In 2009, Australia’s Fair Work Act introduced a new system of rules and regulations for workplaces across the country. The Act established the National Employment Standards (NES), which set out the various mandatory entitlements that employers in Australia have to provide for their employees. Amongst those entitlements are minimum standards regarding notices of termination.
If you are an Australian employer, or have employees working in Australia, it’s important that you become familiar with termination rules to stay on the right side of compliance. With that in mind, we’ve put together a short introduction.
Notice of Termination
How much notice do I need to give?
Employers must give their employees notice if they are terminating their employment. The minimum periods of notice vary depending on the amount of continuous service an employee has with their employer:
| Continuous service with employer |
Minimum notice* |
|---|---|
| Up to 1 year |
1 week |
| Up to 3 years |
2 weeks |
| Up to 5 years |
3 weeks |
| Over 5 years |
4 weeks |
*Employees over 45 years old with 2 years of service receive an additional week’s notice.
Employees cannot be terminated without receiving notice, however, employers may pay their employees in lieu of notice at their full pay rate - which includes all incentives and bonuses, loadings, monetary allowances, overtime, or any other amounts due.
Are there any exceptions?
Certain employees are exempt from the termination notice and pay in lieu of termination rules - these are:
- Casual employees
- Employees on any period of pre-specified employment, such as fixed contracts or training arrangements.
- Employees who are fired for serious misconduct: theft or assault, for example.
- Employees working on a daily hire basis in the construction or meat industry - and those on a weekly hire basis whose employment depends on seasonal factors.
How do I give notice of termination?
Employers need to give their employees written notice of termination, on the day of termination. That notice can be delivered personally, or sent to the employee’s last known address by hand or pre-paid post.
What does Payroll need to know?
Whether an employee works out their notice period, or receives ‘Payment in Lieu of Notice’ (PILON) instead is key for processing a compliant final payroll.
- Employees who work their notice period receive this time as “Permanent Ordinary Hours” earnings and this is taxed at normal marginal rates.
- Employees who work their notice period are entitled to normal leave accruals during this period.
- Employees who receive PILON will receive this payment as an ETP lump sum payment.
- Employees who have received an ETP within twelve months of termination will have these earnings taxed concessionally.
- Employees who receive PILON are not entitled to leave accruals for this period.
In summary, any termination input sent to the processing team should include the employees final working day and their termination date to indicate whether the notice period was worked or not.