should stipulate the required notice periods. The contract should also cover circumstances that would allow the contract to be terminated earlier by either party. If you and your employee agree to extend or amend the original contract it should be agreed in writing and signed by both parties. Awards are documents that set out the legal minimum pay and conditions for employees in particular workplaces, organisations, industries or occupations, even if they are salaried employees. For more information about notice periods or to find out the award that covers your employees visit the Office of Industrial Relations website at or phone

2 Office of Industrial Relations Tip When a fixed-term contract is due to expire it is necessary to enter into a new contract. If you simply roll over the existing contract, you may be establishing an ongoing employment relationship that has no determined expiry date. Example: In October 2001 the Industrial Relations Commission (IRC) allowed a Rail Infrastructure Corporation (RIC) employee to proceed with an unfair dismissal claim after ruling that their fixed-term contract was poorly drafted by the organisation and that it could be interpreted as open-ended. The RIC fixed-term contract stated You are offered temporary employment as an infrastructure worker 1A(3) at Lidcombe. Your temporary employment will be for a maximum duration of six months leading to a permanent appointment through satisfactory performance by you but in any event, the temporary employment may be terminated by RSA (Rail Services Authority) at any time on giving two weeks notice or payment of two-week salary in lieu of notice. The IRC found the wording of the contract to be ambiguous and so poorly drafted that it nullified the perceived intent of the term temporary employment and gave the expectation that the contract was open-ended. Redundancy Redundancy occurs when the work performed by an employee is no longer required to be done by anyone. This can happen because: the job is replaced by technology the business is restructured and the job no longer exists you can no longer afford to retain the employee due to economic circumstances. Most awards require you to consult with your employees or their representatives if redundancies occur as a result of restructuring in the workplace. Opportunities to discuss the changes and ways to avoid redundancy such as retraining or redeployment should be considered. Most awards contain notice provisions where redundancies occur. Check the relevant award as the notice period and conditions vary from award to award. Redundancy payments Most NSW awards provide a scale of minimum severance payments to be made to permanent employees where their employer has 15 or more staff. This schedule is based on the redundancy provisions of the Employment Protection Act Where the award or agreement stipulates a greater entitlement than the Act, you must pay the greater amount. Employers are generally exempt from this provision if they have less than 15 employees. Scale of Severance Payments Continuous Service Under 45 Over 45 years of age years of age Weekly Pay Weekly Pay Less than one year Nil Nil 1 year but less than 2 years 4 weeks 5 weeks 2 years but less than 3 years 7 weeks 8.75 weeks 3 years but less than 4 years 10 weeks 12.5 weeks 4 years but less than 5 years 12 weeks 15 weeks 5 years but less than 6 years 14 weeks 17.5 weeks 6 years or more 16 weeks 20 weeks Dismissal You must have a valid reason for dismissing an employee. The reason must be based on: poor performance misconduct extremely serious misconduct, resulting in on-the-spot termination (summary dismissal). Dismissal for poor performance and misconduct If the employee is being dismissed because of poor performance, their work history must justify your action. You must ensure the employee understands why you are not happy with their performance or behaviour. They should also be given the opportunity to respond and improve their performance. It is important that the final written warning to the employee indicates that they could lose their job if their performance or attitude does not improve. If a breach of company policy can lead to dismissal, it must be clear to employees. You also need to ensure that each employee reads and understands the policy. If an employee is being dismissed for misconduct, you should get legal advice or contact your employer organisation. Ensure that the employee understands the reasons for termination. It can save problems later if this has been made clear.

3 Do I need to give three warnings for poor performance or misconduct? Unless specifically stated in an award or agreement you do not have to give three warnings (written or otherwise). However, you should give your employee opportunities to improve their performance without having to issue a large number of openended warnings. In general, three warnings would be considered adequate. The employee must understand the consequences if their performance or conduct does not improve. You should have a consistent policy which you apply to all employees. Sample letter of warning Date Dear {employee s name} Re: {First/second/third} written warning This is your {first/second/third} official warning in relation to {insert performance/behaviour related issue}. (If second or third warning) This warning confirms the counselling/ disciplinary meeting that was held on {date} and a prior written warning on {date} given in relation to this issue. (If second or third warning) Since the previous warnings and meetings, your {insert performance/behaviour} has not improved. Continued {poor performance/behaviour} or failure to improve will result in a review of your employment. This review may result in the termination of your employment if your performance/behaviour does not improve. As discussed, it is expected that your performance/behaviour will be improved by {include details of agreed improvements}. Your {performance/behaviour} will be reviewed on {date}. This warning will be placed on your personnel file. If you would like to discuss this matter further, please do not hesitate to contact me. SIGNED: Most awards require you to provide the employee with some notice of your intention to terminate their employment. Check the relevant award as the notice period and conditions vary from award to award. Summary dismissal Summary dismissal is instant or on-the-spot termination, usually reserved for extremely serious misconduct by an employee. When considering summary dismissal, ask yourself the following questions: was the employee aware that their actions or behaviour would lead to instant dismissal? has the employee been given a chance to explain what happened? did I act promptly when the incident occurred? would an impartial person, that is, someone not involved, agree that the employee s conduct was seriously improper? have I followed proper policy and procedure and verified that the alleged misconduct actually took place and by this person? You should not proceed with a summary dismissal if you answered no to any of these questions. In a summary dismissal you have the right to dismiss an employee without notice, or payment in lieu of notice. Understanding the decision is final In any termination of employment the employee should understand the decision is final. Sample dismissal letter {Date} Dear {Employee s name}, Termination of employment Your {performance/behaviour} has been reviewed through disciplinary meetings held on {insert dates} and written warnings dated {insert dates}. During these interviews and warnings your {performance/ behaviour} was reviewed in the following manner: {Insert details} Assistance was also provided by {include any assistance or training offered if appropriate}. Although I/we have given you every opportunity to improve your {performance/behaviour} I/we have seen no sign of any significant improvement. Accordingly this is to advise that your employment with {business name} will be terminated on {insert date}. You will be paid an amount in lieu of notice in accordance with your entitlements. Your full payment will be detailed in the final payslip that will be forwarded to you shortly. Yours sincerely, {Your name/name of relevant person} Written notice of termination In all of the above circumstances it is better to give written notice of the termination, including an explanation of why it is occurring.

4 Documentation required You should also provide the employee with a certificate of service, or Centrelink separation certificate, indicating the period of employment, job classification and type of work undertaken. You are also required to provide a group certificate for taxation purposes within 14 days of the date of the termination. Sample certificate or letter of service {Date} {Employer s Address} To whom it may concern This is to certify that {name of employee} worked as a {job classification} doing {a brief description of the work undertaken by the employee} from {date of employment} to {date of termination}. Yours sincerely {Signed by employer} Ending Employment Constructive dismissal Ending A constructive or forced dismissal occurs when conditions are unfairly applied to employees which force them to resign. This includes: telling the employee to resign or be dismissed changing an employee s responsibilities or duties so that their contract of employment changes changing working arrangements such as start and finish times, days and other hours worked. The employee may later prove that your actions were a threat of dismissal and as a result they may be found not to have resigned but to have been dismissed. Example: An employee of a hotel was found by the IRC to have been constructively dismissed after her hours were reduced from 38 to only nine hours per week. At the time of termination, this employee had been working for the hotel for eight years, with hours ranging from 38 to 50 per week. A new manager reduced her hours to 13 per week on a three month trial period. During the trial period the employee spoke to the manager on several occasions asking for more hours. After refusing to increase her hours he reduced them even further to only nine hours per week. The employee decided she could no longer tolerate the conditions in which she was working and so resigned from her position. The IRC found that the employee had no alternative but to resign and that this resignation was a constructive dismissal. The employee was compensated for the dismissal, and awarded in lieu of reinstatement an amount of 20 weeks pay, based on an average of 38 hours worked each week. Unfair dismissal The NSW Industrial Relations Act 1996 allows an employee to apply for unfair dismissal if they believe their employment was unfairly threatened or terminated. This includes casual employees in many circumstances, where there has been regular systematic work for at least six months with an expectation of on-going employment. A dismissal is unfair when it is harsh, unreasonable or unjust. In dealing with a claim, the IRC may take into account whether: a reason for the dismissal was given the applicant was given an opportunity to give an explanation or to justify his or her reinstatement or re-employment a warning of unsatisfactory performance was given. The IRC may also take into account other matters it considers relevant. Unlawful dismissal Unlawful dismissal occurs when an employee is dismissed for any of the following reasons: taking time off work because of illness or injury being a member of a trade union or participating in union activities outside working hours or with the employer s consent during working hours wanting or not wanting to be a member of a union seeking election, or being elected representative of the employees filing a complaint against the employer or another employer about non-compliance with any laws or regulations participating in legal proceedings against the employer or another employer taking or planning parental leave taking time off work to meet family responsibilities taking time off work to participate in voluntary emergency service activities, where the absence is reasonable falling pregnant or during pregnancy if the decision is based on an employee s race, colour, sex, sexual preference, physical or mental disability, marital status, age, ethnicity or religion. Further information is contained in the OIR brochure Unfair Dismissals. For a copy visit the OIR website at or phone Useful contacts Your employer association (if you are a member) Office of Industrial Relations at or on Your legal adviser If you are ending the employment of an apprentice or trainee: Department of Education and Training at or on Industrial Registry, 50 Phillip Street, Sydney, at or on (02)

5 Ending Employment Checklist Employer responsibilities Ending fixed-term contracts Remind employee when the contract is approaching completion date Check contract for notice period required Enter into a new contract if employment is to continue Redundancy Consult employees if redundancies occur refer to the relevant award Check the relevant award, agreement or contract for notice periods Pay redundancy severance entitlements if applicable Payment of entitlements Check notice period required in relevant award, agreement or contract Check payment in lieu-of-notice in the relevant award, agreement or contract where applicable Pay for annual leave not taken Pay for long service leave, if applicable Check the relevant award for annual leave loading payments Pay bonuses, commission or incentive payments where applicable Do not pay out sick leave Pay entitlements on the last day of work or the next pay day check the relevant award Other Provide Centrelink separation certificate Provide certificate or letter of service where requested or as indicated in the award Provide group certificate for taxation purposes within 14 days of the date of the termination taking effect Employee responsibilities Give appropriate notice, preferably in writing, clearly indicating the date of resignation Check the relevant awards, agreement or contract for notice periods Fulfil all duties during notice period Forfeit pay from outstanding wages in-lieu of notice Return the employer s property (e.g. car, mobile phone, uniform, equipment, security passes/keys)

6 Other titles in the Employment Essentials series Recruitment Managing Performance Workplace Policies and Procedures Managing People Introducing Workplace Flexibility Other Office of Industrial Relations services Awards Online NSW Awards Online is a free service on the OIR website that provides easy access to information on industrial awards. You ll find all major NSW private industry awards on the site, with details of pay rates, award conditions and leave entitlements. You can also download a copy of the awards. Check Your Pay Check Your Pay is an online service that helps you calculate wages, allowances, penalties, leave and other entitlements. You can check your pay against actual hours worked and include allowances, penalties and loadings for specific pay periods. You can also generate time sheets. This tool is currently designed for people working in restaurants, shops, hair and beauty salons or in clerical and administration jobs. Other awards will be added over time. Pay Rate Updates Pay Rate Updates offer you instant alerts on changes to NSW pay rates, leave and other award entitlements. It is a quick, free and easy way to stay informed and anyone can register with the service through the OIR website. Award Subscription Service The OIR Award Subscription Service is another way to stay posted on current award conditions for major awards. For a small annual subscription fee the OIR will send you advice on any changes to your award by mail. To subscribe, subscriptions@oir.commerce.nsw.gov.au or phone the OIR on Small Business Workshops and Seminars The OIR offers a series of workshops and seminars to help small businesses develop practical strategies for managing a wide range of employment issues. OIR seminars cover issues such as employment rights and responsibilities, recruitment and termination procedures and techniques for managing staff performance. The OIR also runs award-specific workshops to give employers a thorough understanding of the award for their workplace and their obligations to staff. Seminars are held regularly across NSW. For dates and locations visit the OIR website. To register or to receive our seminar program brochure please call In-house seminars tailored for your business can also be arranged. Sample pay slips Online sample pay slips on the OIR website help employers maintain correct wage records and issue pay slips that comply with State and Federal requirements. Your Workplace Online Your Workplace Online is a free electronic monthly newsletter ed to subscribers, advising of changes to industrial relations that affect workplaces in NSW. This newsletter keeps employers up-to-date with award information, OIR inspector activities, key legislative changes, important test cases and other developments in industrial relations. To subscribe see the OIR website. Publications The OIR has a wide range of plain English brochures on basic employment rights and responsibilities, some in community languages. We also publish best practice guides, industryspecific handbooks and e-newsletters. Our publications are available on our website or you can pick up a copy from your nearest OIR contact centre. Visit the OIR website at Need more information? Office of Industrial Relations NSW Department of Commerce Telephone: win@oir.commerce.nsw.gov.au MAKING NSW WORKPLACES FAIR FOR EMPLOYEES AND EMPLOYERS. Disclaimer: This publication is intended to be a general guide only. All due care has been taken in its preparation, and the information is believed to be current at the date of publication. For further information check the OIR website at or call the OIR on April Printed on recycled paper.

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