At-will vs Fair Work dismissal: ending employment in Australia as a US employer

At-will thinking does not carry over because Australian termination rules are set by statute and apply regardless of what the contract says. The National Employment Standards (NES) in the Fair Work Act 2009 fix minimum notice and redundancy pay, and the unfair dismissal regime lets many employees ask the Fair Work Commission (FWC) to review the decision.

In the US, a manager who has decided that someone is leaving can usually act on the same day, with legal risk concentrated in discrimination, retaliation or specific contract promises. In Australia, the manager also has to plan the notice period, calculate any redundancy entitlement and be ready to show the dismissal was fair if challenged.

Contract drafting cannot undo this. A clause that tries to give less than the NES is ineffective to that extent The contract can give more than the NES, and it is worth reading the applicable award or enterprise agreement for anything extra. The practical result is that termination in Australia is a process with dates and amounts, not a single conversation.

None of this replaces the risks a US manager already knows. A dismissal for a discriminatory or retaliatory reason is a problem in both countries; Australia adds the notice, redundancy and fairness layers on top.

Two agencies are involved, and they are easy to mix up. The Fair Work Ombudsman (FWO) publishes guidance and enforces minimum entitlements; the Fair Work Commission hears unfair dismissal applications and other workplace disputes.

An Australian employer must give between 1 and 4 weeks’ notice under the NES, depending on continuous service, or pay in lieu of notice. There is no equivalent federal notice floor in ordinary US at-will employment.

• 1 week of notice for someone with a year or less on the books.
• 2 weeks once service passes one year, until the third anniversary.
• 3 weeks from beyond three years through to the fifth anniversary.
• 4 weeks once service goes past five years.
• A further week on any of those for staff aged over 45 with 2 or more years of service.

These are minimums. An employment contract can promise longer notice, and contracts for senior roles frequently do; check any award or enterprise agreement too. Whichever applicable period is longest is the one to follow.

Payment in lieu lets the employment end straight away while paying out the notice period, which is common where the employee has access to systems or clients.

Redundancy pay is owed under the NES when an employee with at least 1 year of continuous service loses their job because the employer no longer needs the role done by anyone, unless the employer is a small business with fewer than 15 employees. The scale rises with service.

Under the NES scale nothing is due before 1 year of service. After that it gives 4 weeks (1-2 years), 6 (2-3), 7 (3-4), 8 (4-5), 10 (5-6), 11 (6-7), 13 (7-8), 14 (8-9) and 16 weeks (9-10), then drops to 12 weeks at 10 years or more.

Redundancy pay is in addition to notice. For an employee with 4 years’ service, the employer would give 3 weeks’ notice, or 4 weeks if the person is over 45, and pay 8 weeks of redundancy pay.

Whether a role is truly redundant matters as much as the amount. The employer should be able to explain why the work is no longer needed, what alternatives were considered, including redeployment elsewhere in the business, and how the affected person was chosen. Check any award or enterprise agreement for consultation terms before announcing a restructure that touches Australian staff.

Genuine redundancy payments get favourable tax treatment. For 2026-27 the ATO’s tax-free limit is AUD 13,598 plus AUD 6,801 for each completed year of service; amounts above that are taxed as an employment termination payment, with an ETP cap of AUD 270,000.

A worked case pulls these together. Take a 50-year-old employee with five and a half years of continuous service whose role is made genuinely redundant by a business with 15 or more employees. The NES gives 4 weeks’ notice plus 1 extra week for age, so 5 weeks, and redundancy pay of 10 weeks. If the payments qualify as a genuine redundancy, up to AUD 47,603 is tax-free in 2026-27: AUD 13,598 plus AUD 6,801 for each of the 5 completed years. In the US at-will equivalent, any severance would usually depend on company policy or a negotiated release.

Most Australian employees can bring an unfair dismissal claim once they have served the minimum employment period, provided they earn under the high income threshold or are covered by a modern award or enterprise agreement. From 1 July 2026 the threshold is AUD 190,100, up from AUD 183,100 the year before.

The threshold test catches US managers out. An engineer on AUD 200,000 who is not covered by any award or enterprise agreement falls outside the regime. A support specialist on AUD 90,000 covered by an award falls inside it. A senior employee on a high salary who is still covered by an award also remains eligible, because award coverage is an alternative route in.

The minimum employment period is longer for small business employers, those with fewer than 15 employees, than for larger ones; check the current periods and the time limit for lodging an application with the FWC. Applications must be made quickly after dismissal, so employers should expect to hear about a claim within weeks, not months.

A clear written record of the reasons and the process makes any response to the FWC faster to prepare. Employers should keep the file together from the first performance concern, because reconstructing it after an application arrives is slow and less persuasive.

Where the FWC orders compensation, the ceiling is 26 weeks’ pay or AUD 95,050 (half the threshold), whichever is smaller. How that single figure affects several other rights is covered in the AUD 190,100 high income threshold.

A US manager should treat an Australian performance exit as a documented process with time for the employee to improve and to respond, because that record is what the employer relies on if the dismissal is challenged.

In practice that means raising concerns in writing, setting specific expectations and a review period, meeting to hear the employee’s side, and allowing a support person at formal meetings. The outcome of each step is recorded. None of this assures a particular result before the FWC, but a dismissal without it is much harder to defend.

Timing interacts with the thresholds. An employee who is dismissed shortly before completing the minimum employment period may still have other avenues of complaint under the Fair Work Act, so avoid assuming that an early exit carries no risk.

Conduct cases need the same discipline: collect the evidence, put the allegation to the employee, and record the response before deciding. The same structure suits both the US and Australian sides of a team, which is a sensible reason to adopt it globally.

Neither route removes the rules in the way at-will employment does. Since 6 December 2023, fixed-term contracts generally cannot run beyond 2 years in total, including renewals, and a third back-to-back contract for substantially the same job is generally not allowed, subject to limited exceptions. Disputes go to the FWC using forms F10DA and F10DB.

Probation clauses are common in Australian contracts, but the protection that matters in practice is the statutory minimum employment period for unfair dismissal. A probation clause does not shorten NES notice and does not change who is eligible to claim.

A fixed term that ends on its agreed date is a different event from a dismissal part-way through the term. If a fixed-term employee is let go early, the notice terms in the contract and the NES still need checking, and repeated renewals can blur the line between a fixed-term and an ongoing role.

For a first hire, a permanent contract with clear performance expectations is usually simpler than a chain of fixed terms. The broader rules on ending employment are gathered in notice, redundancy and unfair dismissal in Australia.

If your Australian team member was hired through Employer of Record Australia, the termination comes from us, because we are the legal employer (employer of record). We issue the notice, calculate notice and redundancy, and process the final pay. Your company decides on the business reasons and supplies the evidence for a performance or conduct case.

That split means the employer of record will ask for documents before acting. Expect questions about the reason for the exit, the performance record, any award coverage and the employee’s salary against the AUD 190,100 threshold. Answers that would satisfy an at-will US process will rarely be enough on their own.

Build that into your timeline. A US company planning a global restructure should add the Australian notice, any redundancy entitlement and the employer of record’s review time to its plan, so the Australian exit date does not fall behind the rest of the programme. Settlement terms and any release of claims belong in a document written for the Australian employment, with Australian advice, because a US separation template will not map onto NES entitlements.

Final pay runs through the employer of record’s payroll with PAYG withholding and STP reporting, and super on qualifying earnings follows the Payday Super timetable of 7 business days. Our monthly charge, from USD 560, for that employee ends with the employment. What we handle across the employment lifecycle is set out on the EOR Australia services page.

Q01Can an Australian employer dismiss someone at will, as in most US states?+

A.No. The Fair Work Act 2009 sets minimum notice and redundancy pay through the NES, and most employees who have served the minimum employment period can challenge a dismissal as unfair.

Q02What notice is owed after three years of service?+

A.Exactly three years falls in the NES band that gives 2 weeks, and a person older than 45 receives a third week. The contract can set a longer period, and any award or enterprise agreement should be checked as well.

Q03Can a high earner in Australia claim unfair dismissal?+

A.Only where an award or enterprise agreement applies to their role. An employee earning above AUD 190,100 from 1 July 2026 with no such coverage falls outside the unfair dismissal regime.

Q04How much compensation can the FWC award for an unfair dismissal?+

A.Whichever is lower of half a year’s pay and AUD 95,050, the figure that applies to dismissals on or after 1 July 2026.

Q05Do small businesses pay redundancy pay?+

A.Employers with fewer than 15 employees are exempt from NES redundancy pay, although the employment contract may still promise it, and any award or agreement should be checked.