Resignation
If you are a small business owner or employer, resignations are going to be a part of your business and life. Anytime an employee resigns, it is an important moment in the business as the resignation will kickstart a process including the notice period. Resignation is the termination of employment initiated by the employee. That is, the employee voluntarily ends employment and communicates that decision to the employer.
When an employee resigns, they may have to give written notice via a letter (or email) to their employer. The employee will provide a period called the notice period to transfer their duties and responsibilities. The notice period acts as a safeguard and protection for the business and allows the employee to transition out of their role.
The resignation process
When an employee resigns, there are many things you need to do. The first step is for the employee to officially announce their resignation in writing. In this resignation letter, they will mention their date of resignation, their expected notice period, and their last day of employment. They will include details of any other projects or equipment they need to hand over. Ideally, the employee would have discussed all of this with you verbally or with the hiring manager.
On or before the employee’s final date of employment, you can request the employee to:
Return all property of the business (including keys, documents, information technology equipment, intellectual property).
Remove hard copy and electronic personal and confidential files.
Inform supervisor/s of any passwords/codes to access computer files.
What are notice periods?
The notice period:
Starts the day after the employee gives their employer notice in writing via email or a letter that they want to end their employment.
Ends on the last day of employment.
Forming a part of the offboarding process, the notice period helps the employee and the company acclimatise to the resignation and shift in responsibilities. Notice periods can be tricky as their duration is not standardised across all roles. Having an offboarding or resignation policy in place can benefit you during such times.
Notice required when resigning
If an employee has resigned or been dismissed, they need to give notice. The required notice period will depend on their award, registered agreement, or contract. An employee can give more notice than what is outlined in the applicable award, registered agreement, or contract.
If the employer does not want the employee to work the notice period or wishes to shorten it, they would need to agree with the employee to the shorter notice including waiving notice. If you are an employer, you cannot unilaterally substitute the proposed notice period by an employee for a shorter one, even if it’s according to the award or employment contract. Doing so constitutes the employer terminating the contract and therefore would have unfair dismissal risks attached.
If the employer pays out the notice period, the employee’s employment ends on the date that payment is made. In that case, the employee doesn’t stay employed during the notice period (or continue to accrue entitlements, such as annual leave). If the employer doesn’t pay out any part of the notice period, the employee stays employed for the entire period. Employment can’t end on a date earlier than the day the notice is given. The notice period must be paid out before the termination is effective.
An employee’s award, employment contract, enterprise agreement, or other registered agreement sets out:
How much notice (if any) the employee has to give when they resign.
When an employer can withhold money if the employee does not give the minimum notice period.
Taking money out of an employee’s pay before it is paid to them is a deduction.
An employer can only deduct money if:
The employee agrees in writing and it’s principally for their benefit.
It’s allowed by a law, a court order, or by the Fair Work Commission.
It’s allowed under the employee’s award.
It’s allowed under the employee’s registered agreement and the employee agrees to it.
Most awards say that in certain circumstances an employer can deduct up to one week’s wages from an employee’s pay if they do not provide the minimum amount of notice. Where an award allows this, an employer can only deduct pay from an employee’s wages under the award, not from other entitlements. Although, you must follow the requirements in the industrial instrument, such as the employee must be over 18 years of age; and the employer may deduct from wages due to the employee under the relevant award that is no more than one week’s wages for the employee. Also, any deduction made must not be unreasonable in the circumstances.
Final payments on resignation
Final pay is what an employer owes an employee when their employment ends. An award, employment contract, enterprise agreement, or other registered agreements can specify when the final payment must be made. If it does not, the best practice is for an employee to be paid within 7 days of their employment ending, or on the next scheduled payday.
An employee should get the following entitlements in their final payment:
All outstanding wages for hours worked, including penalty rates and allowances
Any accumulated annual leave and, if applicable; annual leave loading – i.e. if it would have been paid during employment.
Accrued or pro-rata long service leave – depending on the relevant state or territory legislation.
Sick or carer’s leave is generally unpaid when employment ends unless an award, contract, or registered agreement says otherwise.
Updating employment records
You should have a clear HR policy around resignation and dismissal. This policy should outline the process, next steps, and responsible parties. A key part of this process should involve having updated employment records. The employee’s resignation letter should be stored in the employee’s personnel file. As part of the record-keeping requirements under the Fair Work Act 2009, the file should contain details of the notice period, and in what circumstances the employee resigned. This file should remain private and confidential. Generally, no one can access these records other than the employee, their employer, and relevant payroll staff. If requested by the employee, or the former employee to whom the record relates, or the Fair Work Ombudsman, employers must make copies of these records available.
Manage resignation and notice periods
Running a small business is no small task. You need to know latest rules and policies around staff management, performance, resignation, and dismissal. We have supported thousands of business owners with policies, resources, and tools for their business. Contact Peninsula today to learn more about resignation policies, entitlements, and calculating correct final payments.
