Dealing with staff involves dealing with leave requests, managing performance, and handling resignations and terminations. Sometimes an employee will resign and request to not work out their notice period. They may demand payment in lieu of notice. This can be frustrating if you are an employer and must fill an important position quickly. In this guide, we explain the basics of notice periods, your obligations when an employee doesn’t wish to work out their notice period, and ways Peninsula can help your business.
Notice period
When an employee resigns, they may have to give written notice via a letter (or email) to their employer. Although award and agreement-free employees don’t have to give notice when they resign, generally the employee’s employment contract, if not the applicable award or registered agreement, will set out the amount of notice an employee has to give when the employee resigns. The notice period:
- Starts the day after the employee gives notice that they want to end their employment.
- Ends on the last day of employment.
Typically, a notice period can be between one week to one month. Some companies have longer notice periods for senior employees or management.
Employees who have been hired on a casual basis aren’t required to provide notice. In certain circumstances, casual employees may be required to provide notice, depending on the employment agreement or registered agreement in question.
Notice periods and deductions
An employee’s award, employment contract, enterprise agreement, or other registered agreement sets out:
- How much notice (if any) the employee must give when they resign.
- When an employer can withhold money if the employee does not give the minimum notice period.
Taking money out of an employee’s pay before it is paid to them is called a deduction.
An employer can only deduct money if:
- The employee agrees in writing and it’s principally for their benefit.
- It’s allowed by a law, a court order, or by the Fair Work Commission.
- It’s allowed under the employee’s award.
- It’s allowed under the employee’s registered agreement, and the employee agrees to it.
It’s important for employers to note deductions outside of these causes run the risk of breaching Wage Theft Provisions which came into effect on 1 January 2025.
Many Awards say that in certain circumstances an employer can deduct up to one week’s wages from an employee’s pay if they do not provide the minimum amount of notice. Where an award allows this, an employer can only deduct pay from an employee’s wages under the award, not from other entitlements.
Even if the deduction is made in accordance with an award, registered agreement, or contract, an employer can’t deduct if:
- It benefits the employer, not the employee, and the deduction would be unreasonable in the circumstances.
- The employee is under 18 years of age, and their parent or guardian hasn’t agreed in writing.
Generally, the employee will work the notice period. However, sometimes the employer will not require the employee to work the notice period, in which case the employer and employee may agree that the employer can make payment in lieu of notice. If the employee does not work the notice period when the employment ends, this is notice-not-worked.
Waiving notice periods
If you do think it is in your best interest to waive the notice period, you can discuss this arrangement with your employee. You can end their contract immediately. You can also put the employee on garden leave if they have access to confidential information and resources. Remember that when an employee resigns, they want to leave as soon as possible. By compromising and negotiating, you are creating a comfortable situation for everyone involved.
Payment in lieu of notice
When the employer terminates the employee, the employer often does not require the employee to work the notice period, but the employee is still entitled to be paid for that period. In this case, the employer pays the employee in lieu as if they had worked the notice period. Besides other obligations, when terminating an employee’s employment, an employer is required to give the employee written notice of their last day of work. How far in advance they need to do this will depend on how long the employee has been employed.
How much notice should employees give employers of resignation?
Under the National Employment Standards (NES) employees are not required to give notice of their employment ending. Typically, a full-time or part-time employee’s award, registered agreement, or employment contract will set out how much notice (if any) an employee must give when they resign. But this depends on the contract, award, or agreement terms and type of employment.
A casual employee is not required to give notice upon resignation. Likewise, the employer does not have to give a casual employee notice when terminating their employment either due it’s ad hoc nature, though you should tell the employee why you are ending their employment, and there will be a requirement to consult with the employee prior to terminating them under the applicable award or registered agreement.
Once you receive notice of resignation from an employee, you can either:
- Let the employee work out the notice period.
- Have the employee finish up early and pay them in lieu of notice.
- A combination of both, where an employee works a portion of their notice and the employer pays the rest of the notice period out.
If you pay out any part of the notice period, you must pay the employee the exact same amount they would have received if they worked it.
Notice of termination to employee
When you end an employee’s employment in most cases you have to give the employee the minimum notice period in writing or pay in lieu of notice. You do not have to give notice to casuals, seasonal workers, fixed-term workers on the expiry of the contract term, daily hire workers in the building construction or meat industries, or employees fired for serious misconduct.
The amount of notice you have to give depends on the employee’s number of years of continuous service within the business. Fair work notice periods are listed as:
| Period of continuous service | Minimum notice period |
|---|---|
| 1 year or less | 1 week |
| More than 1 year - 3 years | 2 weeks |
| More than 3 years - 5 years | 3 weeks |
| More than 5 years | 4 weeks |
Employees over 45 years of age with at least two years of continuous service are entitled to an extra week of notice of termination.
When you terminate an employee’s employment, you must give the employee an employment termination letter. The letter should clearly state the reason for the termination, the date of the employee’s last day of work, and the fixed amount of entitlements and unpaid wages the employee will receive.
Final payment notice
When an employee’s employment ends you have to provide a final payment notice – in writing – which sets out the wages and entitlements due to the employee. It is your responsibility to ensure the last pay slip is delivered on time and correctly calculated.
To calculate an employee’s final pay, refer to the applicable modern award, registered agreement, or employment contract to find out what entitlements you owe. While each contract is unique, you will most likely need to calculate one or more of the following entitlements:
- Unpaid wages (including penalty and overtime rates).
- Expense claims.
- Accrued annual leave entitlements.
- Payments in lieu of notice.
- Allowances.
Check the terms of the employee’s Modern Award, registered Agreement, or employment contract to find out the final pay due date. If none of the documents say so, you can process the final pay on their next scheduled payday within seven days of their employment ending.
Manage notice periods and resignations
Peninsula has worked with thousands of businesses in Australia and supported them in matters of notice periods, resignations, and dismissals. Call our free initial advice line on 1300761935 today.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.