Termination Letter (Notice or Payment in Lieu)

In most employment contracts there is a provision allowing the employer or the employee to terminate the employment agreement on notice. Under the provisions of the Fair Work Act 2009 (Cth) (Act), an employer must give this notice in writing.

Sometimes an employer may choose for an employee not to work out their notice period and cease working immediately. In such cases, the employer must pay the employee the amount they would have been paid had they worked throughout their notice period. This is known as payment in lieu of notice.

Generally, the employment agreement sets out the period of notice to be given, and whether payment in lieu of notice is available. However, where the agreement is silent as to the notice period, the lawful minimum periods of notice can be found in the Act. The Act provides the employer with the option of requiring the employee to work through the notice period or to be paid in lieu of notice.

The employer should have certainty that the employee has received this letter.

NOTE: When considering whether to terminate the employment of an employee on notice, it is important to be aware of the laws relating to unfair dismissal and to ensure that the termination will not fall foul of these laws. If you are not aware of your obligations under unfair dismissal laws, seek legal advice.

Termination on the initiative of the employee is called resignation. See the Letter of Resignation for this option.

Other names for Termination Letter (Notice or Payment in Lieu) include:

• Letter of Termination; and
• Termination of Employment Letter.

This document:

• Informs the recipient that the employment contract is terminated pursuant to his or her employment agreement;
• Provides for a notice period or payment in lieu of notice;
• Sets out relevant termination payments.

Other documents you may need:

• Termination letter (Poor Performance)
• Formal Warning Letter (Unsatisfactory Performance)
• Termination letter (Serious Misconduct)
• Final warning letter (Unsatisfactory Performance)

Further Information

• Requirements for Valid Notice: Termination of Employment