When there is a termination of employment, this can be because the employee resigns, or is dismissed. In the case of a dismissal, employers must follow proper procedures when it comes to notice and final pay. There are also different obligations and rights when the position is made redundant or if the business goes bankrupt. See also ‘redundancy pay ‘ in chapter 17 and ‘termination of employment’ in chapter 18.
When an employment relationship ends, employees should receive the following entitlements in their final pay:
- any outstanding wages or other remuneration still owing
- any accrued annual leave and long service leave entitlements
- any pay in lieu of notice of termination
- any redundancy pay or entitlements if the employee has been made redundant and eligible
- payments for unused rostered days off
- if applicable, a gratuity or ‘golden handshake’.
If an employee has taken more leave than he or she is entitle to when employment is terminated, the employer can deduct the amount owing from the final pay.
Taxation on termination payments applies, and employers are also encouraged to inform employees how these payments are taxed. ATO’s website gives more details about tax requirements on termination payments.
An employer is liable to a penalty of up to $63,000 per contravention if they have not complied with their obligations under Commonwealth workplace laws.
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