How do employers make a termination payment to an employee? The end of an employment relationship can be a difficult and emotional time for both the employer and the employee.
In Australia, there are a number of laws and regulations that govern how an employer can terminate an employee’s employment. This includes information on the termination payments that the employer may owe. Some important legislations about employment law are:
- Fair Work Act 2009
- National Employment Standards (NES)
- Work Health and Safety Standards (WHS)
- State and Federal anti-discrimination laws
- Privacy Act 1988
In this article, we will take a closer look at the termination of employment in Australia, including
- the different types of termination,
- the notice periods,
- the termination payments that the employer may owe.
What’s in an Employment Termination Payment?
Termination payment or final pay is the remuneration employees receive from the employer when their employment ends. Employers have the responsibility to calculate final pay and other necessary payments for their employee. What are the specific entitlements they get? FairWork Ombudsman lists the following:
- outstanding wages for hours they have worked, including penalty rates and allowances
- any accumulated annual leave, including annual leave loading, if it would have been paid during employment
- if it applies:
- accrued or pro rata long service leave
- payment in lieu of notice
- redundancy pay.
Moreover, when an employee leaves their employment, the Department of Human Services (DHS) may request that employers file an Employment Separation Certificate. This certificate must mention the final pay payments.
Calculating Your Employee Termination Payments
Here are some of the tools you can use to calculate your eligible termination payments:
- Award and pay rate
- Annual leave entitlements
- Redundancy pay (if termination is due to genuine redundancy)
When calculating your termination payment, these tips may be helpful:
- Refer to your employment contract, registered enterprise agreement, or award to determine the specific entitlements and calculations for your final pay.
- Your employer should make your final pay within seven days of the end of your employment. You should also receive a pay slip within one working day after you receive the payment.
- Consider any accrued entitlements, such as annual leave, annual leave loading (if applicable), long service leave, payment in lieu of notice, and redundancy pay.
- Calculate the wages owed to you for the hours you have worked, including any overtime or penalty rates.
- Identify any other owed payments like early retirement scheme payments, death benefit termination payments, life benefit termination payments, and severance pay.
Note: Employment termination can also be by mutual agreement, otherwise known as a life benefit termination payment. In the event of the death of an employee, employers also need to pay a death benefit termination payment to a beneficiary. Death benefit payments are made through a lump sum payment to the beneficiary
The calculation of final pay may vary depending on individual circumstances and the specific terms outlined in your employment agreement or relevant industrial instrument.
If you have any doubts or questions, it’s advisable to seek advice from a professional, such as an employment lawyer or an HR specialist, to ensure that your final pay is calculated correctly and in accordance with the applicable laws and regulations.
Different Types of Termination in Australia
To have a wider understanding of termination payment and termination in Australia, you need to learn about the types of termination.
Australian employers need to follow specific rules and regulations to ensure that the termination is fair and consistent with the terms of any employment contract. Here are some of the types of termination from employment in Australia:
Resignation
An employee may resign from their job voluntarily for any reason, so long as they give the advance notice stipulated in their employment contract.
Dismissal
An employee can be dismissed (fired) for various reasons, but it’s important to follow the rules about dismissal, notice, and final pay. There are different types of dismissal, including:
a. Unfair dismissal. This occurs when an employee is dismissed from their job in a way that is harsh, unjust, or unreasonable. Employees who have been employed for six months are protected from terminations of employment that are harsh, unjust, unreasonable, or that don’t follow the correct grievance procedure.
For companies with less than 15 employees, the protection covers those who are employed for 12 months.
b. General protections dismissal. This is distinct from an unfair termination. It is not about “fairness,” it is about whether the employer violated the Fair Work Act’s general protections regulations.
Employees who are let go for a Fair Work Act-prohibited reason have this choice. These reasons include:
- Discrimination
- Workplace rights
- Sham contracting
- Temporary absence due to illness or injury
- Freedom of association.
c. Unlawful termination. This refers to the situation where an employer ends an employee’s employment in a way that is in violation of the Fair Work Act. However, you cannot apply if you are eligible to apply for unfair dismissal or general protections dismissal.
Minimum periods of notice at termination are set out in the National Employment Standards. Moreover, the length of notice required to be given to an employee will depend on the duration of the employee’s period of continuous service.
If an employer fails to follow the correct procedure when terminating an employee, it can result in claims for breach of contract or breach of the industrial instrument. Also, potential remedies include reinstatement and compensation.
Notice Periods for Employee Termination
The National Employment Standards (NES) include notice of termination and redundancy pay. Regardless of any awards, agreements, or contracts, the NES applies to all employees covered by the national workplace relations system.
The minimum notice period, or payment in lieu of notice, that an employer must provide an employee to terminate their employment is set forth in the NES. Not just those covered by the national workplace relations system are affected by this; all employees (apart from casuals) are as well.
Here’s a table for the minimum notice periods that employers must comply with:
| Period of continuous service | Minimum notice period |
| 1 year or less | 1 week |
| More than 1 year – 3 years | 2 weeks |
| More than 3 years – 5 years | 3 weeks |
| More than 5 years | 4 weeks |
If the employee is over 45 years old and has completed at least two years in service, the business shall give them an additional week of notice upon receiving the notice.
Need Help Regarding Employment Termination Payments?
If you are facing termination from employment and believe that it was wrongful or unfair, it may be helpful to consult with an employment lawyer who specialises in wrongful termination cases.
Schedule a consultation with JB Solicitors today to discuss your case. We can provide legal advice and representation for a range of employment-related issues, including wrongful termination, unfair dismissal, discrimination, harassment, and wage and hour disputes.
Submit an enquiry now if you need help with your employee termination payment.
