How to write a termination letter: do's and don'ts for employers

Ending an employee's tenure is rarely pleasant, yet how you handle the paperwork shapes how the person walks away and how your business is remembered. A well-crafted termination letter can reduce the risk of an unfair dismissal claim, preserve professional relationships, and demonstrate that you took the process seriously. It also gives both parties a written record of what was said, when it was communicated, and what entitlements are owed.

In Australia, termination letters sit inside a wider framework that includes the Fair Work Act 2009, the National Employment Standards, and any applicable modern award. Whether you operate a small café in Fitzroy, a tech startup in Barangaroo, or a regional accounting firm in Toowoomba, the same baseline rules apply. Understanding these rules before you draft a single line helps you avoid the kind of missteps that lead to the Fair Work Commission.

Clarify the legal ground before you write

The first step in writing a termination letter is rarely about the letter itself. It is about confirming that the decision is lawful, defensible, and properly documented. In Australia, employees with at least six months' service (or twelve months for small businesses with fewer than fifteen staff) can lodge an unfair dismissal claim if they believe the termination was harsh, unjust, or unreasonable. A letter that contradicts your earlier written warnings or that fails to cite a valid reason can make that defence far harder.

Before drafting, review the employee's file for performance reviews, written warnings, and any evidence of misconduct. If the dismissal is for poor performance, your letter should be able to reference specific incidents and the support you offered to improve. For misconduct, the letter should briefly outline the behaviour that breached policy. If the termination is genuine redundancy, ensure you have followed consultation obligations and considered redeployment, as required by the Fair Work Act.

Small business owners often underestimate how much paperwork their decisions generate. Even a verbal caution left undocumented becomes a problem if the matter escalates. Take time to gather the file, then summarise the key facts in plain English before composing the letter.

Build the letter around a clear structure

A strong termination letter is short, factual, and structured. Most employers in Sydney, Brisbane, and Perth use a similar format because courts and the Fair Work Commission expect to see the essentials without ambiguity. A typical letter includes the date, the employee's name and address, a clear statement that their employment is being terminated, the reason, the last day of work, and information about final pay and accrued entitlements.

Make the reason for the termination specific but neutral. Phrases such as "continued underperformance despite three written warnings" or "serious breach of the company's social media policy" are appropriate. Vague statements like "not a good fit" or "cultural reasons" leave the employer exposed. Reference any earlier warnings by date so the chain of events is obvious to a third-party reviewer.

The letter should also cover practical matters. Confirm the date and time of the final shift, instructions for returning company property, the date the final pay will be paid, and how accrued annual leave and any long service leave will be handled. If a severance payment applies, mention the calculation method and the timeframe. Many Australian employers also include a short paragraph acknowledging the employee's contribution and wishing them well, which can soften the tone without weakening the message.

Choose language that protects the relationship

How you say something often matters as much as what you say. Avoid language that could be interpreted as discriminatory, retaliatory, or based on protected attributes such as age, gender, pregnancy, religion, or disability. Even phrases that feel harmless in casual conversation can be problematic in writing. "We've decided to go in a different direction," for example, is far safer than "you don't fit with the new team dynamic."

Steer clear of emotional or accusatory statements. Sentences beginning with "you always," "you never," or "everyone knows" tend to escalate disputes. Stick to objective facts: dates of incidents, copies of policies breached, and outcomes of investigations. If you mention disciplinary history, do so briefly and without editorial commentary. Keep the tone respectful, even when the circumstances are not.

Avoid mentioning anything unrelated to performance or conduct. References to personality clashes, social media activity outside work hours, or personal relationships rarely have a place in a termination letter and can be used as evidence of bias. If you are unsure whether a sentence is appropriate, leave it out. A short, factual letter is almost always stronger than a long, explanatory one. For additional guidance on compliant wording, compliance templates tailored to different industries can offer useful reference points.

Deliver the letter with care and a witness

The best-written letter can be undermined by poor delivery. In Australian workplaces, terminations are usually conducted in person with a manager and a second staff member acting as a witness, followed immediately by the written letter. The meeting should be private, free from phones or interruptions, and held away from public areas. Avoid Friday afternoons if you can, as employees who are dismissed late in the week often have difficulty reaching support services over the weekend.

Bring two copies of the letter so the employee can keep one and you can file the other with a signed acknowledgement. Explain the contents calmly, give the person time to read it, and be prepared to answer factual questions about pay, leave, and return of equipment. Avoid debating the merits of the decision; once the letter is handed over, the conversation is largely over.

If the employee becomes distressed, pause and offer water or a short break. If they request a support person, allow a reasonable adjournment where possible. Although there is no general legal right to have a support person present at a termination meeting, accommodating the request can reduce the risk of a claim and reflects well on the employer. Make a short note of what was said and by whom, and store it alongside the letter.

Wrap up the loose ends after the letter is delivered

Once the meeting ends, several administrative tasks remain. Calculate and pay out all owed entitlements, including outstanding wages, accrued annual leave, and any long service leave if the employee qualifies under your state's legislation. In Victoria, long service leave currently applies after seven years of continuous service; in NSW and Queensland, the threshold is generally ten years, although transitional rules apply. Confirm the figures in a separate final payslip and provide it to the employee.

Update your payroll system to reflect the termination date and arrange for access to email, building entry, and shared drives to be revoked at the appropriate time. Notify the IT team, security, and any relevant clients or suppliers. If the employee managed customer accounts, brief a colleague promptly so service is not disrupted.

Consider what you will say if future employers call for a reference. Most Australian employers provide only basic confirmations of role and dates, although you are free to provide more detailed references if you wish. Decide in advance what the reference will say so that the response is consistent with the termination letter. Finally, store the letter, the witness note, and any related documents for at least seven years, as industrial claims can be brought well after the event.

The day a termination letter lands on someone's desk is rarely easy, but a careful process protects everyone involved. Strong documentation, fair language, and respectful delivery reduce legal exposure and help preserve the dignity of the person leaving. If you are still refining your approach, working through the do's and don'ts with a seasoned mentor can make the difference between a smooth exit and a six-month dispute.

Owners and managers across Adelaide, Hobart, and the outer suburbs of Melbourne regularly tell us the same thing: every difficult conversation feels a little easier with a second pair of eyes on the paperwork. If you would like guidance from people who have hired, fired, and rebuilt teams in tough markets, explore how you can work alongside SCORE Nashville volunteers to sharpen your small business practices. Free, confidential mentoring and a library of practical templates are available to help you handle the moments that matter.