Final pay is one of the highest-risk payroll events because several entitlements can come together at once. A termination can involve ordinary wages, unused leave, payment in lieu of notice, redundancy, long service leave, deductions and special tax or STP treatment. The correct result depends on the employee’s circumstances and the applicable award, agreement or legislation.
This TNS Accounting guide explains the payroll-control process Melbourne SMEs should use when an employee leaves.
What should be included in an employee’s final pay?
Fair Work explains that final pay includes wages owing and unused annual leave, and can also include payment in lieu of notice, redundancy pay and certain long service leave entitlements depending on the circumstances. Fair Work final-pay guidance should be checked for current rules.
When must final pay be paid?
The timing can come from an award, enterprise agreement, the National Employment Standards or other workplace rules. Fair Work notes that many awards require final pay within seven days after the last day of employment, but employers need to check the instrument that applies.
How should unused leave be checked before termination?
Reconcile leave balances to the payroll system, investigate negative or unusual balances and confirm which leave types are payable on termination. Do not assume every accrued balance is paid out the same way.
How should notice and redundancy be handled in payroll?
Confirm the employee’s entitlement and calculation basis before processing. Payment in lieu of notice and redundancy can have specific rules, so employers should use current Fair Work and ATO guidance and obtain specialist advice where needed.
How should termination payments be reported through STP?
Payroll software should use the appropriate STP treatment for the payment type. Review the employee’s year-to-date data after the termination pay run and confirm the STP event is accepted. The STP Phase 2 guide explains broader reporting controls.
What records should be kept for a final pay calculation?
Keep the termination date, reason or category where relevant, final timesheet, leave reconciliation, notice or redundancy calculation, payroll register, payslip, STP evidence and approvals. This provides a clear audit trail if the amount is questioned later.
How should employers verify a final pay calculation before processing it?
Use a termination checklist that confirms the last day worked, final hours, leave balances, notice arrangements, redundancy eligibility where relevant, deductions and any award-specific rules. Have a second person review unusual or high-value calculations before the payment is released.
Compare the final payroll result with source documents rather than relying solely on the software preview. Termination settings can differ from ordinary pay-run rules.
How should final pay affect payroll reconciliation and employee records?
After processing, reconcile the net payment to the bank, check PAYG and super liabilities, review the employee’s year-to-date STP totals and confirm leave balances are closed appropriately. Retain the calculation and supporting evidence with the employee’s payroll records.
What should employers do when a final pay is later found to be wrong?
Recalculate the entitlement from source records, identify whether the employee was underpaid or overpaid, and obtain appropriate advice on the correction process. Update payroll and STP data as required and document the reason for the correction. Avoid using a manual journal as a substitute for fixing the employee-level payroll record.
How should employers plan for final pay before an employee’s last day?
As soon as a departure date is confirmed, payroll should review outstanding timesheets, approved leave, notice arrangements, company property deductions if any, and whether redundancy or other entitlements may apply. Early preparation gives the business time to resolve missing records instead of trying to reconstruct them after the employee leaves.
For planned resignations, coordinate payroll, management and HR information so the final pay calculation is based on a complete record rather than last-minute estimates.
How should final pay be reviewed when an employee worked overtime or penalties near termination?
Check the final roster and timesheets against the applicable award or agreement before calculating the last payment. Overtime, weekend penalties, allowances and leave taken close to the termination date can change the amount due. Review the final payslip and year-to-date totals after processing so a timing issue does not leave an employee underpaid.
Why should final pay receive a second-person review?
Termination payroll can combine several entitlement types at once, so an independent check can catch missing leave, notice or rate issues before payment.
What final-pay control is easiest to overlook?
Confirm every final payment is supported by approved source records before release.
What questions do Melbourne employers ask about final pay?
Is unused annual leave paid on termination?
Generally yes, subject to the applicable rules and the employee’s entitlement.
Is sick leave paid out when employment ends?
Fair Work states that unused paid sick and carer’s leave is generally not paid out on termination.
Can notice be paid instead of worked?
Payment in lieu of notice may apply depending on the circumstances and employment rules.
Is redundancy always payable?
No. Eligibility depends on the employer, employee and circumstances.
When should final pay be processed?
Check the applicable award, agreement and Fair Work rules for the required timing.
Should the final payslip be issued normally?
Yes. Payslip requirements continue to apply to the final pay.
Does STP need a special termination treatment?
Some termination payments require specific STP reporting categories.
Should leave balances be reconciled first?
Yes. Confirm the balance before calculating the payout.
Can deductions be taken from final pay?
Deductions are regulated and should be checked carefully against the applicable rules.
Should super be checked on final payments?
Yes. Review the current super treatment for each payment type.
Can TNS Accounting process final pay?
TNS Accounting can assist with payroll processing and reconciliation; legal employment questions may require specialist advice.
What records should be retained?
Keep the calculation, approvals, payroll reports, payslip and supporting employment records.
What if the employee disputes the amount?
Reconcile the calculation to the source records and applicable employment instrument.
Should access to payroll systems be updated after termination?
Yes. Offboarding should include appropriate systems and data-access controls.
What should I read next?
Read the payroll records guide and reconciliation guide.
For support with payroll workflows in Melbourne, visit TNS Accounting Payroll Services or the complete payroll guide.
One Response