Termination of Employment Contracts

• Termination of employment contracts and relationships results from decisions by the employee or employer.

Types of Termination

• Voluntary termination occurs when an employee decides to leave a business through retirement or resignation.
• Involuntary termination occurs when the employer decides to end the employment relationship through redundancy or dismissal.
• Handling termination well is vital due to its impact on the departing employee, remaining staff, and the corporate culture.
• Businesses improve efficiency by reducing wage expenses, often leading to restructuring and redundancies.
• Termination strategies help firms manage retirements and remain competitive.
• Knowledge of both different methods of termination AND entitlement and transition considerations are vital.

Resignation (Voluntary Termination)

• Resignation is when an employee chooses to leave a business for reasons like promotion, further study, job dissatisfaction, or relocation.

Retirement (Voluntary Termination)

• Retirement is when an employee decides to discontinue full-time or part-time work and leave the paid labor force.

Redundancy (Involuntary Termination)

• Redundancy occurs when an employee leaves the business because their job no longer exists, resulting in retrenchment.
• Reasons for redundancy include poor financial performance, business restructuring (e.g., reducing staff), or the implementation of new technology.
• Businesses sometimes offer voluntary redundancy where employees are given the choice to leave, often with an extra payout.
• If insufficient employees volunteer for redundancy, involuntary redundancy takes place.
• Employees subject to involuntary redundancy receive the same package as those who volunteer.

Dismissal (Involuntary Termination)

• Dismissal is the involuntary termination of an employee who fails to meet work standards or has unacceptable or unlawful behavior.
• Summary dismissal is the most serious form, occurring when an employee seriously breaches their contract like being drunk at work, theft, harassment, or illegal activities and is dismissed without notice or warning.
• Dismissal on notice occurs when employees do not meet required standards, receive warnings to improve, and are given a chance to improve or risk losing their job.
• If problems persist, the employee will receive notice of termination, the length of which depends on the workplace agreement, typically 1-5 weeks.

Entitlement Considerations

• Entitlements are what the business must legally provide.
• Employees are entitled to accrued benefits like holiday pay and long service leave.
• The employer is entitled to provide a period of notice, as determined by the Award or EBA.
• With retirement and other terminations, the employer is entitled to a period of notice as specified in the Award or EBA.
• People are now entitled to choose when to retire following legislation changes in the 1990s.
• Employees are entitled to a severance/redundancy package based on their length of service.
• The amount received is outlined in the Award/workplace agreement.
• Employees are entitled to full payment for completed work and entitlements like annual leave upon dismissal.
• Employers must know their legal obligations, and employees employed for at least six months are entitled to apply for unfair dismissal (12 months for small businesses).

Transition Considerations

• Transition considerations include how the business can go above and beyond what they are legally required to do.
• HR can conduct exit interviews to understand why staff are leaving and ensure a positive transition, preventing negative comments about the organization.
• HR can assist with retirement transitions by providing advice and support to help employees prepare, which may include guidance on superannuation, financial planning, lifestyle changes, and reduced hours leading up to retirement.
• Managers should support staff through redundancy by offering counseling, career advice, CV writing assistance, or extra training to enhance employability.
• Outplacement services are external organizations that manage the transition of redundancy, paid for by the business.
• Depending on the reason for dismissal, managers may assist employees in seeking new employment or offer counseling.

Comparing Transition and Entitlement Considerations

• Both require union involvement and can contribute to a firm's labor expense.
• Both are part of the termination process and may be included in redundancy packages.
• Transition considerations may include CSR practices, while entitlement considerations usually do not.
• Transition requirements are not legally obligated, while businesses must meet entitlements in the National Employment Standards.