Termination of Employment
Timing of Final Pay
The Fair Work Act does not specify when amounts due on termination should be paid to the employee. In the past, Fair Work provided us with the following advice:
| It should be paid to an employee on their last day of work or on the next scheduled pay day, unless an award, employment contract, enterprise agreement or other registered agreement says otherwise. |
Fair Work are currently reviewing this situation and have developed a new clause regarding “payment on termination of employment” that is intended to be inserted into 92 of the Modern Awards with decisions still pending on the remaining 30 awards (which already have existing clauses).
These changes are still listed as provisional, but the draft variation determinations are being drawn up for 92 of the 122 awards.
The main change to be introduced will require any unpaid wages and all other amounts due to an employee to be paid no later than 7 days after the employee’s last day of employment.
| X. Payment on termination of employment
(a) The employer must pay an employee no later than 7 days after the day on which the employee’s employment terminates: (i) the employee’s wages under this award for any complete or incomplete pay period up to the end of the day of the termination; and (ii) all other amounts that are due to the employee under this award and the NES. |
The link below contains the full clause that will be inserted in the awards:
https://www.fwc.gov.au/documents/decisionssigned/html/2018fwc4206.htm
What about Long Service Leave?
For most employees, Long Service Leave conditions currently remain in accordance with the State rules. Many State LSL Acts also refer to the timing of final payments of unused LSL, and you are still bound by these conditions. In fact, the new award clause specifically reminds employers to double check the LSL rules in your State.
| Note 3: State and Territory long service leave laws or long service leave entitlements under s.113 of the Act, may require an employer to pay an employee for accrued long service leave on the day on which the employee’s employment terminates or shortly after. |
For example, in NSW it says you must pay the LSL forthwith. This is defined as immediately; without delay. Our dictionary also provided the following helpful synonyms: immediately, at once, instantly, directly, right away, straight away, now, this very minute, in a flash, instantaneously, without further ado… you get the idea.
| (5) (a) Where the services of a worker are terminated… the employer shall forthwith pay to the worker in full the worker’s ordinary pay for the leave less any amount already paid to the worker in respect of that leave… |
In SA, they have opted for much simpler wording with payment required immediately on termination.
| (4) A payment in lieu of long service leave made under this Act on the termination of a worker’s service… must be made to the worker immediately on the termination… |
Advice for payroll
The new rules, once enacted, will give you 7 days to make the termination payment, however you still need to comply with the LSL legislation. As a result Alltech would encourage to always make payment as soon as possible after termination.
More information
Keep an eye on your awards for the changes.
For more information, you can read this decision which was released on 15th August 2018
https://www.fwc.gov.au/documents/decisionssigned/html/2018fwcfb4735.htm