What Goes Into a Final Pay When an Employee Leaves?
Final pays are where payroll errors surface—because everything that has been quietly wrong for two years arrives in a single calculation.
They are also the last impression someone has of working for you, and the one most likely to end up in front of the Fair Work Ombudsman if it is incorrect.
Here is what actually goes into a final pay calculation in Australia.
1. The Entitlements That Are Always Included
Outstanding ordinary hours worked up to the last day, including any overtime, penalty rates, or allowances for that final period.
Unused annual leave, paid at the rate the relevant award or enterprise agreement requires.
Annual leave loading, if the award or agreement provides for it.
Payment in lieu of notice, if you are not having the employee work out their notice period.
Payroll Tip: Leave loading is the most commonly missed item on this list. Employers often assume loading only applies to leave taken during employment. Always check the specific award rather than assuming.
2. The Conditional Entitlements
Long Service Leave (LSL): Governed by state and territory legislation rather than Fair Work. Pro-rata entitlements can kick in well before the full milestone period, so check local state laws before assuming nothing is owed.
Redundancy Pay: Applies if the termination is a genuine redundancy (though some small businesses are exempt).
Accrued RDOs or Time in Lieu (TOIL): Depends on your award, agreement, or employment contract provisions.
3. The Entitlement That Is Not Paid Out
Unused Personal / Carer's Leave: Sick and carer's leave accrues and can be taken during employment, but it disappears on termination. It is not cashed out.
Employees often expect sick leave to be paid out, so it is worth clarifying this in your offboarding conversation rather than leaving them to discover it on their final payslip.
4. Why Superannuation on Final Pays Catches People Out
Not every component of a final pay attracts Super Guarantee (SG).
Attracts Super: Payment in lieu of notice generally attracts super (as it counts as Ordinary Time Earnings).
Exempt from Super: Unused annual leave and unused long service leave paid out on termination generally do not attract super.
A final pay package with the exact same gross figure can carry vastly different super calculations depending on how it is broken down. This is a common spot where automated payroll software quietly gets it wrong.
5. Pay Run Timing Matters
There is usually a strict deadline for processing a final pay, and it is often shorter than employers expect.
Check the relevant award or agreement—many specify a timeline (e.g., within 7 days). Where no timeframe is specified, Fair Work expects payment to be made promptly. Waiting for your "next scheduled monthly pay run" is not automatically acceptable if that run is three weeks away.
6. Where Final Pays Commonly Go Wrong
Incorrect Accrual Rates: Leave balances accruing at the wrong rate for years without anyone noticing until payout day.
Miscalculated Notice Periods: Basing notice on incorrect length of service or missing the additional notice required for employees over 45 with at least two years of continuous service.
Missed Leave Loading: Omitting loading entirely.
Cashing Out Personal Leave: Paying out sick leave by mistake creates an overpayment—and overpayments are far harder to recover than underpayments are to rectify.
Checklist Before You Hit "Process"
Reconcile leave balances manually rather than relying solely on software defaults.
Double-check employee classification and pay rates one last time. Any historical error is about to be multiplied across an entire leave balance.
Keep your working calculations on file in case the payout is queried months down the track.
Need Help Getting Your Payroll Systems Sorted?
If processing termination pays makes you nervous, or you want to ensure your payroll software is set up correctly in the background, I can help.
Book a free 30-minute intro call with Simply Secretarial today to discuss payroll support tailored to your business.
Disclaimer: This article provides general information current at the time of publication and does not constitute legal, financial, or tax advice. Entitlements vary based on modern awards, state legislation, and individual contracts. Always consult the Fair Work Ombudsman or a qualified workplace relations professional for advice specific to your business.
