What you need to know
- The Fair Work Commission recently inserted a clause on timing of termination payments into a range of modern awards, including the Banking, Finance and Insurance Award 2010, as part of its four yearly review of modern awards.
- Employees must be paid wages due under the Award up to the date of termination and all other amounts due under the Award and the National Employment Standards, no later than 7 days after the termination date.
- The clause came into operation on 1 November 2018.
What you need to do
- Confirm that payroll processes comply with the new requirement about termination payments under the Award and the NES.
- Bear in mind the new timing requirement when negotiating agreed departures or handling contested terminations.
Implications for employers
Until this determination took effect, the timing of termination payments was specified for award-covered employees in the some industries, but not in others, including the banking, finance and insurance industries.
The Fair Work Commission has inserted a new clause 20.3 into the Award which requires employers to pay an employee no later than 7 days after the day when the employee's employment terminates:
- the employee's wages under the Award up to the date of termination; and
- all other amounts due to the employee under the Award and the NES, including pay in lieu of statutory notice, redundancy pay and leave payments.
Notice of termination
The clause includes Notes confirming that an employer must give an employee the relevant minimum notice period in writing, or make a payment in lieu of notice within the 7 day period. The payment period can be delayed by the FWC where an employer has made an application to reduce an amount of redundancy pay to be paid to an employee.
Long service leave
There may be requirements under State and Territory long service leave laws to pay amounts due under those laws earlier than the 7 day deadline provided for in clause 20.3. Some long service leave laws require payment immediately on termination.
Other payments on termination
The Award clause does not apply to contractual entitlements above any amounts owed to an employee under the Award or the NES or to any additional negotiated payments. The timing for payment of these amounts will be determined by contractual arrangements or agreement with the employee, subject to the requirement of section 323 of the Fair Work Act that payments relating to work must be made at least monthly.
Deed of Release
Bear the timing requirements in mind when negotiating agreed terms in a separation agreement. You can still agree on the timing of termination payments, but an employee can legitimately insist on the release documents providing for Award and NES payments within 7 days. If negotiations are ongoing, it would be prudent to pay Award and NES entitlements within the new time limit, and continue to negotiate about other payments without being at risk of a claim of Award breach.
Where to find the FWC determination
A copy of the Fair Work Commission determination outlining the new model clause as inserted into the Award is available here.
Other affected Awards
A list of the other modern awards which have had a timing of termination payments clause inserted is available here.
Authors: Jennie Mansfield, Partner; and Caitlin Sandy, Lawyer.
