On 1 November 2018, 89 Modern Awards will be varied to include a requirement that an employer must pay an employee’s final pay no later than seven (7) days after the day on which the employment ends.
The 89 Modern Awards that will be affected are listed at the end of this statement released by the Fair Work Commission.
New termination pay clause in awards
The new clause that will be inserted in the awards covers the obligation to pay wages “and all other amounts that are due to the employee under [the] award and the NES”. This would cover things such as payment for annual leave, allowances, etc.
The exact wording of the new clause is set out below:
“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 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.”
These changes are not being introduced in all awards so it is important for employers to check the precise rules in the award(s) that cover their employees. These could provide for a longer (or shorter) period by which final pay must be made.
Given that financial penalties can be imposed on businesses who breach provisions in modern awards, it is obviously important to get the timing of termination pay right.
Employers should also be aware that the notes to the new clause make clear that the timing of payments for long service leave vary from State to State.
Not sure whether or not a modern award applies to your business? Need help working out when final pay must be made to your employees? At Employment Innovations, we have a team of industry experts who can provide the answers to these questions. You can also access unlimited workplace advice as part of our subscription products, and make sure your employees are paid correctly and on time through our payroll services.