Understanding Your Termination Pay: Don’t Miss Out on What You’re Owed

KEY TAKE OUTS:

• Termination of employment can be a challenging experience, but understanding your rights and entitlements during this process is crucial.
• There are various entitlements to be paid on termination depending on your employment status and employment contract.
• The final payout is typically paid within 7 days of the date of termination but will depend on your contract of employment.

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Terminating employment can be a challenging experience, but understanding your rights and entitlements during this process is crucial. When your employment ends, you’re entitled to various benefits, including not only your owed wages but also other earned entitlements. If you haven’t received your final pay, its essential to raise this with your employer. Disputes regarding final payouts are typically resolved between the employer and employee. Generally, most awards say that employers need to pay employees their final payment within seven (7) days of the employment ending. Coutts is ready to assist you in understanding your rights and entitlements and reaching an amicable agreement with your employer regarding final payout if issues arise.

 

The entitlements which may be paid to you on termination of your employment include: –

1. Unpaid wages;
2. Unpaid bonuses (if applicable);
3. Annual leave;
4. Long service leave (if applicable);
5. Payment in lieu of notice;
6. Redundancy pay (if applicable).

These entitlements may not apply to employees who are employed for specific period of time, to perform specific tasks or seasonally employed, such as contractors.

 

In addition, certain entitlements are not owed for employees terminated for serious misconduct, casual employees or employees (other than an apprentice) to whom a training arrangement applies.

 

Unpaid Wages

When your employment ends, your employer must settle any outstanding wages for the work you’ve done up to the termination date. This includes regular pay, overtime and any other earnings.

 

Unpaid Bonuses

In some cases, employees will have bonus incentive schemes incorporated into their employment contracts. It is important to review the bonus incentive schemes when considering terminating your employment or if you are terminated. The employees contract of employment and/or award will set out whether you are entitled to payment of bonuses which were earned and accrued during your tenure. If you are entitled to payment of bonuses earned and accrued during your tenure and termination does not impact that, then those bonuses should be paid to you in your final pay.

 

Annual Leave

If you’re a full-time or part-time employee, you may have accrued annual leave during your tenure. Upon termination, any unused and accrued annual leave should be compensated. You should check your employment contract for this entitlement.

Casual employees do not accrue annual leave; however, it is essential to check the terms of your contract of employment.

 

Long Service Leave

Long Service Leave varies by state or territory in Australia. In New South Wales, section 2(a) of the Long Service Leave Act 1955 No 38, states that after ten years of service with the same employer, an employee is entitled to two months of long service leave. For every five years of service, you earn one month of leave. If your employment began before 1 January 2010, you should consult Your Award or agreement for precise details.

In some circumstances, Long Service Leave may be paid out on a pro-rata basis prior to reaching your ten year service, however, it is essential to check the terms of your employment contract or seek advice depending on the circumstances of your termination.

 

Notice of Termination or Payment in Lieu of Notice

If your contract requires advanced notice of termination, your employer must provide it. If they fail to do so or they do not wish for you to work out your notice period, they will need to pay you in lieu of notice. If you are terminated due to serious misconduct however, this requirement may not apply.

 

Redundancy Pay

A redundancy is the case where an employer terminates an employee for the reason that they either no longer need that job to be done by anyone, or because of the insolvency or bankruptcy of the employer. Redundancy pay is calculated from the continuous service of an employee and excludes periods of unpaid leave. It is not applicable to casual employees, employees employed for a period of less than 12 months or small businesses. To be classified as a small business, there must be fewer than 15 employees. Employers may reduce the amount of redundancy pay if they have found you suitable alternative employment, or if they are facing financial hardship. There are other exclusions under the National Employment Standards in respect to employees entitled to redundancy pay. If you are made redundant you should consult with your employment contract and seek legal advice.

 

Exclusions

Personal leave, such as sick leave or carer’s leave will not be paid out on termination. Whilst it accrues, if you do not use up this entitlement during your employment it will be lost.

 

 

Deductions From Sum Payout

Some businesses may offer to pay for the training and development of employees. In order to protect the employer from paying for training for employees that then leave the company, the contract of employment may contain a clause which stipulates that if an employee leaves within a certain period of time after completing the course, then the employee must reimburse a portion of the fees to their employer. The terms of this will be stipulated in the contract of employment, and may vary depending on how long after the employee terminated their contract with the employer.

 

HOW COUTTS CAN HELP

Navigating termination payouts involves understanding your contractual rights and entitlements. Employment laws vary by state, so it is important to consult professionals who specialise in your state’s jurisdiction. Coutts can ensure a smooth transition during this challenging time, providing expert advice for your specific situation.

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