Final pay is the money an employer owes an employee when employment ends. In Australia, that usually includes payment for work already performed, plus any other entitlements that are due on termination. Under Fair Work regulations, it is required to be paid within 7 days after the employee\u2019s last day of employment, but you must still check the relevant award, enterprise agreement, or contract because specific rules can be different.<\/p>\n
For employers searching final pay calculation Australia or termination pay Australia, the risk is simple: the final pay packet is often larger than just ordinary wages. It can also include notice in lieu, unused annual leave, long service leave where applicable, redundancy pay, and any award-based entitlements that are still owing.<\/p>\n
Final pay is the employee\u2019s last payment after employment ends. Fair Work says it should include all outstanding entitlements, which commonly means wages already earned and leave balances that must be paid out on termination.<\/p>\n
A correct final pay calculation usually needs to include:<\/p>\n
1) Confirm the reason employment ended.<\/strong> 2) Check the notice requirement.\u00a0<\/strong><\/p>\n Under the NES, minimum notice depends on continuous service:<\/p>\n *Employees over 45 years old get an extra week if they have at least 2 years of service.<\/em><\/p>\n 3) Decide whether notice is worked or paid out.<\/strong> 4) Add unused leave and other termination entitlements.<\/strong> 5) Add redundancy pay if the job was made redundant and the employee is eligible.<\/strong> The table below shows the standard entitlement employees should receive:<\/p>\n *Redundancy pay for employees with 10+ years of continuous service has been reduced from 16 weeks to 12 weeks, aligning with the 2004 Redundancy Case.<\/em><\/p>\n 6) Check whether any lawful deduction for insufficient notice applies.<\/strong> A practical termination pay calculation is usually built in this order:<\/p>\n That order matters because employers often try to start with leave balances or deductions first. That is backwards. You first establish what is owed, then check whether any deduction is actually permitted.<\/p>\n Payment in lieu of notice means the employee does not work the notice period, but is paid as though they had. Fair Work says the amount must equal the full amount the employee would have been paid if they had worked until the end of the notice period, including incentive payments, loadings, monetary allowances, overtime and penalty rates. Once the notice is paid out, employment ends on the payment date and the employee stops accruing leave and other entitlements from that point.<\/p>\n If the employee resigns and has not given enough notice, the award may allow a deduction from award wages in final pay, but not all awards do. Fair Work says employers need to check the award because some modern awards do not allow deductions for insufficient notice at all. If the award does allow it, the deduction is limited to award wages and still cannot be unreasonable.<\/p>\n When an employee is terminated for serious misconduct, the employer does not have to give notice. Even then, final pay still has to include outstanding entitlements such as payment for time worked and accrued annual leave, and in some cases long service leave.<\/p>\n If the role is genuinely redundant, the employer may need to pay redundancy pay. Fair Work says redundancy pay is based on continuous service, and some employees do not get redundancy pay at all, including most casual employees, apprentices, trainees engaged only for the training agreement, employees with less than 12 months\u2019 service, and most employees of a small business. A small business employer is generally one with fewer than 15 employees at the time notice is given.<\/p>\n The most common errors from handling final payments include:<\/p>\n Q1: What is included in final pay in Australia?<\/strong> Q2: How long does an employer have to pay final pay?<\/strong> Q3: Can an employer deduct notice from final pay?<\/strong> Q4: Does final pay include unused annual leave?<\/strong> Q5: Is redundancy pay part of final pay?<\/strong> Redundancy Pay in Australia: Calculating Severance Entitlements Under the NES<\/a><\/span><\/em><\/p>\n Handling ETPs: A Guide for Payroll Teams<\/a><\/span><\/em><\/p>\n Redundancy and ETP Tax Implications<\/a><\/span><\/em><\/p>\n How to Handle Casual Employee Termination?<\/a><\/em><\/span><\/p>\n
\nResignation, dismissal, serious misconduct, redundancy and expiry of a fixed-term arrangement can all change what has to be paid. Fair Work is clear that termination can happen for many reasons, and the entitlements differ depending on how the job ended.<\/p>\n\n\n
\n Years of continuous service\u00a0<\/strong><\/td>\n Minimum notice\u00a0<\/strong><\/td>\n<\/tr>\n \n 1 year or less<\/strong><\/td>\n 1 week<\/strong><\/td>\n<\/tr>\n \n 1 to 3 years<\/strong><\/td>\n 2 weeks<\/strong><\/td>\n<\/tr>\n \n 3 to 5 years\u00a0<\/strong><\/td>\n 3 weeks\u00a0<\/strong><\/td>\n<\/tr>\n \n 5 years or more<\/strong><\/td>\n 4 weeks\u00a0<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
\nAn employer can let the employee work the notice period, end employment early and pay it out, or use a combination. If payment in lieu is used, the employee must receive what they would have earned if they had worked to the end of the notice period, including loadings, allowances, overtime and penalty rates where relevant.<\/p>\n
\nFinal pay should include accrued annual leave and, where applicable, long service leave. Fair Work also notes that an employee dismissed for serious misconduct is not entitled to notice, but still must be paid outstanding entitlements such as payment for time worked and accrued annual leave, and in some cases long service leave.<\/p>\n
\nRedundancy pay is based on continuous service and is paid at the employee\u2019s base rate of pay for ordinary hours worked.<\/p>\n\n\n
\n Number of years worked\/continuous service<\/strong><\/td>\n Entitlement\u00a0<\/strong><\/td>\n<\/tr>\n \n 1\u00a0<\/strong><\/td>\n 4 weeks<\/strong><\/td>\n<\/tr>\n \n 2\u00a0\u00a0<\/strong><\/td>\n 6 weeks\u00a0<\/strong><\/td>\n<\/tr>\n \n 3\u00a0<\/strong><\/td>\n 7 weeks\u00a0<\/strong><\/td>\n<\/tr>\n \n 4\u00a0<\/strong><\/td>\n 8 weeks\u00a0<\/strong><\/td>\n<\/tr>\n \n 5\u00a0<\/strong><\/td>\n 10 weeks\u00a0<\/strong><\/td>\n<\/tr>\n \n 6\u00a0<\/strong><\/td>\n 11 weeks\u00a0<\/strong><\/td>\n<\/tr>\n \n 7\u00a0<\/strong><\/td>\n 13 weeks\u00a0<\/strong><\/td>\n<\/tr>\n \n 8<\/strong><\/td>\n 14 weeks\u00a0<\/strong><\/td>\n<\/tr>\n \n 9\u00a0<\/strong><\/td>\n 16 weeks\u00a0<\/strong><\/td>\n<\/tr>\n \n 10 or more<\/strong><\/td>\n 12 weeks\u00a0<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
\nMost awards contain a model term allowing an employer to deduct up to one week of award wages from final pay if the employee is over 18, did not give enough notice, the employer did not agree to a shorter period, and the deduction is not unreasonable. But only wages due under the award can be withheld. That includes ordinary hours, penalties, allowances, overtime and time off instead of overtime owed on termination. It does not include accumulated leave due on termination or over-award payments.<\/p>\nHow termination pay works in practice<\/h2>\n
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What is payment in lieu of notice?<\/h2>\n
What does final pay include if the employee resigns without enough notice?<\/h2>\n
What happens if the employee is dismissed for serious misconduct?<\/h2>\n
What happens in a redundancy?<\/h2>\n
Common final pay mistakes<\/h2>\n
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FAQs About Final Pay and Redundancy<\/h2>\n
\nA1: Final pay usually includes wages owed, unused annual leave, leave loading where applicable, long service leave where applicable, payment in lieu of notice if relevant, and redundancy pay if the employee is eligible.<\/p>\n
\nA2: Fair Work states most awards require final pay within 7 days after the employee\u2019s last day of employment, but the award, agreement or contract must be checked.<\/p>\n
\nA3: Sometimes. Most awards allow a deduction of up to one week of award wages if the employee is over 18, did not give enough notice, and the deduction is not unreasonable.<\/p>\n
\nA4: Yes. Final pay should include accrued annual leave that has not been taken, and annual leave loading if it applies and is payable on termination.<\/p>\n
\nA5: Yes, if the termination is a redundancy and the employee is eligible for redundancy pay under the NES.<\/p>\nRead More<\/h2>\n
Final Pay & Redundancy Related<\/h2>\n
HR and Glossary<\/h2>\n