Should termination pay be paid immediately?


Should termination pay be paid immediately?

If an employee is dismissed, should termination entitlements be paid immediately? Or can payments be made within a certain time frame?


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Should termination entitlements be paid within a certain time frame?

This question was recently sent to our Ask an Expert service.

Q We intend to terminate an employee’s employment, however, the employee has countermanded our notice and left his employment immediately. Because the amount of termination pay involved is substantial there may be a delay in paying all monies. The employee is insisting he receive his outstanding termination pay immediately.

Is there a time frame for paying entitlements when a worker's employment is terminated?

A The Fair Work Act is silent on the method of payment of monies due on termination. However, the applicable modern award, applicable enterprise agreement or an individual’s contract of employment may contain terms about the time period in which termination payments must be paid.

For example, the Manufacturing and Associated Industries and Occupations Award 2010 (cl. 34.3) states that on termination of employment, wages due to an employee must be paid on the day of termination or forwarded by post on the next following day.

Other modern awards with terms relating to payment of wages on termination include: Meat Industry Award 2010; Pharmaceutical Industry Award 2010; and the Storage Services and Wholesale Award 2010.

In the absence of a specific provision, payment is usually arranged by the agreement of the parties, but should be paid to the employee as soon as practicable.

Waiting time claim

Where an employer does not pay the outstanding monies on the termination date, an employee cannot claim overtime payments because of 'waiting time'. Employers who do not pay the appropriate termination payments on time may be in breach of the applicable modern award or contractual terms, and be subject to penalties.

The bottom line: An employer must pay termination pay in compliance with the terms of the applicable modern award, enterprise agreement or contract of employment. Otherwise, termination payments should be paid as soon as practicable after the date of termination, or as agreed by the parties.

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