With the exception of an employee whose employment is genuinely terminated as a consequence of serious misconduct, an employee should receive the following entitlements in their final pay:
- Any outstanding wages (including penalty rates and allowances);
- Payment in lieu of notice (if the employee has not worked their notice period);
- Any accumulated annual leave (up until the last date of any notice period);
- Annual leave loading (if leave loading had been paid during the course of employment);
- Any accrued or pro-rata long service leave (up until the last date of any notice period); and
- Severance pay (if employment is terminated by way of redundancy).
Payment in lieu of notice, annual leave and long service leave must be calculated on the full amount the employee would have earned had they worked out the period in question. Calculation of these amounts must therefore include any bonuses, incentive payments, monetary allowances, overtime, penalty rates and other amounts the employee would otherwise reasonably have had the opportunity to earn during the period.
Termination entitlements can be complex and involve a review of an employee’s contract, award and legislative entitlements.
The 2014 New South Wales Supreme Court matter of Susanna Ma v Expeditors International Pty Ltd shows the potential consequences of wrongfully calculating an employee’s termination entitlements. Ma was an employee of the company from 1987 until 2011 at which time her employment ceased as a result of an inability of Ma and the company to re-negotiate acceptable terms of employment. Ma’s employment contract was silent as to her notice period. Ma was paid 5 weeks’ pay in lieu of notice.
Whilst minimum notice periods are defined in the Fair Work Act, if a notice period is not defined in an employment contract, an employee is entitled to payment of reasonable notice. Ma commenced a claim in the Supreme Court for breach of contract alleging the company had failed to pay her the appropriate termination entitlements. She sought payment equivalent to 12 months’ pay in lieu of notice and her bonuses for the 2011 financial year. The Court held that in the circumstances, particularly the length of Ma’s service, she was entitled to payment of 10 months’ notice calculated on the basis of her ordinary earnings, i.e. inclusive of bonuses and allowances. The Court also held that Ma’s long service leave payment was inclusive of her bonuses and allowances. Ma was also entitled to a pro-rata amount for her 2011 bonus. In total, the Court ordered the company to pay Ma in excess of $1 million.
Miller Sockhill Lawyers can help employers to calculate termination entitlements as well as guide employers through a termination or redundancy process.
Sunshine Coast Lawyers, Miller Sockhill Lawyers can assist with any litigation, court related or employment matters. Please contact Nicole Doyle Solicitor on 07 5444 4750.