When an employee’s employment ends, one of the most common payroll questions is: when exactly does the final pay need to be processed? The answer depends on the type of payment – and recent court decisions have significantly tightened what “on time” actually means.
The general rule: 7 days under most awards
Most modern awards now include a standard clause requiring employers to pay all amounts owing including wages for the final pay period and all entitlements due under the award and the NES – no later than 7 days after the employee’s last day of employment.
This clause was introduced across 92 modern awards in 2019 following a Fair Work Commission review. The remaining awards that already contained their own timing provisions were not affected.
If no award or enterprise agreement applies, and there is no specific provision in the employment contract, best practice is to pay as soon as practicable – and certainly within 7 days.
A critical update: NES entitlements must be paid on the final day
The 7-day award rule does not tell the whole story. A 2025 Federal Court decision – Jewell v Magnium Australia Pty Ltd (No 2) – confirmed that entitlements arising from the National Employment Standards (NES) must be paid on the employee’s final day of employment, regardless of what an award says about timing.
This has significant practical implications. The entitlements affected include:
- Payment in lieu of notice – must be paid on or before the day of termination (s.117 of the Fair Work Act)
- Accrued annual leave – must be paid at the end of employment (s.90(2) of the Fair Work Act)
- Redundancy pay – must be paid at the time of termination
In Jewell v Magnium, the employer paid these entitlements approximately three weeks after the employee’s last day, in the next regular payroll run – a common practice that many employers had assumed was acceptable. The Court found this to be a contravention of the NES and imposed penalties of $6,200 per contravention, totalling $18,600. Critically, the court noted the employer was “careless” rather than deliberately non-compliant – ignorance of the rule was not a defence.
Summary: what needs to be paid when
Entitlement | When it must be paid |
Wages for the final pay period | Within 7 days (most awards) |
Payment in lieu of notice | On or before the day of termination (NES) |
Accrued annual leave (including loading where applicable) | On the day of termination (NES) |
Redundancy pay | On the day of termination (NES) |
Long service leave | Depends on state legislation (see below) |
Worked example
James is a full-time employee covered by the Clerks – Private Sector Award 2020. His employer decides to make his position redundant, effective Friday 18 July 2026.
- James is entitled to 4 weeks’ redundancy pay and has 15 days of unused annual leave
- His employer gives him payment in lieu of notice (3 weeks)
- He has no long service leave entitlement
Under current law, the employer must pay James his redundancy pay, annual leave payout, and payment in lieu of notice on Friday 18 July 2026 – his last day. Wages for his final incomplete pay period may be paid within 7 days under the award. Waiting until the next regular payroll run the following week would be a breach of the NES for the redundancy, annual leave, and notice components.
Practical tip: When a termination is planned, notify payroll as early as possible so that final entitlements can be calculated and processed before the employee’s last day – not after.
What about long service leave?
Long service leave is governed by state and territory legislation, not the Fair Work Act. The timing of LSL payments on termination varies:
State/Territory | Timing of LSL payment on termination |
NSW | Forthwith – immediately, without delay |
VIC | On the employee’s last day of employment |
QLD | As soon as practicable |
SA | Immediately on termination |
WA | As soon as practicable |
TAS | As soon as practicable |
ACT | As soon as practicable |
NT | As soon as practicable |
The safest approach across all states is to treat long service leave the same way as other NES entitlements – pay it on the final day wherever possible.
What are the penalties for late payment?
Late payment of termination entitlements is a contravention of the Fair Work Act. Civil penalties can be significant:
- Up to $19,800 per contravention for an individual
- Up to $99,000 per contravention for a body corporate (2025–26 figures)
As Jewell v Magnium demonstrated, the Court will impose penalties even where the delay was unintentional. The safest approach is to treat all NES entitlements as due on the final day and build your payroll process accordingly.
Practical advice for payroll
- Notify payroll of a termination as early as possible – ideally before the employee’s last day
- Calculate all NES entitlements (notice, annual leave, redundancy) before the termination date
- If the termination date cannot align with a payroll run, consider scheduling the final day to coincide with one, or run an off-cycle payment
- Check the applicable award or enterprise agreement for any specific timing provisions that apply
- For long service leave, check the relevant state legislation
Thinking about outsourcing your payroll?
Processing final pay correctly – on time, with the right entitlements, in the right order – is one of the highest-risk areas of payroll administration.
At Alltech, we manage payroll for 150+ businesses across Australia, including end-to-end termination processing. Get in touch to find out how outsourced payroll works and whether it’s right for your business.