Terminating employment: Notice period and final pay

Introduction

Our Employment Law team provides answers to some common questions asked by employers when considering terminating an employee.

How much notice must I provide?

Practically speaking, notice periods allow employees the opportunity to look for a new job, while still receiving an income from their previous employer, albeit for a limited time.

Importantly, only full time or part time employees are entitled to a notice period, and only if they have not been dismissed for serious misconduct.

When determining how much notice you must provide, the first thing to check is the employee's Employment Contract or Modern Award. Often, these provide how much notice an employee must be given upon termination of their employment.

In the event there is no contract or applicable Modern Award, your next port of call is the Fair Work Act 2009 (Cth). Section 117 details how much notice an employee must be given upon termination, with the period of notice dependent on the length of employment. Employees over the age of 45 are entitled to an extra week's notice.

Remember, just because an employee is entitled to a particular notice period, it does not mean you must have that employee work out that notice period. You can request the employee to not attend work at all during their notice period, though you must still pay the employee the salary to which they would have ordinarily been entitled had they attended work during the notice period.

Final Pay

In the event you have just terminated someone's employment, there would usually be some entitlements or salary that the employee has accrued, but which have not yet been paid.

As a general rule, if an employee has accrued an entitlement at the time of their dismissal, then they must be paid for that entitlement. This includes, amongst other things, outstanding salary for hours worked, annual leave and superannuation. However, this does not include accrued personal leave, be it sick leave or carer's leave.

As employment lawyers, we are regularly asked by employers whether a portion of an employee's final pay can be withheld or a sum deducted from that final pay, on account of some outstanding issue.

Such deductions are risky, given that the scope for such deductions in the Fair Work Act 2009 is very narrow. Before proceeding with any deduction, a comprehensive review of the relevant Employment Contract, Modern Award or Enterprise Agreement must be performed.

As a preventative step, we also recommend that template Employment Contacts contain a specific right to deduct amounts that might be owed by the employee, so the employee would agree to such deductions on signing the Contract.

Depending on the circumstances, final pay may also include additional salary to which the employee may not ordinarily have been entitled. Of course, such additional salary may be paid for any number of reasons, often related to the particular circumstances of the employment and of the termination itself.

In such circumstances, we strongly recommend that both the employer and employee sign an agreement detailing the circumstances of the additional payment and what exactly the employee will provide to the employer in exchange for any such additional payment.

How can Sharrock Pitman Legal help me?

Our guidance and counsel can help reduce the risk and cost associated with terminating employment. We aim to make what is often an uncomfortable and difficult situation as stress free as possible.

If you are experiencing any issues with an employee, please give us a call. It would be our pleasure to assist you. Furthermore, we offer fixed prices to all customers, along with substantive benefits to those who own or manage a business. Click here for full details.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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