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12 December 2018
In its four-yearly review of modern awards the Fair Work Commission (FWC) has varied nearly all modern awards to require that employers make termination payments within seven calendar days of the effective date of termination.
On 15 August 2018 the full bench of the FWC confirmed that 89 modern awards, which had previously been silent on when an employee's final pay must be paid, would be varied to include a new model term: payment on termination of employment.
The only modern awards that do not impose a time restraint on employers are the Alpine Resorts award 2010, the Pharmacy Industry award 2010 and the Rail Industry award 2010.
Under the model payment on termination of employment clause, employers must pay their employees' wages for any pay period up to termination and all other amounts that are due to the employee under the applicable award and the National Employment Standards (NES) within seven days of termination.
The FWC considered seven calendar days to be the most appropriate length of time for all parties, considering:
The variation came into effect on 1 November 2018.
Although the Fair Work Act 2009 is silent on the method of payment of monies due on termination (including annual leave entitlements) the applicable enterprise agreement or an individual's contract of employment may contain terms about the period in which termination payments must be paid.
If an employee's award, contract or agreement does not say when their final pay must be provided then, according to the Fair Work Ombudsman, it is best practice for an employee to be paid on their last day of work or on the next scheduled pay day.
It is also important for employers to note that payment in lieu of notice should ideally be paid immediately (ie, on the day of termination). In the cases of Melbourne Stadiums Ltd v Sautner(1) and Cerin v ACI,(2) the court noted that an employee's termination does not take effect until payment in lieu of notice has been made.
Employers should be aware of the requirements for termination payments, which now appear in the majority of modern awards and amend their employee exit procedures accordingly.
For further information on this topic please contact Daniel Proietto at Lander & Rogers by telephone (+61 3 9269 9000) or email (firstname.lastname@example.org). The Lander & Rogers website can be accessed at www.landers.com.au.
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