Federal Court clarifies when payments in lieu of notice must be paid ...
as an employee leaves, NOT after
Whilst we are not HR specialists, we thought this recent Federal Court case might be of interest:
There are many situations where employers choose to make a payment in lieu of notice to outgoing employees, and it has become common practice for employers to provide that final payment after the termination date of the employment. A recent Federal Court Case however, has made it clear that such payments need to be made at time of termination – not after – in order for that termination to be lawful. If paid after the termination date, it amounts to a contravention of the Fair Work Act which may subject the employer to pecuniary penalties.
We recommend employers be mindful of this when planning any future terminations and review current processes to ensure this requirement is met. According to FWA, if the employer pays out the notice period, the employee’s employment ends on the date that payment in lieu of notice is made.
It's also timely to remember:
The amount of notice an employer is compelled to give will often be determined by what is prescribed by the NES, an Award, an enterprise agreement or employment contract – noting that, where an employment contract differs to the notice requirements under the NES or an Award, the period that is more favourable to an employee will apply.
Where they intend to terminate the employment of an employee, employers must stipulate a relevant notice period that explains when the prospective termination is to take effect.
Should an employer choose to make payment in lieu of notice, this payment must be equivalent to the employee’s full rate of pay for the time they would have worked during the notice period. This includes:
- incentive-based payments and bonuses
- loadings
- monetary allowances
- overtime
- penalty rates
- any other separately identifiable amounts.
posted 3/4/2023
