Notice and final pay

Employers and employees usually need to give notice when they end the employment relationship and there are rules about what needs to be included in an employee’s final pay.

How does an employer give notice?

To end an employee’s employment, an employer must provide them with written notice of their last day of work (except when employment is ending due to serious misconduct).

Notice can be given by:

• delivering it personally at a face-to-face meeting; or
• mailing it to the employee’s last known address; or
• sending an email.

It is recommended that the employer informs the employee in a meeting about their termination, and then follows up the termination in writing.

How much notice does an employer need to give?

• The amount of notice that an employer needs to give to an employee will depend on the award and/or employment contract.

Most awards refer to the minimum period of notice set out in the National Employment Standards (NES) in the Fair Work Act (FW Act).

If an employee is over the age of 45 and has completed at least 2 years of continuous service with the employer, the notice periods above will need to be increased by 1 week. For example, someone who is 50 years old and has been employed for 5 years, would be entitled to 5 weeks’ notice instead of 4.

Employment contracts may provide for different notice provisions than the NES, so employers should check the contract as well.

Casual employees are not entitled to notice of termination.

How does an employee give notice?

Employees should check their award and/or employment contract to find out how much notice they need to give when resigning from their job. In most circumstances, employees can resign verbally without giving notice in writing.

Does notice need to be worked or can it be paid out?

When an employer gives an employee notice of termination, they can decide to either require the employee to work their notice period or pay it out to them (also known as payment in lieu of notice).

When making a payment in lieu of notice, the payment must be equal to the full amount that the employee would have been paid if they had worked until the end of the notice period. This should include:

• incentive-based payments and bonuses
• loadings
• monetary allowances
• overtime
• penalty rates
• any other separately identifiable amounts.

If an employer chooses to pay in lieu of notice, employment will end on the date that the payment is made.

If the employer requires the employee to work out the notice period, then the employee remains employed until the notice period ends.

Final pay

When employment ends, the employer must provide a final pay which includes any outstanding wages and unused annual leave entitlements.

When to pay?

Most awards require employers to pay employees their final payment within 7 days of employment ending. Employment contracts can also specify when final pay must be paid.

If an award or contract doesn’t say when an employee’s final pay must be paid, it is best practise to pay it within 7 days of employment ending.

What is included in the final pay?

The following entitlements should be included in the final pay:

• outstanding wages for hours worked, including any penalty rates and allowances;
• unused annual leave, including leave loading;
• if applicable, accrued or pro-rata long service leave;
• if applicable, redundancy pay.

Personal/carer’s leave (also known as sick leave) is not paid out when employment ends.

What if an employee resigns and they don’t give the correct amount of notice?

Sometimes an employee will resign and give either more than or less than the required amount of notice.

When an employee gives more notice there are two options available for the employer. They can:

• accept the longer notice period; or
• inform the employee that they are only required to give a shorter notice period and ask the employee if they would like to give the shorter notice period.

When an employee gives less than the required notice, the employer should check the relevant award and/or employment contract to determine what options they have available to them.

Most awards say that an employer can deduct up to one week’s wages from an employee if they are over the age of 18, and the employee hasn’t given the correct amount of notice and the deduction isn’t unreasonable.

However, an employer can only deduct from wages owing under the award. An employer cannot deduct from other entitlements owed to the employee upon termination, such as unused annual leave. This would be a breach of the FW Act, because the Act requires an employer to pay out any unused annual leave on termination.