The employer and employee’s rights and obligations
Australia has a fairly complex system of workplace regulation. When an employee resigns, it’s important to be aware of your rights and obligations as well as theirs. Here are some of the key points to be aware of.
Written or verbal resignation notice?
An employee’s contract of employment might say that they need to provide a written resignation notice. If it doesn’t, they can give you notice of their resignation either verbally or in writing. However, it’s better to have a written resignation notice. Having a written record of your employee’s resignation will help to prevent any misunderstanding about the notice period. Written notice could be in the form of a resignation email or even a text message, but consider asking your departing employee for a printed and signed letter of resignation to make it more official.
It can be quite a shock when an employee suddenly resigns, especially if you thought everything was going great. You’re left wondering what went wrong and scrambling to look for a replacement or ensure their work gets handed over to another employee.
Fortunately, your employee is legally required to give you a minimum amount of notice. You may have agreed on a minimum notice period in your employment contract. Otherwise, most modern awards and enterprise agreements will tell you how much notice your employee is required to give. It’s important to note that the notice period starts on the day after your employee gives notice of resignation and ends on the last day of their employment.
Can I pay out my employee’s notice?
Your employee can work until the end of the notice period or, if you prefer, you can ask them to leave early and pay out their notice period. This is known as pay in lieu of notice. If you decide to pay out your employee’s notice, their employment ends on the day you give them their pay in lieu of notice. They don’t keep accruing entitlements, such as annual leave, after this date. The pay in lieu of notice must be equal to the full amount your employee would have received if they had worked their notice period.
What should I do if the minimum notice period isn’t mentioned anywhere?
If your employment contract doesn’t provide a notice period and no other modern award, industrial instrument or registered agreement applies, then your employee just needs to give ‘reasonable notice’ when they resign. This means they need to give you as much time as can reasonably be expected to find a suitable replacement.
What can I do if my employee doesn’t comply with the minimum notice period?
If a minimum notice period is stipulated in writing somewhere, and your employee doesn’t give the correct amount of notice, you are entitled to withhold any money you owe your employee, such as outstanding wages. The amount of money you withhold can only be up to the amount your employee would have earned if they had given proper notice and worked out the notice period. As an example, let’s say your employee is required to give four weeks’ notice, but they only give two; in this case, you can withhold two weeks’ wages and/or annual leave payments.
Can my employee take leave during the notice period?
In short, yes. If you approve their leave, your departing employee can take paid annual leave instead of working out the notice period. They may also use their paid personal or carer’s leave, as long as they give you sufficient notice. They can also take sick leave if necessary, but the normal rules apply – they must present a medical certificate. If your employee doesn’t have any accrued annual leave or sick leave, they may choose to take unpaid leave after getting your approval.
It’s important to check what money you still owe your departing employee when their employment ends, known as their final pay. Modern awards, enterprise agreements or your employment contract may have requirements about when you need to give your employee their final pay. If they don’t, best practice is to make the final payment within seven days of their employment ending or on the next regular payday. Final pay includes:
- outstanding wages, including penalty rates and allowances
- any accrued and unused entitlements, such as annual leave and annual leave loading
- and, if applicable:
- long service leave payout
- payment in lieu of notice
- redundancy pay.
Other things to consider
Conduct an exit interview
An exit interview is a meeting between an employer and an employee who has decided to resign. Think of it as the opposite of a job interview: instead of finding out why someone wants to join your business, your goal is to find out why they want to leave. It’s a chance for you to get feedback about your soon-to-be-former employee’s experiences, both positive and negative. Finding out in which areas you are performing well and where improvement is needed can help guide your business in the right direction and improve your employee retention rates. Exit interviews are completely voluntary. If your employee doesn’t feel comfortable participating, they should be able to decline freely without facing any repercussions.
Should I make a counteroffer?
This is a tricky question. On the one hand, if the person is a high-performing employee and is critical to the team, you may be prepared to offer anything to keep them. On the other hand, counteroffers are fraught with issues and are often counterproductive. Keep in mind that your highly valued team member decided to quit for one or more reasons. Perhaps it was the company culture, changes to management or a lack of career development – there could be any number of reasons, but it’s very rare that money is the only issue. So, if you offer a financial incentive but don’t address their core concerns, you’ll most likely end up with an employee who is just as disengaged, but now on a higher salary.
A counteroffer could be effective if you address the specific causes of your employee’s dissatisfaction. If it’s a lack of career development opportunities, moving them internally or creating a new position for them could fix the problem. However, if you don’t think a counteroffer will work, you can try to maintain a relationship with your employee after they leave and recruit them again down the track.
Make a hiring plan
If the counteroffer option isn’t viable and the team member really is leaving, their departure will inevitably create a higher workload for the rest of the team. It’s important that you take action to find a replacement as soon as possible so that everyone understands that the increased workload is only temporary. Start the process of advertising the position as soon as possible. Get input from your employees on what skills, experience and attributes they think the new hire should have. Also ask them if they know of anyone, either inside or outside the business, who could be a good fit for the role. Perhaps you might want to promote someone internally. It could be a great opportunity for someone to grow in their career.
Undoubtedly, there will be many thoughts racing through your mind when an employee resigns, but here are some key points to remember:
- It’s best practice to get a written notice of resignation from your departing employee.
- Check the relevant award, enterprise agreement or employment contract to find out what the minimum notice period is. You have the option to pay out the notice period.
- See the resignation as a learning opportunity. Conduct an exit interview to identify where you can improve.
- Make a hiring plan as soon as possible to ease the load on the rest of your team.