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Terminating an employee - serious misconduct versus underperformance

There are many factors to consider when terminating an employee. HIA can assist in ensuring you follow a fair and appropriate termination process.

There is no ‘one size fits all’ approach to terminating an employee for serious misconduct or underperformance. However, there are some factors that you should consider to ensure you follow a fair and appropriate termination process. 

If you operate a small business with less than 15 employees, you must follow the Small Business Fair Dismissal Code when terminating an employee. 

Underperformance or serious misconduct?

Your reason for termination is important as it may have an impact on your employee entitlements. For example, generally notice will not be payable for an employee terminated for serious misconduct.

There is often confusion between what amounts to serious misconduct as opposed to when an employee is underperforming. 

Outlined below are some factors to consider when terminating an employee.

Serious misconduct

Under the Fair Work Regulations serious misconduct has its ordinary meaning. Serious misconduct involves an employee deliberately behaving in a way that is inconsistent with continuing their employment. 

To be considered serious misconduct, the behaviour by that employee must be:

  • Wilful or deliberate behaviour that is inconsistent with the continuation of employment
  • Conduct that causes a serious and imminent risk to the health or safety of a person or the reputation, viability or profitability of the employers business.

Serious misconduct may include:

  • Sexual harassment
  • Theft
  • Fraud
  • Assault/threats of violence
  • Intoxication at work
  • Refusal to carry out lawful and reasonable instruction that is consistent with the employee’s employment. 


Underperformance is when an employee is not doing their job properly or is behaving in an unacceptable way at work. This may include:

  • Failure to perform the duties of the position or to perform them to the required standard
  • Not following workplaces policies or rules
  • Unacceptable behaviour in the workplace
  • Disruptive or negative behaviour that impacts on co-workers
  • Unexplained or numerous absences
  • ‘On the job’ absenteeism i.e. being late, taking extended or unexplained breaks
  • Poor work relationships
  • Failure to follow directions or instructions.

Handling serious misconduct

Summary dismissal for serious misconduct has immediate effect. It is a severe step to terminate an employee’s employment without notice so you should get legal advice before taking these steps.

Termination for serious misconduct should be considered on a case-by-case basis. 

The steps outlined below may assist you in determining when dismissal on the basis of serious misconduct is warranted and how it should be approached.

Identify the serious misconduct
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  • What has the employee done?
  • What effect has this conduct had on the business?
  • What effect has this conduct had on other employees?
  • What effect has this conduct had on a client?
  • Is this the first time the employee has engaged in such conduct? If it is not, have previous warnings been given about this behaviour – is the employee aware that it is unacceptable?
  • Do any workplace policies apply?
  • Did anyone witness the misconduct or was anyone else directly involved?
Discuss the misconduct with the employee
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Organise a meeting to discuss the problem directly with the employee to avoid any misunderstandings or assumptions being made. 

The employer should:

  • Let the employee know the reason for the meeting.
  • Take into account the employees personal circumstances.
  • Advise that they can have a support person present.
  • Record the meeting in writing.
  • Explain that this behaviour could lead to their instant dismissal and the reason why such behaviour could lead to that outcome.
Consider your options
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Taking into consideration:

  • those issues listed at Step 1
  • the information provided by the employee during Step 2 and 
  • the seriousness of the conduct
  • You may decide to:
    • Give the employee a written warning
    • Dismiss the employee with notice or pay in lieu of notice
    • Instantly dismiss the employee. 
Prepare and provide the employee with a letter of termination
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If the employees’ action was serious misconduct that warrants summary dismissal, you will need to draft an appropriate termination of employment letter. 

Include in the letter:

  • The reasons for the termination of the employment
  • When the employment will end
  • Any appropriate payments for employment entitlements.

Managing underperformance

Establishing a system to manage underperformance can be a useful tool to ensure that your business runs smoothly.

Any performance management issues should be dealt with as soon as possible as employees can sometimes be unaware that they are not performing well and so are unlikely to change their behaviour. The longer the poor performance is allowed to continue the more difficult it becomes to resolve any issues. 

Consider the following checklist when managing an underperforming employee. 

1. What is the problem?
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Employee/Employer act or understanding Possible cause Action


  • Does not follow directions and take instructions
  • Does not complete tasks in the requested timeframe
  • Is regularly absent.

Does the employee understand what is expected of them in their job?

Is there a clash of personalities?

Does the employee have the skills and training required to do the job?

Is there a wider problem with the work environment?

Is there any evidence of workplace bullying or harassment?

Does the employee have any personal factors that may be affecting their ability to do their job?

Review or create a job description.

Investigate if there is a lack of understanding of  the job role and responsibilities.

Explore possible training opportunities.

Ask yourself what the work environment is like.

2. Assess and analyse the problem
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The employer needs to consider:

  • How serious the problem is
  • How long the problem has existed
  • The differences between what is expected of the employee and the employee’s actual performance.

Organise a meeting to discuss the problem.

The employer should:

  • Let the employee know the reason for the meeting in advance.
  • Advise that they can have a support person present.
3. Meet with the employee to discuss the problem
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The employee should understand:

  • The reason for the meeting
  • What the problem is
  • Why it is a problem
  • How it impacts on the workplace
  • What the employers concerns are.

The employer should give the employee the above points in writing. 

Hold the meeting in private. 

The employer should try to create a non-threatening environment, away from distractions and interruptions. 

Ensure that notes of the meeting have been taken.

Establish meeting outcomes.

The employee needs to be given an opportunity to discuss and respond to problems. 

Reinforce any positive aspects of the employee’s performance.

Talk about the issue not the person.

When discussing performance issues make sure the employee:

  • Is aware that it is a task that is required if them.
  • Has been shown what is required of them.
  • Understands that there is a gap between what is happening and what is required. 


4. Come up with a plan
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The employer and the employee need to come up with a plan together to try and address the issues raised in the meeting.

An action plan for managing underperformance can:

  • Reflect performance expectations. 
  • Include timeframes for review including a date for the next meeting.
  • Clarify the employee’s job description and responsibilities.
  • Include recommendations in relation to training and development.
  • State that if the employee does not meet the expectations set out in the plan; this may lead to the employees’ termination. This needs to be made very clear to the employee. 

Ensure that the above is put into writing and agreed to by the employee.

5. Monitor performance
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The employer must ensure that:

  • They stick to any set review dates
  • They provide positive and negative feedback.

A meeting to discuss the employee’s performance should be conducted even if there is improvement.

Ensure all follow up meetings are recorded in writing.

Identify any further issues that may have arisen.

Continue to monitor performance overtime.

6. Employees performance does not improve
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If the employees performance has not improved before terminating an employee for underperformance the employer should consider if:

  • The employer clearly warned the employee that the employee was not doing the job properly and would have to improve his or her conduct or performance or otherwise be dismissed
  • You provided the employee with a reasonable period of time to improve his/her performance/conduct
  • You provided the employee with any training or opportunity to develop his/her skills
  • You have records of warnings or discussions about how the employees conduct or performance could have been improved.

If you feel you have satisfactory grounds for termination on the basis of underperformance you will need to:

  • Ensure the employee understands the reason for dismissal and provide the employee with an opportunity to respond
  • Provide these reasons in writing along with a letter of termination setting out:
    • The date of termination
    • Reason for termination
    • Appropriate payments for entitlements such as notice, annual leave and redundancy (if applicable).

How can HIA assist members with employee management?

HIA HR Docs can assist members with relevant employment policies and procedure documents relating to performance management. Members can purchase a Performance Management – Reviews Kit which includes a Performance and Misconduct Policy and a variety of templates you can use in your business. 

Additionally, there is a Performance Management – Complaints and Investigations Kit which includes 7 policies and a wide range of template documents you can use. 

Find out more about how HIA HR Docs can help you manage your employees or contact your local HIA Workplace Advisor. 

To find out more, contact HIA's Workplace Services team

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