89 of 122 modern awards were varied effective 1 November 2018 to include a requirement that an employer must pay an employee’s final pay no later than seven days after the day the employment ends.
The new clause is set out below:
Clause X Payment on termination of employment
(a) The employer must pay an employee no later than 7 days after the day on which the employee’s employment terminates:
i. the employee’s wages under this award for any complete or incomplete pay period up to the end of the day of termination; and
ii. all other amounts that are due to the employee under this award and the NES.
(b) The requirement to pay wages and other amounts under paragraph (a) is subject to further order of the Commission and the employer making deductions authorised by this award or the [Fair Work] Act.
Note 1: Section 117(2) of the Act provides that an employer must not terminate an employee’s employment unless the employer has given the employee the required minimum period of notice or “has paid” to the employee payment instead of giving notice.
Note 2: Paragraph (b) allows the Commission to make an order delaying the requirement to make a payment under clause X. For example, the Commission could make an order delaying the requirement to pay redundancy pay if an employer makes an application under section 120 of the Act for the Commission to reduce the amount of redundancy pay an employee is entitled to under the NES.
Note 3: State and Territory long service leave laws or long service leave entitlements under s.113 of the Act, may require an employer to pay an employee for accrued long service leave on the day on which the employee’s employment terminates or shortly after.
You can see that the clause refers to “pay wages and all other amounts that are due to the employee under the award and the NES”. This would appear to cover payments including payment for unused accrued annual leave, allowances and other similar entitlements.
This amendment has not been introduced into all awards, so it is important for all our employers to check the current terms of their award. A list of the awards which have been amended is linked here.
To avoid civil penalties that can be imposed on employers who are found to be in breach of provisions of modern awards, we encourage all our employers to promptly review their termination and separation processes.
It is also important to note that the new clause makes clear that the timing of payments for long service leave (LSL) will be as per State/Territory LSL legislation and so the requirements of the timing of payment of LSL can vary between States/Territories.
If you are unsure whether your current processes are compliant, we recommend you seek legal advice.