Termination letter for poor performance or conduct

A guide to the contents of a letter of termination of employment for reasons of conduct and/or performance.

A letter of termination of the employment relationship for reasons of conduct and/or performance should include details of:
  • the period of notice
  • payment in lieu of notice (unless ‘summarily’ dismissed for serious misconduct or actual notice provided)
  • outstanding wages
  • outstanding annual leave balance
  • outstanding long service leave (if legislative tenure period has been met)
  • any severance/separation payment. where an entitlement to severance pay exists
  • any other entitlements the employee may be entitled to receive under any relevant industrial instrument (for example, pro-rata bonus, commission payment etc)
  • when property should be returned.
Calculation of entitlements
IMPORTANT: If you wish to provide your employee(s) with a statement or schedule of entitlements they are to receive on termination of their employment, it is very important that you ensure the amounts of the monetary entitlements you record in the statement or schedule are correct, before you provide these figures to the relevant employee(s).
Over-calculation: If you have over-calculated the entitlements owed and present this to the employee(s), you may in some circumstances, be bound to pay the additional amounts you have offered, despite the fact a miscalculation has occurred.
Under-calculation: Likewise, if you have under-calculated the entitlements owed, you may be in breach of a relevant industrial instrument or applicable legislation, which may lead to a financial penalty, damages and/or interest on the unpaid entitlements, being imposed.
If you are unsure of the correct entitlements to offer or pay, or the relevant taxation treatment for each component, you should seek legal and relevant financial and taxation advice.
Notice (or payment in lieu of notice)
An employee dismissed for serious misconduct is generally not entitled to payment in lieu of notice and other benefits may also be in jeopardy. When in doubt please seek legal advice.
With respect to an employee who is not dismissed for serious misconduct, the employee will be entitled at least to the greater of the following:
  • the relevant minimum period of notice outlined in the federal Fair Work Act 2009 (Cth)
  • the notice specified in the employee's employment contract, or
  • the notice period specified in another applicable industrial instrument (eg award, agreement, etc).
However, there are various circumstances where a greater period of notice may be required. For example, if an employee's employment is not subject to an up-to-date contract of employment which reflects their current position, duties, salary etc, or which does not specify a notice period, then a greater period of notice may be payable. If in doubt, seek specific legal advice, before terminating the employee's employment.
Post-employment restraints
If you wish to enforce post-employment restraints contained in an employee’s contract, there are a number of factors to consider:
  1. The restraints must be enforceable at law, that is, consideration has been provided for the employee’s agreement to the restraints, or the restraints are contained in a properly executed Deed.
  2. Second, the restraints must be drafted in such a manner that the obligations imposed on the employee are clear and unambiguous, otherwise the restraints may be void for uncertainty. 
  3. The restraints must be 'reasonable' in the circumstances of the particular employee’s employment. The geographical area, time period and activities sought to be restrained, all must be reasonable. The Courts may strike out restraints that impose an unreasonable restraint of trade on an employee, or extend beyond the legitimate business interests of an employer. For example, if the restraint would prevent the employee earning a living, or if the restraint continues beyond the period in which another employee should reasonably be able to establish a relationship with the client.
Confidential information
A confidentiality clause will seek to prevent the use and disclosure of confidential information by the employee during and after the employment relationship. It is important that you ensure the definition of 'confidential information' in the employee's contract encompasses all relevant confidential information you wish to protect. For example, if the employee is working on a top secret project, you may wish to include a specific reference to this in the confidential information definition.
If the employee's contract does not have an express confidentiality clause, the employee is still required to abide by the common law duty of confidentiality.
Separation Certificate
If Centrelink or the employee requests a Separation Certificate on termination of the employee's employment, you must provide them with one.
For an extensive library of policies, agreements, forms, correspondence and checklists, designed to make human resources (HR) management easy for your business see our HR Advance website.


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