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Last Updated January 25, 2022

Processing the final pay and getting it right

The final employee pay, your obligations, and how to make sure everyone gets what they’re owed.

The conclusion of employment can be initiated by either the employer or the employee. However there are a number of different reasons why the employment relationship may be concluded and slightly different processes to follow for each scenario.

Small Business Society often receives questions about the legalities of processing final payments.  However the employment relationship ends, it’s important to follow the rules about dismissal, notice and final pay for each situation.

Let’s first start by understanding the difference between the different ways an employment relationship ends.

  • Resignation; when an employee provides written notice of their intention to leave. The notice period is set out in the National Employment Standards (NES).  If you do not need the employee to work their notice period, you can pay them in lieu of notice and let them leave early.
  • Redundancy; a position usually becomes redundant when an employer either doesn’t need an employee’s position to be done by anyone.  Employees may be entitled to redundancy benefits depending on their length of service and the award, agreement or contract they were employed under.
  • Dismissal; when an employer needs to dismiss an employee because of a valid reason, such as poor performance, ill health or misconduct. The notice period is set out in the National Employment Standards (NES). If you are thinking about dismissing an employee, you must make sure you’re acting fairly and lawfully. If you dismiss an employee, they can challenge the dismissal with the Fair Work Commission if they think it was unfair.
  • Conclusion during probation; where an employee has not satisfactorily met expectations during probation an employer and conclude employment. The notice period is set out in the National Employment Standards (NES).  If you are thinking about dismissing an employee, you must make sure you’re acting fairly and lawfully. There is a qualifying period of six months or twelve months for a small business to be able to make an unfair dismissal claim.

Now that we know more about the ways an employee can end the employment relationship, we can talk about the ‘final pay’. When we are talking about final pay, we are referring to what an employer owes an employee when their employment ends.

Final pay payments
An employee should be paid the following entitlements in their final pay:

  • 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

In certain situations, employees will be owed:

  • accrued or pro rata long service leave
  • payment in lieu of notice
  • redundancy pay
  • reimbursement for uniforms or other company property.


Some employees may have certain arrangements in place that an employer may be able to deduct from the final payment. This includes claw-backs for loans and training programs. 

While there might be a desire to seek reimbursement for damages to company property or final cleaning expense for a company car, it is important to note that an employer can only deduct money if the employee acknowledges and agrees in writing and it is principally for their benefit. 

Not all final pays are straightforward. It’s important to understand that any deductions an employer requires from the final pay can only be withheld from wages, and not from leave entitlements – which must be paid out.

If the amount exceeds the wages then it is best to seek expert advice about how to proceed, as circumstances may vary the advice.

The Fair Work Act has guidelines about what to include, timeframes for payment and what deductions can be made.    

Timing of payment

Most awards require employers to pay employees their final payment within seven days of the employment ending. Employment contracts, enterprise agreements or other registered agreements can also specify when the final pay must be paid.

If an employee’s award, contract or agreement doesn’t say when an employee’s final pay must be paid, then it’s best practice for an employee to be paid on their last day of work or on the next scheduled pay run.

Final pays can be complex and time consuming, but it’s imperative employers get it right, not just to cover their legal obligations, but also to ensure the employee’s final experience with the business is a good one – who knows, maybe one day they will work for you again, or refer a friend!

For specialist help managing final pays, contact  Small Business Society .

The information provided in this document is for your guidance only and is general in nature. It does not constitute as legal advice. It is the responsibility of the individual to seek legal advice where required.

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About Kate Tongue

Kate Tongue is the founding Director of Small Business Society.

She is a qualified and experienced Human Resources professional with more than 10 years of experience across the private and public sectors.

Her particular interest and experience is in managing the employee life cycle, delivering process improvements, and Human Resource strategy.

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