When we think of the issue of unfair dismissal, there will always be disputes about who actually bears the ultimate cost, the employer or the employee. While some would say it is the employee, other schools of thought seem to think it is the employer. But who does bear the cost? A sneak peek at what unfair dismissal is.

According to labor law, an unfair dismissal is an act of employment termination, made without good reason or contrary to the specific legislation. Put in another way, when there is a good reason for dismissing an employee, but the dismissal happens through the wrong procedure.

Now when an aggrieved employee wants to raise a claim of unfair dismissal, they have to lodge an unfair dismissal application to the commission responsible for handling such matters in the country.

For example, the Fair Work Commission is responsible for such in Australia. When this procedure is completed, the commission urgently sends a due copy of the application to the employer who then reciprocates and send a response to the commission and the ex-employee. More often than not, the commission tries to settle the matter through agreements, but where this is not possible; it progresses to a legal hearing.

To examine which party bears the ultimate cost of unfair dismissal, it is important we examine it from different perspectives:

Financially, in most cases, for an aggrieved ex-employee to lodge an unfair dismissal application against a former employer, they will have to pay a particular fee, before they can start the process. This is currently $71.90This fee can be waived in cases of serious financial hardship.

Thereafter, the cost reduces considerably on the side of the employee and in some cases, the fee may even be refunded if the application is not accepted. For the employer, especially employers or large companies who are being accused of unfair dismissal, they will bear the cost of hiring a Human Resource/ Employment Relations Consultant or a lawyer to ascertain if truly there’s legal backing for unfair dismissal.

Also, in a case where the employee was truly unfairly dismissed, the compensation paid by the employer is usually hefty, when compared to the compensation paid by the ex-employee, if any at all when the claim is unsubstantiated. While the Fair Work Act in Australia allows costs payment if either of the party acted unworthily or without genuine cause. It should also be noticed that the same act states that all parties bear their own cost.

Note; Compensation is capped at 26 weeks’ pay and the total amount of compensation able to be awarded is half of the high-income threshold amount that applies immediately before the dismissal. This is currently $71,000 as the high-income threshold until 30 June 2018 is $142,000

Additionally, either parties can be detrimentally affected by an unfair dismissal application. Look at it this way, it can affect the employee’s ability to get another reasonable job or affect the company’s productive. If a person starts an unfair dismissal application against their former employer and after the whole proceedings, they are found to have acted inappropriately or without cause, they might find it considerably difficult to get another good job as acts like this are closely monitored by other employers.

For an employer found guilty of unfair dismissal, not only would they lose customers trust, but there will also be internal employee uproar. The public sentiment would be in support of the unfairly dismissed employee, and the image of the company will be damaged. Before long, stakeholders begin to express their dissent and the company has to deal with it.

Before embarking on dismissing an employee unfairly, it is noteworthy employers come to grasp the cost that they would be paying. Whether the dismissal was intentional or not, as far as it is unfair, employers end up bearing the greater cost. No matter how you look at it, it ultimately affects the profit gearing and perceived image.

The team at Fresh HR Insights fully understand and appreciate the costs involved with terminating an employee either because of their conduct or their capability. Which ever it is we strongly advise to tread carefully and follow a process. If you need to terminate give us a call on 0452 471 960 or alternatively book a time to chat through our booking system.

Some facts: More than 90% of unfair dismissal claims in 2017 were resolved before they reached a hearing involving a Fair Work Commissioner, but experts say disputes can still cost businesses significant time and money even if they never make it to the formal hearing stage.

The Fair Work Commission’s annual report in 2016-17 revealed 14,587 claims were made for unfair dismissal against Australian businesses in the 12 months leading up to June 30. On average, this is 280 claims a week.

If you want to find out more about the Disciplinary process, we have developed an eBook that will guide you through the process step by step and provide tips and templates. For the month of March 2019 this eBook is on sale. 

In House Training

Managing Separation and Termination training – Duration 3-hours for up to 10 people

Learning Outcomes:

  • Understanding Legislation
  • Knowledge of what Fair Work look for in an unfair dismissal claim
  • Procedural Fairness awareness
  • Skills and Knowledge for Disciplinary Action
  • The role of Managers and Supervisors
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