Final Payment | Resignation & Termination (2024)

After an employeeresigns,the employer must calculate their final pay. When the employee receives this payment depends on the employment agreement, but most final payments are made on the employee’s usual pay day after employment ends. In some cases, employees may be entitled to payment forpublic holidayswhich fall after the end of their employment.

What to include in final pay

An employee’s final pay must include the following:

• All hours worked from the last pay period up until the final day of employment.

• Unusedannual holiday entitlement, including any alternative holidays which may be owed.

• Extra lump sum payments and other payments specified in the employment agreement. If necessary, these can be negotiated between both parties as part of a leaving package.

When calculating an employee’s final pay, be aware of any deductions that need to be made.

If an employer does not pay the full amount of an employee’s final pay, they are in breach of the employment agreement. An employee who believes they have been underpaid may raise a claim, seeking both to recover the unpaid wages, and if they deem necessary, seek compensation for the breach.

Employees who do give notice

Whether or not an employee gives proper notice can influence the amount of final pay they receive.

If an employee does give notice of theirresignation, they must receive the total amount of final pay up to the end of the notice period.

An employer can ask the employee to not work the full notice period, but the employee must still receive payment for the full notice period in their final pay despite not being at work. This can only be done if it is in the employment agreement or both parties mutually agree.

Some of the notice period can be waived if requested by the employee, but in the event that this occurs, the employer is not required to pay the employee for any time that is waived, unless otherwise agreed.

Employees who do not give notice

An employee who does not giveproper noticemay not be entitled to the same amount of final pay as those who do. Because the employee has given less notice than that stipulated in their employment agreement, this would be considered a breach of contract.

To make up for this, an employer may be able to make authorised deductions from their final pay to offset any unworked days of the specified notice period.

Calculating final holiday pay

As part of an employee’s final pay, any unused annual holidays and alternative holidays owing must be paid to the employee. This applies to employees who have retired, been terminated, made redundant, or resigned for any other reason.

The final holiday pay calculation will depend on how long the employee has been working for the employer. If an employee has been working for under 12 months, they are not yet entitled to be paid annual leave in their final pay. In this case, the final holiday payment is calculated at 8% of the gross earnings during the employment period.

If an employee has been working for over 12 months, the calculations are slightly more complicated, please refer to the Employsure guide oncalculating holiday payfor more information.

An employer may also need to consider whether an employee is entitled to an annual leave cash up as part of their final payment. Anannual leave cash upis when an employee is paid out for any unused annual leave entitlements that they have accrued but not taken.

However, not all employment agreements provide for an annual leave cash up, so it is important to check the agreement or workplace policies to determine whether an employee is entitled to it.

If an employee is entitled to an annual leave cash up, this should also be included as part of their final pay calculation.

When does an employee’s final pay have to be paid?

An employer and employee can agree that the final pay will be made on the employee’s last day of work. At the latest, employees should receive their final pay on the next pay day after employment ends.

For advice on how to calculate final payments in the workplace, contact Employsure on0800 568 012.