How to manage the termination of employees
As an employer, there will inevitably come a time where you will have to let some of your staff go. Generally, this will be the result of misconduct on their behalf, a change in operational requirements, or general under performance. It’s important for employers to understand the legal ramifications of the termination process in order to safeguard themselves from any potential liability.
To provide an overview of employee obligations in this space, The Sector consulted with LawPath, an online legal solutions platform. It’s important to note that legal advice can only be provided by lawyers with current practising certificates. As LawPath is not a law firm, the information provided here is of a general nature. You should always seek advice from a lawyer on any of the information provided below to ensure it’s relevant and suitable for your specific needs.
Employers who fail to manage the process of terminating an employee correctly, often find themselves answering to an unfair dismissal claim. Developing an understanding of unfair dismissal laws and how they apply can assist employers in avoiding a claim.
What is unfair dismissal?
Unfair dismissal describes a situation where an employee is terminated in a harsh, unjust or unreasonable manner. There are a number of conditions that an employee has to satisfy in order to make a valid claim. The Fair Work Commission must receive an application within 21 days of the dismissal in order to consider the claim. In addition, there is also a minimum employment period that must be met. To apply for unfair dismissal, an employee must be employed at the business for at least six months. This increases to 12 months for employees working at a small business.
Provided an employee meets this criterion, they will be able to submit an application against an employer. It’s important to note that Fair Work won’t investigate the claim, rather the responsibility falls on the employee to show evidence of the injustice.
The laws guiding unfair dismissal differ slightly for small businesses. For the purpose of unfair dismissal, a small business is one with fewer than 15 employees. The count of “fewer than 15” includes all employees who are employed on a regular and systematic basis.
The Small Business Dismissal Code provides the small business owner with a framework to protect themselves from claims of unfair dismissal. The Commission will deem a dismissal to be fair if a small business employer acts in accordance with this Code.
Underperformance, along with serious misconduct, is often one of the predominant reasons to consider terminating an employee. However, terminating due to underperformance can be problematic if not managed the correct way. This is especially relevant if an employer is trying to avoid claims of unfair dismissal.
As an employer it’s important to understand what constitutes underperformance and how to best manage it. Effective performance management encourages productivity and helps create an inviting workplace environment. Managing underperformance can be extremely challenging and confronting for both the employer and the employee. Listed below are a couple of steps to ensure the process is dealt with fairly.
The key theme to keep in mind when dealing with underperformance is communication. Communicating effectively will ensure an employee has the best opportunity to improve and will also offer maximum protection to the employer in the long run.
Step 1 – Identify and understand
It’s vital that performance management begins from the moment underperformance is first observed. This process begins with correctly identifying what underperformance is, in relation to an employee’s job description, and other policies and practices of the workplace, before seeking to assess the cause.
There are a number of reasons an employee may be underperforming, and being able to accurately identify them may go a long way to resolving the issue. Reasons can range from personal issues to a lack of skill and understanding.
Step 2 – Communicate with the employee directly
Once it has been observed that an employee isn’t performing to the expected standard, or in line with policy and procedure, an employer should look to discuss the identified concerns with the employee directly, offering them the opportunity to have a support person present.
It’s important to hold this discussion in a private setting, where the employee will feel comfortable talking, and where their privacy will be respected. Employers should outline what the problem is and why it’s a concern, making reference to the agreed terms and conditions of employment and any supporting documentation, such as a job description and previous performance reviews, etc.
Additionally, employees should be given the opportunity to provide their perspective, and participate in an open discussion about the issues as noted. The aim of this stage of performance management should be for the employer to clarify their expectations and ensure these are clearly understood by all parties.
Step 3 – Agree on a solution
If possible, attempt to form a solution to the problems as identified with the input of the employee. By involving the employee in the process, they are more likely to feel a sense of ownership, and to subsequently follow through with solutions put forward. Look to establish a plan of action that the employee believes they can execute. Employers should be careful to not leave anything open for interpretation by being vague or unclear in the steps proposed to address the problem and affect change. Employers should be sure to keep a written record of these discussions, which is signed and kept by both the employer and employee, and set a timeframe for a follow up.
Step 4 – Monitor and follow up
After the initial discussion, an employer should monitor the employee to ensure they are carrying out the agreed expectations. It’s wise to continue an ongoing discussion with the employee throughout this period, providing feedback and encouragement. In the event that performance is not improving after this point, more serious disciplinary action may be required.
Although there is no official legal requirement for an employer to provide warnings before terminating an employee, it is viewed as best practice. The Fair Work Commission will also take warnings into account when considering an unfair dismissal claim. When issuing warnings an employer should make sure that the warnings are both transparent and reasonable. The point of this process is to make it clear to the employee that their employment is at risk with the current level of performance. It is also wise for both parties to write the details of the warning down.
If there is no improvement after issuing warnings, an employer may have no other choice than to terminate employment. It’s best to view termination as a last resort, in which you simply have no other option. If termination is the action chosen, it’s important to provide the correct notice period as per the contract with the employee, and ensure that the final pay is processed correctly.
At the time of termination, an employer may wish to cross check the unfair dismissal provisions to ensure the termination won’t result in a claim. If an employer is considering terminating an employee, the advice of an employment lawyer may be helpful in addressing concerns.
Whilst the process of undertaking performance management, up to and including managing the termination of an employee, may be viewed with some trepidation, it does not have to be a time which results in ill feelings by either party.
When managed correctly, with professional support and advice as required, the termination of an employee from a business can be an opportunity for both parties to start again, and find an opportunity or staff member more in line with their expectations.
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