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Should termination pay be paid immediately?

Should termination pay be paid immediately?

A question that we regularly are asked is, do we have to pay termination pay on the day of termination?  Whilst the Fair Work Act is silent on the method of payment of termination monies, the applicable modern award, enterprise agreement or an individual’s contract of employment may contain terms about when termination payments must be made.

For example, some modern awards state that termination payments must be made on the day of termination and should an employer not make payment as specified by the applicable instrument, they will be in breach and may face penalties.. Most moderns awards provide that termination payments must be made within 7 days.

Where a modern award, enterprise agreement or employment agreement not stipulate when a termination payment be made, payment may usually be arranged by agreement of the parties however it should be paid as soon as is practicable ie., the next pay date.

Where an employer does not make payment on the termination date, the employee cannot claim overtime payments for ‘waiting time’.  As stated above, if the employer is found to be in breach of an applicable award, they may face penalties. 

As an overview, employers must ensure they have reviewed the applicable instruments to determine if they are bound by a specific timeframe to pay termination monies to employees.   Otherwise they must arrange for payments to be made as soon as is practicable and in agreement with the terminating employee.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors such as government legislation changes, may not be up-to-date at the time of reading. It is not legal advice and should not be treated as such.

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