As part of the four yearly review of the modern awards, the Fair Work Commission recently amended modern award provisions regarding withholding monies from employees when adequate notice upon resignation was not provided. These provisions came into effect on 1 November 2018.

The main changes are that:

  • Only one weeks’ pay can be withheld;
  • Pay can only be withheld where the employee is at least 18 years old; and
  • Monies can only be withheld from wages (rather than annual leave).

Prior to modern award review

Prior to the Fair Work Commission’s decision, when an employee failed to give the required amount of notice of resignation, many awards allowed employers to withhold any monies from their final pay. For example, the Hospitality Industry (General) Award 2010 at clause 16.2(a), stated the following:

“If an employee fails to give the required notice the employer may withhold from any monies due to the employee on termination, under this award or the NES, an amount not exceeding the amount the employee would have been paid under this award in respect of the period of notice required by this clause, less any period of notice actually given by the employee.”

At a glance, the phrase “any monies owing upon termination” appeared to authorise the deduction of monies payable for wages owing on termination and any accrued but unused annual leave.

There has been debate as to whether such wording had any effect, given the right to be paid out accrued annual leave on termination of employment is a right under the National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (FW Act). Modern awards are not allowed to provide less beneficial terms than are set out in the NES.

Prior to the recent changes to the modern awards, the amount of money an employer was allowed to deduct was equivalent to the period of notice of resignation the employee should have given. So if an employee was required to give four weeks’ notice and gave only one week, the employer was entitled to withhold three weeks’ pay.

What is the current position?

Provisions which allowed employers to deduct from “any monies” owing to employees upon termination have now been amended in order to and ensure consistency with the FW Act and the NES.

For example, clause 16.1(d) of the Hospitality Industry (General) Award 2010, now provides the following:

“If an employee who is at least 18 years old does not give the period of notice required under paragraph (b), then the employer may deduct from wages due to the employee under this award an amount that is no more than one week’s wages for the employee.”

This amendment makes clear that deductions can only be made from wages, rather than “any monies” such as payments for accrued but unused annual leave and further that the deduction must not be more than one week’s of wages.

The Fair Work Commission also inserted a further caveat to the effect that amounts cannot be deducted from an employee younger than 18 years of age and that the deduction must not be unreasonable in the circumstances.

Need help?

If your employee has not provided adequate notice of resignation, you should check the applicable modern award to determine whether it contains any provisions relating to withholding wages prior to deducting any amounts from their final pay.

If you need assistance in working out which modern award(s) apply to your business and/or the rules in your award regarding deductions from pay, please contact us at Employment Innovations. We have a number of products available to make employing staff easier, including access to unlimited workplace advice through our subscription products.