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Employment Termination - What To Pay Out

Published 10 Dec 2019

When an employment relationship comes to the end, the final obligation of the employer is to ensure that the employee receives their correct final payment.

The date of such payment can be agreed by the parties and can either be on the date of last services rendered or on the subsequent pay cycle.


The final payment must include:

  • Payment for all the hours worked since the last pay date till the end of employment;
  • Payment for accrued annual holidays;
  • Payment for any public holiday that falls between the period of last pay date and end of employment*;
  • Any agreed and/or contractual additional lump sum or other payments owing;

* End of Employment is last working day plus any days of accumulated holiday entitlement.

Employers may only deduct from an employee’s final pay, other than legally mandatory deductions, any authorised deductions confirmed in writing by the employee. Deductions not authorised by employees via written consent may not be processed.

Annual Holidays Payment

How much an employee gets paid for annual holidays in their final pay depends on how long they have been working for the employer.

If employment ends before the employee has an entitlement to annual holidays (12 months’ employment) the employee is entitled to an annual holiday payment of 8% of their total gross earnings.

If employment ends after the employee has an entitlement to annual holidays there are two calculations to do in order to work out the annual holiday payments for the employee:
  • All remaining annual holidays that they are entitled to these are paid at the rate of the greater of ordinary weekly pay or average weekly earnings, as if the holidays were being taken at the end of the employment, and
  • The employee also gets an annual holiday payment of 8% of their total gross earnings since their last anniversary date for annual holidays accrued during this time.
Above pay-outs are less any amount the employee has already had for:
  • Payment for annual holidays taken in advance;
  • Payment for annual holidays on a pay-as-you-go basis.

Notice period payments

Both parties are required to give notice when terminating the employment relationship, with the exception of summary terminations due to serious misconduct and/or by agreement.

If the notice period is worked, payment will be made after the completion of such period. If the notice period is not worked on the request of the employer, payment in lieu of notice can be done, providing this has been agreed to in the Employment Agreement.

If an employee gives less than the agreed amount of notice, the employer will only pay until the last day they actually worked. The employer may also, if a written agreement exists, deduct pay in lieu of notice from any amount already owed to the employee.

Please refer to our Newsletters on Public holidays and Deductions for further reference.