Termination of Employment in Australia (2026): Lawful Process, Final Pay, NES Entitlements and Separation Certificates

Ending someone's employment is one of the riskiest things a small business does. A rushed conversation, a text-message dismissal or a final pay that leaves out leave loading can turn a routine exit into a Fair Work claim or an underpayment finding. This guide walks through termination of employment in Australia for 2026 from start to finish: the different ways employment ends, how to keep a dismissal lawful, what the National Employment Standards (NES) require on termination, what goes into final pay and when it's due, how termination payments are taxed and reported through Single Touch Payroll, and when you need to give an Employment Separation Certificate. A full final pay calculation in Australian dollars is at the end.

Quick answer

To end employment lawfully, have a valid reason that isn't a prohibited one, follow a fair process (or the Small Business Fair Dismissal Code), and give written notice under the NES or pay in lieu. Final pay — wages owed, all unused annual leave plus loading, payment in lieu of notice, any redundancy pay and long service leave — is due within 7 days under most awards, with payment in lieu due on or before the last day. Report the cessation date and reason through STP, and complete a separation certificate within 14 days if one is requested.

• Unfair dismissal claims need 6 months service (12 months in a small business)

• General protections apply from day one

• Sick and carer's leave isn't paid out

• Super applies to final wages and payment in lieu, not to unused leave

• Employees have 21 days to lodge a dismissal claim

How employment can end

The rules that apply depend on how the employment ends, so start by naming it correctly.

• Dismissal by the employer for performance, conduct or capacity. Notice applies unless the reason is serious misconduct, and unfair dismissal and general protections laws apply.
• Redundancy, where the employer no longer needs the job done by anyone. Notice applies, and redundancy pay may be owed under the NES unless the employer is a small business. Our redundancy pay guide covers the scale and the tax-free limits.
• Resignation by the employee, with notice set by their award, agreement or contract. The employer can't refuse a resignation. See our notice period guide.
• End of a fixed-term contract or a specific task or season. This usually isn't a dismissal, but a string of back-to-back contracts can be treated as ongoing employment, and the 2023 rules limit fixed-term contracts of more than two years.
• Mutual agreement, where both parties agree to end the employment, often with a deed of release. A "mutual agreement" the employee was pressured into can still be a dismissal.
• Abandonment, where the employee stops coming to work without explanation. Don't assume a resignation. Contact the employee in writing, ask them to explain and to return, and keep records before treating the employment as ended.

Casual employment works differently. Each shift is in law a separate engagement, so a casual isn't entitled to NES notice and isn't usually "dismissed" by not being offered more shifts. But a regular casual can bring an unfair dismissal claim if their service meets the minimum period, so the safest approach is to treat ending a regular casual's work like any other dismissal.

Termination deadlines (2026)

7 days

Final pay under most awards

after the last day

Last day

Payment in lieu of notice

on or before termination

21 days

Employee's time to lodge a claim

unfair dismissal or general protections

14 days

Separation certificate

from the request

Making a dismissal lawful

Three separate legal regimes can catch an employer who ends employment badly. They have different eligibility rules, and an employee chooses one.

Unfair dismissal

An employee can claim unfair dismissal if they've completed the minimum employment period — 6 months, or 12 months if the employer has fewer than 15 employees — and they're either covered by an award or agreement or earn less than the high income threshold of A$190,100. The Fair Work Commission asks whether the dismissal was harsh, unjust or unreasonable: was there a valid reason related to conduct or capacity, was the employee told the reason and given a chance to respond, was a support person allowed, and were there earlier warnings about performance? Small business employers who follow the Small Business Fair Dismissal Code are protected, but the employer must prove compliance. Our unfair dismissal guide for small business covers the Code and how claims run, and our probation guide explains how the minimum period is counted.

General protections

The general protections have no minimum service and no income cap. It's unlawful to dismiss someone because they have or use a workplace right — such as asking about their pay, taking leave or making a complaint — because they belong or don't belong to a union, or because of a protected attribute including race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction or social origin. If an employee alleges a prohibited reason, the employer must prove it wasn't one. A dismissal application must reach the Commission within 21 days, and the Commission can extend that only in exceptional circumstances.

Section 352 adds a specific protection for employees temporarily absent because of illness or injury. Broadly, an employee who provides a medical certificate or similar evidence is protected while on paid sick leave and for unpaid absences of up to 3 months, or a total of 3 months in a 12-month period. Dismissing someone in that window because of the absence is unlawful even if the business genuinely needs the role filled.

Other obligations

If you plan to dismiss 15 or more employees for economic, technological, structural or similar reasons, section 530 requires you to notify Services Australia (Centrelink) in writing before any dismissals take effect, and awards and agreements add consultation duties for major workplace change. Employers outside the national system — mainly unincorporated sole traders, partnerships and trusts in Western Australia — follow state law for unfair dismissal, although the unlawful termination protections still reach them.

A lawful dismissal, step by step

Step 1

Identify a valid reason (conduct, capacity or redundancy)

Step 2

Rule out prohibited reasons

Step 3

Warn, explain and hear the employee's response with a support person

Step 4

Decide and give written notice — or pay in lieu

Step 5

Pay final pay and report through STP

within 7 days under most awards

Summary dismissal for serious misconduct

Serious misconduct means wilful or deliberate behaviour that's inconsistent with continuing the employment, or conduct that causes serious and imminent risk to health, safety or the business's reputation. Examples include theft, fraud, assault, sexual harassment, being intoxicated at work and refusing a lawful and reasonable instruction. An employer that has reasonable grounds can dismiss without notice. But it still has to pay everything owed — wages for hours worked, accrued annual leave and loading, and long service leave if state law requires it. Summary dismissals are where most unfair dismissal claims start, so investigate first, put the allegation to the employee, and record their response before deciding.

Notice and the termination letter

Unless an exclusion applies, the NES requires written notice stating the last day of employment, with a minimum period that depends on continuous service: 1 week for up to a year, 2 weeks for 1 to 3 years, 3 weeks for 3 to 5 years and 4 weeks after that, plus 1 week for employees over 45 with at least 2 years' service. The employer can pay out the notice instead, calculated at the full rate of pay including loadings, penalties and allowances the employee would have earned. Our notice period guide has worked examples.

A good termination letter states the date it's given, the last day of employment, whether the employee will work the notice or be paid in lieu, the reason in neutral terms, what final pay will include and when it will be paid, and how to return company property. Keep it factual. If the termination is a redundancy, say so, because it changes the tax treatment and the STP cessation code.

NES entitlements on termination

The NES set the minimum an employee must receive when employment ends, whatever their award or contract says. The Fair Work Ombudsman lists final pay as:

• Wages owing for hours worked up to the last day, including penalty rates and allowances.
• Unused annual leave, paid at the rate the employee would have received if they'd taken it — including annual leave loading. The FWO says loading is paid out on termination even when an award, agreement or contract says it isn't.

And, if they apply:

• Payment in lieu of notice.
• Redundancy pay under the NES scale (between 4 and 16 weeks of base pay for employees with at least 1 year of service), unless the employer is a small business or another exclusion applies.
• Long service leave, accrued or pro rata, under the relevant state or territory law or a pre-modern award. Pro rata payouts often start from 5 years of service in New South Wales and 7 years in Queensland, while Victoria pays pro rata after 7 years. Our long service leave guide covers every state.

What's not paid out: unused sick and carer's leave and compassionate leave. Some awards also deal with banked time off instead of overtime and accrued rostered days off. The Retail Award, for example, requires untaken time off for overtime to be paid at the overtime rate on termination.

When final pay is due

The Fair Work Ombudsman explains that the timing rules come from awards, agreements, the NES and the Fair Work Act, in that order of specificity:

• Most awards require final pay within 7 days after the last day. The General Retail, Hospitality and Clerks awards all say this.
• Payment in lieu of notice must be paid on or before the termination day, because section 117 requires the employer to have paid it before ending the employment.
• If no award or agreement sets a rule, the Fair Work Act's general requirement to pay at least monthly applies.

The FWO's best-practice advice is to pay final pay as soon as possible, ideally in the next pay cycle, without unreasonable delay. A payslip must be issued within 1 working day of paying, showing each component separately. An employer can only deduct from final pay if the employee authorised it in writing for their benefit, or an award or law allows it — for example, the award deduction of up to one week's wages for an adult employee who resigns without the required notice.

Tax, super and STP reporting on termination

The ATO treats termination payments differently from ordinary wages, and Single Touch Payroll Phase 2 requires each one to be reported in its own category.

Tax. Final wages are taxed as normal salary. Unused annual leave and long service leave paid on termination are taxed under the ATO's unused leave rules; in a normal termination post-1993 leave is reported as paid leave type U, while in a genuine redundancy it's reported as lump sum A and withheld at 32%. Payment in lieu of notice and other compensation for loss of employment are generally employment termination payments (ETPs), taxed at concessional rates up to the A$270,000 ETP cap. In a genuine redundancy, payment in lieu of notice counts towards the tax-free redundancy amount instead.

Super. You must pay the super guarantee of 12% on final pay that is ordinary time earnings — final ordinary hours and payment in lieu of notice. The ATO confirms that ETPs and unused leave payments aren't ordinary time earnings, so no super is due on them. Under Payday Super, which applies to wages paid from 1 July 2026, super on the final pay must reach the employee's fund within 7 business days of the day you pay it. See our Payday Super guide.

STP. In your STP Phase 2 report you must include the employee's cessation date and a cessation reason:

After the last payment, finalise the employee's STP data so their income statement is marked tax ready. You can finalise at any time during the year. Our Single Touch Payroll guide covers the deadlines.

Employment Separation Certificates

An Employment Separation Certificate (form SU001) tells Services Australia why someone stopped working and what they were paid, so it can pay income support at the right rate from the right date. You don't have to issue one to every employee who leaves. Services Australia says it may ask for one when someone stops working for you or reduces their hours, and a current or former employee can also ask you for one. Once requested, you need to complete it within 14 days of the request.

The quickest way is online through Services Australia's Business Hub, which also handles Paid Parental Leave. You can instead fill out the paper form and give it to the employee, or provide the same information on business letterhead, signed by you or an authorised pay officer, keeping a copy. Accurate STP cessation reporting reduces the number of certificates Services Australia needs, because it can see the cessation date and reason directly, but it doesn't remove your obligation when a certificate is requested. Make sure the reason on the certificate matches the reason you reported through STP.

Records to keep

Employers must keep time and wages records for 7 years, including the termination details: who ended the employment, how, and the reason. Keep the termination letter, notes of any meetings, warnings, the final pay calculation, the payslip and any separation certificate together. If a claim is made, the employer usually carries the burden of showing what happened, and good records are the evidence. Our employee records guide lists what's required.

Worked example: a full final pay in A$

Mia is a full-time administration assistant under the Clerks—Private Sector Award at Level 1, Year 1 — A$26.97 an hour, or A$1,024.70 a week. She's 38 and has 3 years and 4 months of service with a business that employs 40 people. After written warnings about repeated errors and a performance plan, her employer dismisses her on a Wednesday, effective the same day, and pays her notice in lieu.

1. Wages for the final week. Mia worked Monday to Wednesday: 3 × 7.6 hours = 22.8 hours × A$26.97 = A$614.92.

2. Payment in lieu of notice. With more than 3 but not more than 5 years' service and aged under 45, Mia gets 3 weeks. At her full rate (she has no regular penalties or allowances): 3 × A$1,024.70 = A$3,074.10, paid on or before her last day.

3. Unused annual leave. Mia has 76 hours (two weeks) of untaken leave: 76 × A$26.97 = A$2,049.72, plus the Clerks Award's 17.5% loading of A$358.70.

4. Redundancy pay. None — this is a performance dismissal, not a redundancy.

5. Sick leave. Mia has 40 hours of unused personal leave. It isn't paid out.

Total gross final pay: A$6,097.44. Super of 12% is due on the wages and the payment in lieu (A$3,689.02 × 12% = A$442.68) but not on the annual leave payout. The employer reports a cessation reason of F (dismissal), the leave as paid leave type U and the payment in lieu as an ETP, pays everything by Wednesday and finalises her STP data.

Mia's final pay at a glance

Component	Amount	Super?	STP category
Wages (22.8 hours)	A$614.92	Yes	Gross
Payment in lieu of notice (3 weeks)	A$3,074.10	Yes	ETP
Unused annual leave (76 hours)	A$2,049.72	No	Paid leave type U
Leave loading 17.5%	A$358.70	No	Paid leave type U
Total	A$6,097.44	A$442.68 super	Cessation reason F

Wages (22.8 hours)

Amount

A$614.92

Super?

Yes

STP category

Gross

Payment in lieu of notice (3 weeks)

Amount

A$3,074.10

Super?

Yes

STP category

ETP

Unused annual leave (76 hours)

Amount

A$2,049.72

Super?

No

STP category

Paid leave type U

Leave loading 17.5%

Amount

A$358.70

Super?

No

STP category

Paid leave type U

Total

Amount

A$6,097.44

Super?

A$442.68 super

STP category

Cessation reason F

If Mia had instead been made redundant, she'd also receive 7 weeks' redundancy pay at her base rate (A$7,172.90) for at least 3 but less than 4 years of service, the cessation code would be R, and the redundancy pay and notice would be tax-free up to the 2026-27 limit of A$13,598 plus A$6,801 for each complete year of service.

Common termination mistakes

• Dismissing by text or phone. NES notice must be in writing and state the termination date.
• Leaving out leave loading. Annual leave loading must be paid on termination if it would have been paid during employment.
• Paying notice at the base rate. Payment in lieu is calculated at the full rate.
• Paying late. Most awards give 7 days; payment in lieu is due on or before the last day.
• Super on the wrong items. Pay it on final wages and payment in lieu; don't pay it on leave payouts or ETPs.
• Wrong STP cessation code. A redundancy reported as a resignation changes the employee's tax and Centrelink outcomes.
• Ignoring separation certificate requests. The 14 days clock runs from the request.
• Dismissing during protected sick leave or soon after a complaint, without strong evidence of another reason.
• Assuming a no-show has resigned. Follow up in writing first.

Termination checklist for employers

0/10

• Confirm the reason is valid and not a prohibited reason
• Follow a fair process or the Small Business Fair Dismissal Code
• Work out notice under the NES, award and contract — use the longest
• Give a written termination letter with the last day
• Calculate wages, notice, leave and loading, redundancy and long service leave
• Pay final pay on time and issue a payslip
• Pay super on final OTE within the Payday Super deadline
• Report cessation date and reason in STP and finalise
• Complete any separation certificate within 14 days of a request
• File all records for 7 years

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Official links

• Final payFair Work Ombudsman — what to include and when
• Dismissal and noticeFWO — written notice and payment in lieu
• Notice and Redundancy CalculatorFWO — notice and redundancy amounts
• When a worker leaves your businessATO — termination payments, super and STP
• Employment Separation CertificatesServices Australia — deadline and Business Hub
• General protections dismissal (Form F8)Fair Work Commission

What to do next

Before you end anyone's employment, write down the reason and check it against the prohibited reasons, then work out notice using our notice period guide and, for a redundancy, our redundancy pay guide. Prepare the final pay calculation before the meeting so you can pay on time, and use our free payslip generator to show every component clearly.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

How long does an employer have to pay final pay in Australia?

Most modern awards require final pay within 7 days after the employee's last day. Payment in lieu of notice is stricter: under the NES it must be paid on or before the termination day. If no award or agreement applies, the Fair Work Act requires pay at least monthly, but the Fair Work Ombudsman recommends paying in the next pay cycle without unreasonable delay.

What must be included in final pay?

Final pay includes wages owing for hours worked (with penalty rates and allowances), all unused annual leave plus leave loading if it would have been paid during employment, and, where they apply, payment in lieu of notice, redundancy pay and long service leave under state law. Unused sick and carer's leave isn't paid out. Some awards also require banked time off for overtime and rostered days off to be paid.

Is unused annual leave paid out when employment ends?

Yes. Under the NES, all unused annual leave is paid out at the rate the employee would have received if they had taken it, including annual leave loading. The Fair Work Ombudsman says loading is paid on termination even where the award, agreement or contract says it isn't. Super guarantee doesn't apply to unused leave paid on termination.

Do I have to give an employment separation certificate?

Only if Services Australia or the former employee asks for one to support a Centrelink claim. You then need to complete it within 14 days of the request, ideally online through Business Hub. Reporting the cessation date and reason through Single Touch Payroll reduces how often Services Australia needs a certificate, but it doesn't remove the obligation when one is requested.

Can an employer dismiss an employee without notice?

Only for serious misconduct, such as theft, fraud, violence, sexual harassment or a serious safety breach, or where the employee is excluded from NES notice — casuals, genuine fixed-term employees and some daily hire workers. Everyone else must get written notice of the termination date or payment in lieu. Summary dismissal still requires final pay, including accrued annual leave.

What reasons for dismissal are unlawful?

It's unlawful to dismiss an employee because they have or use a workplace right (like asking about pay or making a complaint), because of a protected attribute such as race, sex, age, disability, pregnancy or family responsibilities, because of union involvement, or because they're temporarily absent with an illness or injury within the protected period. These general protections apply from the first day of employment.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 13 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Final pay — Fair Work Ombudsman · accessed 13 October 2026
2. 2.Dismissal — notice of termination — Fair Work Ombudsman · accessed 13 October 2026
3. 3.Protections at work — Fair Work Ombudsman · accessed 13 October 2026
4. 4.When a worker leaves your business — Australian Taxation Office · accessed 13 October 2026
5. 5.STP Phase 2 — when an employee transfers or leaves — Australian Taxation Office · accessed 13 October 2026
6. 6.Employment Separation Certificates for employers — Services Australia · accessed 13 October 2026
7. 7.Apply for general protections dismissal — Form F8 — Fair Work Commission · accessed 13 October 2026
8. 8.Clerks—Private Sector Award 2020 [MA000002] — consolidated to 1 July 2026 — Fair Work Commission · accessed 13 October 2026
9. 9.Fair Work Act 2009 — sections 117, 323, 351, 352, 530 (compilation C2026C00355) — Federal Register of Legislation · accessed 13 October 2026