Insufficient notice: can you dock termination pay?


Insufficient notice: can you dock termination pay?

If employees resign without giving sufficient notice, can you dock their termination pay? Paul Munro explains.


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If an employee gives insufficient notice of resignation, can we deduct monies from her termination pay?

This question was recently sent to our Ask an Expert service.
Q An employee has resigned from her employment and given one week’s notice. This is because she has already accepted another position and is required to start work next week.

The employee has an administrative role in our head office and her employment conditions are covered under the Clerks – Private Sector Award 2010. She has been employed with the company for about three and a half years.

The minimum periods of notice under the National Employment Standards do not apply to a resignation. However, if the terms of the award require more than one week's notice, can we deduct any wages owing on termination of employment, including any pro rata annual leave?
A The Clerks – Private Sector Award 2010 (cl 13.2) provides that the notice of termination required to be given by an employee is the same as that required of an employer, except there is no additional notice based on an employee’s age. In this case, it would be three weeks.

If an employee fails to give the required notice the employer may withhold from any monies due to the employee on termination under the award or National Employment Standards. This amount cannot exceed the amount the employee would have been paid for the period of notice required by the award (three weeks) less any period of notice given by the employee (one week).
In this case, this means the equivalent of two weeks’ pay may be forfeited by the employee from any wages outstanding at the time of termination. This is considered a permitted deduction under the Fair Work Act (s324(1)(c)). 

Pro rata annual leave under the Fair Work Act (s90(2)) is included in the pool of monies available on termination from which the employer can withhold the relevant amount.
Most modern awards require an employee to provide the same period of notice as that required by an employer (i.e. the notice required under the National Employment Standards), except there is usually no requirement on the employee to give additional notice based on the age of the employee concerned.
The bottom line: The terms of the applicable modern award usually allow an employer to withhold the equivalent amount of notice on termination from all monies payable on termination, which includes pro rata annual leave payment.

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