Wageline often receives calls about the requirements for paying out annual leave when an employee resigns or is terminated.
Under the Minimum Conditions of Employment Act 1993 employees who leave their employment lawfully, or who are dismissed by the employer through no fault of their own, must receive payment for all annual leave (including pro rata annual leave) on termination.
Under this Act, employers are not required to pay out pro rata annual leave if an employee does not lawfully leave their employment (they do not provide required period of notice).
Where an employee is terminated for misconduct, the Minimum Conditions of Employment Act requires employers to pay out any untaken annual leave that relates to completed years of service, unless the untaken leave relates to a year of service that was completed after the misconduct occurred.
If an employee is covered by a WA award, the award may specify more favourable arrangements for the pay out of annual leave on termination. For instance, an award may entitle an employee to be paid out pro rata annual leave on termination even if they have not lawfully left their employment.
Employers covered by a WA award may also be required to pay annual leave loading when paying out accrued annual leave. Some WA awards also require this loading to be paid on pro rata annual leave. Employers should check the relevant WA award summary for specific requirements for annual leave and leave loading paid out on termination.
Award free employees will not receive any annual leave loading unless a contract of employment provides otherwise.
Read more about Termination and dismissal and Annual Leave