Terminating employment: Guidelines

Last updated: 30 Nov 2017

This page is: current

For more information go to Management essentials.

Arrangements in individual agencies may also be included in workplace or enterprise agreements and internal policies.

Information on resignations and retirements is here.

More information on Senior Executive Service (SES) employment and separation can be found here.

The following information relates to circumstances where an agency head makes a decision to end the employment of an APS employee. This is often called ‘employer-initiated separation’.

Terminating employment

Under Subsection 29(1) of the Public Service Act 1999 (the PS Act), an agency head may at any time, by notice in writing, terminate the employment of an APS employee in the agency.

This includes employees who are currently employed in the agency on a temporary transfer made under section 26 of the PS Act. It does not include employees who normally belong to the agency but are on temporary transfer to another APS agency.

Any decision to terminate the employment of an APS employee must be consistent with:

  • the PS Act and subordinate legislation, including the Australian Public Service Commissioner's Directions 2016 (the Directions)
  • the APS Values and APS Employment Principles
  • the Fair Work Act 2009 (FW Act), including in relation to unfair dismissal and adverse actions
  • other employment and administrative law, including in relation to procedural fairness; and
  • relevant workplace or enterprise agreements.

Notice of termination or payment in lieu of notice

Generally, APS employees must be given notice of termination or payment in lieu of notice that is at least equal to the amount  set out in section 117 of the FW Act.

There are limited exceptions, for example where the termination is because of serious misconduct (see breach of the Code of Conduct below) or at the conclusion of a specified period of engagement or the completion of a specified task (see non-ongoing employees below).

Relevant awards, industrial instruments, engagement documents or employment contracts may provide entitlements to longer periods of notice than that available under the FW Act. If this is the case, then the longer periods will apply.

Payment of accrued entitlements

Where employment ends and the employee has a paid annual leave entitlement, the employee must be paid the amount that would have been payable if they had taken that period of leave (section 90 of the FW Act).

The Long Service Leave (Commonwealth Employees) Act 1976 sets out the circumstances in which employees will be entitled to payment in lieu of long service leave on termination of employment.

Unused personal leave is not paid out on termination of employment.

National Employment Standards and redundancy pay

The National Employment Standards (NES) operate as a safety net, setting key minimum entitlements which apply to all employees. The NES cannot be excluded or changed by an enterprise agreement, a modern award or a contract of employment to the detriment of an employee.

The NES apply to all APS employees in circumstances described in section 119 of the FW Act in relation to redundancy. This includes non-ongoing employees and SES employees.

Where an enterprise agreement or other industrial instrument provides redundancy entitlements equivalent to or greater than the NES, the employee is not entitled to both—i.e. entitlements under the instrument are reduced by any entitlements provided to the employee under the NES.

Where enterprise agreements or other instruments include a retention period, these should also include a mechanism whereby retention periods are reduced by the minimum NES entitlement.

See Workplace Bargaining Policy 2015 for further information.

Advising Centrelink and unions

Employers are required to notify the Department of Human Services (Centrelink) and relevant registered employee associations if they decide to terminate the employment of 15 or more employees for reasons of an economic, technological or structural nature. See Division 2 of Part 3-6 of the FW Act.

Ongoing employees

Termination of ongoing APS employees can only be on one or more of the grounds listed in subsection 29(3) of the PS Act.

The ground or grounds for termination must be specified in the written notice of termination.

These grounds are:

  1. the employee is excess to the requirements of the agency
  2. the employee lacks, or has lost, an essential qualification for performing his or her duties
  3. non-performance, or unsatisfactory performance, of duties
  4. inability to perform duties because of physical or mental incapacity
  5. failure to satisfactorily complete an entry-level training course
  6. failure to meet a condition of engagement imposed under subsection 22(6) of the PS Act
  7. breach of the Code of Conduct
    Note that a decision to terminate employment for a breach of the Code of Conduct must:
    • follow a determination that a breach has occurred in accordance with the procedures established under subsection 15(3) of the PS Act and
    • be notified in the Public Service Gazette.
  8. any other ground prescribed by the Public Service Regulations 1999. Note that no other grounds have been prescribed as at the time of publication of this guidance.

a. Where an employee is excess to requirements

Agencies should establish clear and objective procedures for identifying and managing excess staff.

The Workplace Bargaining Policy 2015

The Workplace Bargaining Policy 2015 provides a framework for agencies to implement terms and conditions of employment.

The Workplace Bargaining Policy 2015 provides that each APS agency must include arrangements in their enterprise agreement and other workplace instruments that provide for compulsory redeployment, reduction and retrenchment (RRR) arrangements for the management of excess staff (other than SES staff). Agencies may not enhance existing redundancy arrangements, other than in exceptional circumstances.

Restrictions on engagement of redundancy benefit recipients

The Directions set out certain limitations on the employment in the APS of a person who has received a redundancy benefit from an APS agency or the Australian Parliamentary Service where their ‘redundancy benefit period’ has not expired.

For further information see Engagement of people who have received a redundancy benefit.

The APS Redeployment Policy

The APS Redeployment Policy sets out principles to guide agencies when reducing staffing levels. It includes an APS-wide arrangement for employees who are excess and who are looking to be redeployed in the APS.

Redeployment on a voluntary basis

Excess APS employees may be redeployed between APS agencies, at or below level, by agreement between the employee and the agency head under section 26 of the PS Act.

Redeployment on a compulsory basis

Section 27 of the PS Act provides the authority for the Australian Public Service Commissioner (the Commissioner) to move an excess APS employee to another agency without the employee’s agreement, at or below their classification level.

For the purposes of section 27 of the PS Act, an APS employee is an excess employee only if the agency head has notified the Commissioner in writing that the employee is excess to the requirements of the agency.

This power is expected to be used only in exceptional circumstances where the Commissioner is satisfied that it is in the interest of the APS and the employee is suitable for the new role. As a matter of practice, the Commissioner will normally only exercise this power after consultation with the heads of the two affected agencies. Where an excess employee is moved by the Commissioner, the agency head of the gaining agency will determine the duties of the employee in the agency under section 25 of the PS Act.

Physical or mental incapacity

Where an agency is considering offering a redundancy to an employee who is not fit for, and not at work , the agency should be satisfied that:

  • the employee is excess to requirements
  • the appropriateness of termination on the grounds of physical or mental incapacity has been assessed and any request for invalidity retirement has been considered and determined by the relevant superannuation authority, and
  • the Commonwealth is not exposed to unnecessary or increased liability arising under any relevant legislation—for example employment, workers compensation or anti-discrimination legislation—or at common law in relation to an illness or injury as a result of the agency offering, and the employee accepting, redundancy.

For further information agencies should consult  the Commonwealth Superannuation Corporation and Comcare.

b. Where an employee lacks, or has lost, an essential qualification

An essential qualification can include a formal educational or vocational standard that is necessary to perform a particular set of duties. It can also refer to, for example, professional accreditation, a driver’s licence, a security clearance or a prescribed level of physical fitness.

Where an essential qualification is required, this should be made clear to the employee before they are assigned particular duties.

Agencies may consider establishing procedures dealing with essential qualifications. Such procedures could describe what qualifications are considered essential and the circumstances where termination of employment or reduction in classification may be considered.

In some cases, the circumstances that result in the loss of an essential qualification could mean that termination on other grounds might be appropriate. For example, if an employee was convicted of a criminal offence that resulted in the loss of a security clearance, it may be more appropriate to consider whether the employee has breached the Code of Conduct.

c. Non-performance, or unsatisfactory performance, of duties

The APS Employment Principles provide that the APS is a career-based service that requires effective performance from each employee. Section 39 of the Directions expands on this and provides that each agency will have, amongst other things:

  • performance management policies and processes that support a culture of high performance; and
  • fair and effective measures to address underperformance.

Non-performance of duties

Non-performance of duties includes situations where an employee has been:

  • absent from work without approval and it is no longer reasonable for the employer to continue the employment relationship;
  • on an unauthorised absence and has not responded satisfactorily to reasonable attempts by the agency to have them return to duty;
  • granted leave, but has not returned to work at the end of a period of approved leave and a further period of leave has not been approved; or
  • attending at the workplace but not undertaking assigned duties.

The first three circumstances above deal with a situation where an employee fails to attend or return to work and therefore fails to perform the duties for which they are employed. This can give rise to an ‘abandonment of employment’ situation.

There can be uncertainty as to whether an employee who has abandoned their employment has in effect resigned. An agency may consider taking action under paragraph 29(3)(c) of the PS Act to terminate employment in order to bring the matter to a conclusion.

Where an ongoing APS employee does not return to work in the circumstances listed above, it will not necessarily amount to resignation at common law. The breach of the contract of employment by the employee may not terminate the employment relationship, even where it consists of a failure to perform any of the obligations of an employee.

In considering whether to terminate the employment of an employee because of an absence from work, an agency will need to have regard to:

  • section 352 of the FW Act, which prohibits termination of employment where an employee is temporarily absent from work because of illness or injury of a kind prescribed by the FW Regulations, and
  • obligations under the FW Act in relation to procedural fairness. Before making any decision about whether termination of employment is warranted, agencies should make reasonable attempts to determine the reasons for the employee's failure to return to work or undertake his/her duties. The agency should give the employee a warning of the consequences of not resuming duties and a reasonable opportunity to explain the continued absence or to return to duty.

Where an employee attends work but fails to comply with a lawful and reasonable direction to perform his/her assigned duties, it may be more appropriate to deal with the matter under Code of Conduct procedures.

Unsatisfactory performance of duties

Termination of employment of an ongoing APS employee on this ground will usually be handled as part of an agency's performance management or underperformance arrangements.

Any agency procedures for managing non-performance or underperformance should have regard to procedural fairness and clearly indicate the circumstances where termination of employment or reduction in classification is likely to be considered. They should contain provisions for employees to be warned about non-performance or unsatisfactory performance and to be given an opportunity to improve performance.

Underperformance cases should be managed in accordance with relevant agency procedures. Failure to do so could result in the Fair Work Commission or another review body determining that any resultant action to reduce an employee’s classification or terminate employment should be set aside and the employee reinstated to their original position.

Underperformance during probation is normally managed as part of probation procedures. Termination of employment during probation is normally actioned under provisions in relation to failure to meet a condition of engagement. More information on probation is here.

There may be circumstances where an employee who is performing unsatisfactorily could be more appropriately dealt with under an agency’s Code of Conduct procedures. Examples include where an employee fails to perform their duties with appropriate care and diligence, fails to comply with a lawful or reasonable direction about the way they are to perform their duties, or refuses to participate in the agency’s performance management/appraisal process.

The Australian Government Solicitor’s 2015 Legal Briefing 106 Dealing effectively with unsatisfactory performance in the Australian Public Service may assist in the management of underperformance cases.

Non-performance or underperformance of duties due to physical or mental incapacity

In most cases termination because of an employee’s physical or mental incapacity should be considered under subsection 29(3)(d).

However, there may be situations where unsatisfactory or non-performance of duties is a more appropriate ground for termination, for example:

  • where an agency reassigns duties to an ongoing APS employee under section 25 of the PS Act due to physical or mental incapacity, and
  • the employee is deemed able and qualified to perform the new duties, and
  • the employee unreasonably refuses to perform the duties.

In such a case, the incapacity of the employee to perform the previously assigned duties may not be relevant.

d. Inability to perform duties because of physical or mental incapacity

Termination of employment due to an inability to perform duties because of physical or mental incapacity raises complex legal issues. Agencies are advised to seek specific legal advice before proceeding with the termination of employment in these circumstances.

The FW Act, anti-discrimination legislation and the legislation governing Commonwealth Superannuation arrangements all provide limitations on the powers of the agency head to terminate employment in these circumstances. See Superannuation below.

Note: Under regulation 3.1 of the Public Service Regulations 1999, an agency head may direct, in writing, an employee to attend a medical examination, by a nominated medical practitioner, for the purposes of assessing the employee's fitness for duty.

e. Failure to satisfactorily complete an entry-level training course

This ground may be considered where the employee:

  • is engaged or assigned duties in a training classification, or
  • is not engaged in a formal training classification but was clearly advised that completion of the relevant training was the basis of their employment, or
  • is not in a formal training classification, but the requirement to undergo training is specified as a formal condition of engagement imposed under subsection 22(6) of the PS Act.

However, where there is a failure to meet a condition of engagement it may be more appropriate to consider termination under paragraph 29(3)(f) of the PS Act.

The employee should be advised in writing of what stage in the training course a failure to meet certain requirements can potentially lead to termination of employment.

f. Failure to meet a condition of engagement

An employee must be notified of any specific conditions associated with their engagement prior to the engagement, for example in the letter of offer. The agency should provide information to the employee on how, and by when, the condition of engagement must be satisfied. If these conditions are not met, employment can be terminated.

For more information, see Conditions of Engagement.

g. Breach of the Code of Conduct

For more information see Handling misconduct: a human resource manager's guide.

Serious misconduct

Agencies will need to determine on a case by case basis whether the conduct of an employee falls within the definition of ‘serious misconduct’ in the FW Regulations and therefore whether the employee is entitled to notice of termination, or payment in lieu of notice.

There may be circumstances where an employee can be immediately suspended with or without pay. However, this does not mean that APS employees can have their employment terminated 'on the spot' for serious misconduct (sometime called summary dismissal). Agencies must follow the procedures established under section 15 (3) of the PS Act for determining whether an employee has breached the Code of Conduct.

Termination of employment with or without notice on the grounds of misconduct can only occur following the processes detailed in the agency’s misconduct procedures.

Non-ongoing employees

Where a person is engaged as a non-ongoing APS employee for a specified term, a specified task, or on an irregular or intermittent basis, the employment ceases at the end of the engagement period or at the completion of the task. In this circumstance, the person is not regarded as having had their employment terminated for the purpose of the FW Act and they are not entitled to notice of termination or redundancy provisions.

Notice of early termination

Except in limited circumstances (such as where the termination is because of serious misconduct), where employment is being terminated prior to the specified end date or prior to the completion of a specified task , a non-ongoing APS employee is entitled to notice of termination or payment in lieu of notice at least equal to the amount as set out in section 117 of the FW Act.

Note: Under section 123 of the FW Act, an employer is not required to give notice or payment in lieu of notice in certain circumstances, including to casual employees, employees engaged for a specified period of time, for a specified task or for the duration of a specified season. However, because of the provisions of section 29 of the PS Act, the courts are unlikely to regard APS specified term and task employment as specified term or specified task employment for the purposes of the FW Act. This means that notice or payment in lieu is required when terminating non-ongoing APS employees before the specified date on which their employment was expected to end.

Compensation for early termination

Section 119 of the FW Act establishes a minimum payment required as compensation for early termination where:

  • the duties in relation to which the employee was engaged have been completed ahead of time; or
  • a decision has been made that those duties are no longer required to be performed.

While this is a minimum requirement, compensation must also be reasonable. It must take account of the particular circumstances of the engagement—for example, whether the person relocated from interstate or overseas to take up the engagement, the length of service as a non-ongoing APS employee prior to termination, and other steps taken to mitigate the employee's loss such as assisting in finding alternative employment.

To avoid uncertainty for both parties, arrangements that will apply to the early termination of employment for APS employees engaged for a specified term or a specified task should be detailed in individual employment contracts.

  • Unless other arrangements are agreed between the parties, contracts should make it clear that the employee shall not be entitled to compensation if employment is ended before the expected end date or completion of the specified task, other than in circumstances described in Section 119 of the FW Act.
  • Where an employment contract provides entitlements equivalent to or greater than the NES, it should be clear that the employee is not entitled to both—i.e. entitlements under the employment contract are reduced by any entitlements provided to the employee under the NES.

SES employees

For SES employees, there are certain additional requirements that must be satisfied before employment can be terminated.

More information on SES employment and separation can be found here.

Section 38 of the PS Act provides that an agency head cannot issue a notice of termination to an SES employee unless the Commissioner has issued a certificate stating that all relevant requirements of the Directions have been satisfied in respect of the proposed termination, and that the Commissioner is satisfied that the termination is in the public interest. At the date of publication of this guidance there are no relevant Directions.

Note: Section 37 of the PS Act allows an agency head to offer an SES employee an incentive to retire. In these circumstances, separation is not considered to be an employer initiated termination. Information on offering incentives for SES employees to retire (under section 37 of the PS Act) is here.

Superannuation

Superannuation issues relating to termination of employment are the responsibility of the Department of Finance and the Commonwealth Superannuation Corporation (CSC).

In relation to termination for non-performance or underperformance of duties due to physical or mental incapacity, there are some specific limitations set out in superannuation legislation that limit an agency head’s power to terminate employment.

Agencies are encouraged to review the information available on the Commonwealth Superannuation Corporation website.

CSS, PSS or PSSap members

In considering whether to terminate the employment of an APS employee who is a member of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) or the Public Sector Superannuation accumulation plan (PSSap), an agency head needs to have regard to the requirements relating to termination on medical grounds.

In effect, the test applied by the relevant superannuation authority (currently the Commonwealth Superannuation Corporation) in these cases is that the employee must be considered to be totally and permanently incapacitated (TPI).

In cases where the CSC is not satisfied that an employee is TPI, the employee’s employment cannot be terminated on the ground of non-performance or underperformance of duties due to physical or mental incapacity (paragraph 29(3)(d) of the PS Act).

If paragraph 29(3)(d) of the PS Act is used as the ground for termination in a case where an Invalidity Retirement Certificate has not been issued, the termination could be subject to challenge.

Other funds

If an ongoing APS employee is not a member of the CSS, PSS or PSSap, then the use of the ground set out in paragraph 29(3)(d) of the PS Act to terminate employment is not subject to the requirement that the employee be assessed as TPI.

However, agencies will still need to be satisfied that the employee’s mental or physical incapacity is sufficiently serious to prevent them from performing their duties.

Compulsory reduction in classification

Subsection 23(4) of the PS Act sets out a range of grounds under which an agency head may reduce an employee’s classification without the employee’s consent. The list of grounds includes:

  • a sanction for a breach of the Code of Conduct
  • being excess to requirements at the higher classification
  • lacking, or losing, an essential qualification
  • non-performance, or unsatisfactory performance, of duties at the higher classification; and
  • inability to perform duties at the higher classification because of physical or mental incapacity.

There is considerable overlap between these grounds and those specified in subsection 29(3) of the PS Act in relation to termination of employment. As part of the decision making process to determine whether an employee’s employment should be terminated, an agency head may wish to consider a range of options, including whether, in the particular circumstances of the case, reduction in classification provides a more appropriate outcome.

Any procedures prescribed in an industrial instrument or employment contract must be followed.

Review of termination decisions

There is no right of appeal or review under the PS Act or the PS Regulations in relation to a decision to terminate the employment of an ongoing or non-ongoing APS employee (apart from a right under PS Regulation 7.2 to request investigation of the former employee's separation entitlements).

However, the FW Act has rules and entitlements that apply to termination of employment, including minimum periods of notice, protections against unfair dismissal and dismissal in breach of the General Protections provisions of that Act.

APS employees may also be able to apply for judicial review of termination decisions on the ground of failure to comply with the requirements of administrative law.

Key legislation

  • Public Service Act 1999
  • Public Service Regulations 1999
  • Australian Public Service Commissioner’s Directions 2016
  • Fair Work Act 2009
  • Administrative Decisions (Judicial Review) Act 1977
  • Age Discrimination Act 2004
  • Disability Discrimination Act 1992
  • Racial Discrimination Act 1975
  • Sex Discrimination Act 1984

Legal advice and the PS Act

Agencies are requested to liaise with the Australian Public Service Commission (APSC) when obtaining advice and forward to the APSC copies of any legal advice that they obtain regarding the PS Act framework.

Agencies are also asked to ensure that the APSC is notified of any court or Fair Work Commission proceedings that raise issues of interpretation of the PS Act framework.

Download this publication