How to calculate final pay
A complete guide to calculating final pay when employment ends. Includes outstanding wages, leave entitlements, notice periods, and redundancy pay under Australian law.
Written by
Georgia Morgan
General information only – not legal advice
This guide provides general information about calculating final pay in Australia. It does not constitute legal, HR, or professional advice and should not be relied on as a substitute for advice specific to your business, workforce, or circumstances.
Final pay components
Use this checklist to ensure all entitlements are included in final pay.
Outstanding wages
All hours worked but not yet paid, including penalties and loadings
Annual leave payout
All accrued but untaken annual leave, plus leave loading if applicable
Long service leave (check eligibility)
Depends on state/territory laws and length of service
Notice period or payment in lieu
If notice not worked, pay in lieu is required (except summary dismissal)
Redundancy pay (if applicable)
Only for genuine redundancies with 12+ months service (not small business)
Sick/personal leave is NOT paid out
Unused personal leave lapses when employment ends
6 steps to final pay calculation
Calculate outstanding wages
Work out all unpaid wages up to and including the employee's last day of work.
Key points:
- Include all ordinary hours worked but not yet paid
- Add any approved overtime at the correct penalty rate
- Include shift loadings and allowances earned
- Check the timesheet for the final pay period is accurate
Calculate annual leave payout
All unused annual leave must be paid out when employment ends, including leave loading.
Key points:
- Check the current leave balance in your system
- Annual leave is paid at the ordinary rate of pay
- Add annual leave loading (usually 17.5%) if applicable under the award
- Leave loading must be paid on termination even if the award says otherwise
Check long service leave entitlements
Long service leave is governed by state/territory law and may be payable on termination.
Key points:
- Check the employee's state/territory for LSL rules
- Most states: 8.67 weeks after 10 years of service
- Pro-rata may apply after 5-7 years depending on jurisdiction
- Termination reason can affect pro-rata entitlement
Determine notice period or payment in lieu
Calculate whether notice has been worked or if payment in lieu of notice is required.
Key points:
- Minimum notice under NES: 1-5 weeks based on service and age
- < 1 year service = 1 week notice
- 1-3 years = 2 weeks; 3-5 years = 3 weeks; 5+ years = 4 weeks
- Add 1 week if employee is over 45 with 2+ years service
Calculate redundancy pay if applicable
If the role is genuinely redundant, calculate redundancy pay using the NES scale.
Key points:
- Requires 12+ months continuous service
- Ranges from 4 weeks (1-2 years) to 16 weeks (9-10 years)
- Small businesses (< 15 employees) are generally exempt
- Some awards or contracts provide higher entitlements
Finalise and pay
Add all components together, apply tax correctly, and pay within the required timeframe.
Key points:
- Pay as soon as practicable or in next pay cycle
- Some awards specify timing (e.g., within 7 days)
- Provide a detailed payslip showing all components
- Genuine redundancy payments have tax-free limits
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Minimum notice periods
Under the National Employment Standards, minimum notice depends on length of service.
| Period of continuous service | Minimum notice |
|---|---|
| Less than 1 year | 1 week |
| 1 year to less than 3 years | 2 weeks |
| 3 years to less than 5 years | 3 weeks |
| 5 years or more | 4 weeks |
| Over 45 years old with 2+ years service | +1 week |
Redundancy pay scale
NES redundancy entitlements for employees with 12+ months service (employers with 15+ employees).
| Period of continuous service | Redundancy pay |
|---|---|
| At least 1 year but less than 2 years | 4 weeks |
| At least 2 years but less than 3 years | 6 weeks |
| At least 3 years but less than 4 years | 7 weeks |
| At least 4 years but less than 5 years | 8 weeks |
| At least 5 years but less than 6 years | 10 weeks |
| At least 6 years but less than 7 years | 11 weeks |
| At least 7 years but less than 8 years | 13 weeks |
| At least 8 years but less than 9 years | 14 weeks |
| At least 9 years but less than 10 years | 16 weeks |
| 10 years and over | 12 weeks |
Note: The 10+ years rate reduces to 12 weeks as employees approaching retirement have less need for income support.
Common final pay mistakes
Forgetting annual leave loading
Consequence: Leave loading must be paid on termination even if your award says it isn't
Solution: Always include 17.5% leave loading (or award-specific rate) when paying out annual leave. Use automated payroll systems .
Missing long service leave
Consequence: LSL can be a significant entitlement, especially for long-serving staff
Solution: Check your state's LSL laws. Use our leave entitlements guide .
Wrong notice period calculation
Consequence: The +1 week for over-45s with 2+ years is often missed
Solution: Always check age and service length together. Track with HR software .
Applying small business exemption incorrectly
Consequence: Must have fewer than 15 employees at time of termination notice
Solution: Count all employees (including casuals) at the time of giving notice. Review termination procedures .
Delaying final pay
Consequence: Some awards require payment within 7 days; delays can attract penalties
Solution: Process final pay in the next regular pay cycle or sooner. Use payroll integration .
Tips for accurate final pay
Use a checklist
Create a termination checklist to ensure no entitlements are missed.
Check the award
The relevant award may provide entitlements above NES minimums.
Document everything
Keep records of calculations in case of a future dispute or audit.
Verify leave balances
Double-check leave records with the employee before final calculation.
Consider tax implications
Genuine redundancy has tax-free limits; other payments are fully taxed.
Provide detailed payslip
Break down each component so the employee understands their final pay.
Related guides
More resources for payroll and compliance.
Frequently asked questions
- Final pay must include: outstanding wages (including penalties/loadings), all accrued annual leave (with loading), long service leave if applicable, and payment in lieu of notice if not worked. See our leave entitlements guide for more detail.
- No. Under Australian law, unused personal (sick) and carer's leave is not paid out when employment ends. It simply lapses. Only annual leave and long service leave are paid out.
- Yes, annual leave loading must be paid on termination if the employee would receive it when taking leave. Fair Work has confirmed this applies even if the award says loading isn't payable on termination.
- Redundancy pay is required when an employee's job no longer exists (genuine redundancy), they have 12+ months continuous service, and the employer is not a small business (15+ employees at the time of notice).
Regulatory sources
This guide is aligned with official Australian workplace regulations.
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