Recent ruling confirms statutory entitlements must be paid on final day of employment
A recent court decision has brought new clarity to a longstanding question in Australian employment law: when exactly must employers pay termination entitlements?
The answer, as confirmed in Jewell v Magnesium Australia Pty Ltd (2025), is clear—statutory termination entitlements must be paid on the employee’s final day of employment.
This ruling has significant implications for employers and payroll providers across Australia. Here’s what you need to know.
Understanding the Legal Framework
Employee entitlements in Australia are governed by several layers of legislation:
- The Fair Work Act 2009 (Cth) serves as the primary piece of employment legislation in Australia. It establishes the framework for workplace relations, including minimum employment standards.
- The National Employment Standards (NES) form part of the Fair Work Act and set out minimum entitlements for all employees covered by the national workplace relations system. These include annual leave, personal leave, notice of termination, and redundancy pay.
- Modern Awards are legally binding instruments made under the Fair Work Act. They set minimum pay rates and conditions for specific industries and occupations, building on the baseline established by the NES.
Together, these laws regulate how and when employees must be paid—including when employment ends.
What Changed: The Historical Practice
For many years, a common practice developed across Australian workplaces. Employers and payroll providers typically paid termination entitlements either within seven days of termination.
This approach emerged for several reasons:
- Several Modern Awards state that final payments must be made no later than seven days after employment ends
- Fair Work Ombudsman guidance historically suggested payment shortly after termination was acceptable
- The Fair Work Act requires payment of accrued entitlements on termination but did not explicitly state that payment must occur on the final day
Based on this guidance, many employers reasonably believed that payment within seven days of termination met their legal obligations.
The Court’s Decision
The Jewell v Magnesium Australia Pty Ltd (2025) decision has now clarified the legal position.
The Court confirmed several key points:
- Statutory entitlements must be paid on the final day. Termination entitlements under the NES—including accrued annual leave, notice in lieu, and redundancy pay where applicable—must be paid on the employee’s last day of employment.
- Delayed payment constitutes a breach. Payment made after the termination date, even by just a short period and consistent with common payroll practice, constitutes a breach of the Fair Work Act.
- Intent doesn’t matter. Penalties may apply even where there was no intention to delay or withhold payment. The breach occurs regardless of the employer’s good faith.
This decision resolved an area where guidance had previously been inconsistent, creating clearer, if more demanding, compliance requirements.
What This Means for Australian Employers
Employers operating in Australia should review their termination processes in light of this ruling. Here are the key areas to address:
Review Your Payroll Capabilities
Can your current payroll system process same-day payments outside of your regular pay cycle? If not, you may need to work with your payroll provider or internal team to build this capability. Some questions to consider:
- What’s the minimum lead time your payroll system needs to process an unscheduled payment?
- Can you process direct deposits on any business day, or only on scheduled payroll dates?
- Do you have a backup process for urgent payments if your primary system can’t accommodate same-day processing?
Update Your Termination Planning Process
The timing of terminations may need more careful coordination between HR, finance, and management teams. Consider:
- Building in lead time between the termination decision and the employee’s final day to allow for payroll processing
- Creating a termination checklist that includes payroll notification as an early step
- Establishing clear handoff procedures between HR and payroll to avoid delays
Calculate Entitlements in Advance
To pay on the final day, you’ll need accurate entitlement calculations ready before the employee’s last shift ends. This includes:
- Accrued annual leave balances
- Any applicable notice in lieu
- Redundancy pay (where applicable)
- Outstanding wages for the final pay period
- Any other contractual entitlements
Document Your Process
Given that penalties can apply even without intent to breach, having a documented process can help demonstrate good faith compliance efforts. Consider documenting:
- Your standard termination payment procedure
- How you calculate entitlements
- Your timeline for processing final payments
- Any system limitations and how you work around them
Train Your Team
Make sure everyone involved in the termination process understands the new timing requirements. This includes HR staff, payroll administrators, and managers who may be communicating termination details to employees.
When Compliance Gets Complex
For many businesses, meeting same-day payment requirements is straightforward. But certain situations can make compliance more challenging:
- Terminations with little notice — When an employee resigns effective immediately or is terminated for cause, there may be limited time to calculate and process entitlements.
- Complex entitlement calculations — Employees with irregular hours, multiple leave types, or long service leave accruals may require more time to calculate accurately.
- Payroll system limitations — Some payroll systems aren’t designed for ad-hoc payments outside the regular cycle.
- Multi-state or international operations — Businesses operating across jurisdictions may have varying systems and processes that complicate rapid payment processing.
In these situations, employers may want to consider whether their current internal processes can reliably meet the new requirements—or whether partnering with a payroll specialist or employer of record (EOR) provider might reduce their compliance risk.
How an EOR Partner Can Help
An employer of record can take on the legal employer responsibilities for your Australian workforce, including payroll processing and compliance with termination payment requirements.
Working with an EOR means:
- Compliance expertise — EOR providers stay current with employment law changes and adjust their processes accordingly, so you don’t have to track every legislative update yourself.
- Payroll infrastructure — Established EOR providers have systems designed to handle complex and time-sensitive payments.
- Reduced risk exposure — Because the EOR is the legal employer, they carry the compliance risk for payment timing and other employment obligations.
This can be especially valuable for businesses entering the Australian market, those with small Australian teams that don’t justify dedicated local payroll infrastructure, or organizations looking to simplify their compliance burden.
At People2.0, we’ve already updated our Australian payroll processes to align with this ruling. Our customers can be confident that termination entitlements will be processed on the employee’s final day of employment, with invoicing adjusted to support this timeline.
Moving Forward
Whether you manage Australian payroll in-house or work with an external provider, this ruling requires attention. The shift from “within seven days” to “on the final day” is significant, and the compliance implications are real.
Review your current processes, identify any gaps, and make the necessary adjustments. If you’re unsure whether your current setup can meet these requirements reliably, it may be worth exploring your options.
Already a People2.0 customer? Reach out to your representative if you have questions about how we’re handling this change for your workforce.
Not yet working with us? If you’d like to learn how an EOR partnership could simplify your Australian compliance, contact us to start a conversation.
The information provided in this article does not constitute legal advice. For specific guidance on your obligations under Australian employment law, please consult with a qualified legal professional.
