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As an employer, you may face situations where your employee notifies you of their resignation. In these circumstances, you should ensure that your employee provides you with the required notice of resignation. Notice periods give you time to find an appropriate replacement and allow for a proper handover. They also allow for the return of any company property or confidential information held by your employee. This article explains the notice requirements for an exiting employee and how much notice is required when resigning.

What Is a Notice Period?

A notice period is the length of time that you or your employee must give to end your employee’s employment. The notice period is usually set out in an:

The notice period commences on the day after your employee gives notice of resignation and ends on the last day of employment. Notice periods are not extended by public holidays or leave taken by your employee.

How Can Your Employee Give Notice?

Your employee can give verbal notice of their resignation. However, it is best practice for their resignation notice to be provided to you in writing. This is often a requirement of a contract of employment.

How Much Notice Is Required?

Modern awards or enterprise agreements may specify the minimum period of notice your employee must give when they resign. For example, the General Retail Industry Award 2020 includes the following table of notice periods.

Employee’s period of continuous service with the employer Period of notice
Not more than one year One week
More than one year but not more than three years Two weeks
More than three years but not more than five years Three weeks
More than five years Four weeks

An employment agreement can extend the notice period but cannot specify less than the minimum requirements set out in the relevant award or agreement that covers your employee.

Your employee may only need to provide ‘reasonable notice’ to you before resigning if they:

  • are not covered by a modern award or enterprise agreement; and
  • do not have an employment agreement, or their employment agreement is silent about notice.

The period of notice is ‘reasonable’ depending on the circumstances of your employee. Factors that are relevant include:

  • your employee’s age;
  • the nature of your employee’s position;
  • your employee’s length of service;
  • your employee’s remuneration level; and
  • the amount of time it would take your employee to find similar employment.

For example, the reasonable notice period for a junior or less skilled employee is likely to be shorter than the reasonable notice period for a long-serving or highly skilled senior employee.

Notice periods do not apply to casual or fixed-term employees.

What Happens if Your Employee Gives Insufficient Notice?

Modern awards or enterprise agreements may allow you to withhold wages if your employee gives insufficient notice of their resignation. The award or agreement will often specify requirements for withholding payments, such as:

  • your employee must be at least 18 years old;
  • you can only deduct from wages owed to your employee and not from other entitlements;
  • a maximum amount you can deduct; and
  • the deductions cannot be unreasonable in the circumstances.

For example, if your employee gives one week’s notice of resignation, instead of the two weeks specified in the relevant award, you may be able to withhold one week’s pay.

What Happens After Your Employee Gives Notice?

There are a few steps you can take after your employee gives their notice of resignation. Firstly, check if your employee has provided sufficient notice. Your employee may give more notice than required. However, you do not have to accept the additional notice and ask your employee to work the minimum notice period.

Secondly, you should decide whether to ask your employee to work out their notice period or pay your employee in lieu of notice. Additionally, you can send your employee an email or letter to acknowledge their resignation and outline the final payment owed to them. The correspondence can include a reminder of your employee’s post-employment obligations, such as their duties concerning confidential information and intellectual property.

Moreover, you should commence your internal process when an employee resigns, such as:

  • arranging a formal exit interview; 
  • planning to hand over their work or clients; and 
  • preparing to remove them from IT systems.

Further, you can agree for your employee to take paid annual leave during the notice period. Your employee can also take paid carers or sick leave during the period of notice. Your employee should give you notice of the leave as soon as possible and provide any necessary evidence, such as a medical certificate.

Can the Notice Be Paid Out Instead of Worked?

You can require your employee to:

  • work for the entire notice period; 
  • not to attend work;
  • or perform reduced duties.

Additionally, you can pay them in lieu of all or part of their notice period.

If you choose to pay out the notice period, you must pay your employee the total amount you would usually pay them if they had worked until the end of the notice period. This payment includes:

  • incentive-based payments and bonuses;
  • loadings;
  • monetary allowances;
  • overtime; and
  • penalty rates.

Likewise, your employee’s employment ends on the date that you make the payment in lieu of notice. Hence, your employee does not continue to accrue entitlements such as annual leave. You should also require your employee to return all business property in their possession immediately.

Key Takeaways

Employee resignations can be unexpected and inconvenient for your business. Your employment agreement should outline the minimum notice periods to give you adequate time to rehire and organise a handover. You should also have an internal process to deal with resignations. If you have any questions about notice requirements or need assistance with preparing an employment agreement, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

How much notice is required when resigning?

The length of time you or your employee must give to end your employee’s employment will vary based on how long you have been with the company, and if any industry awards are relevant. Likewise, the notice period may be shorter or longer, depending on the specifics of your employment agreement.

What happens if an employee gives insufficient notice?

Modern awards or enterprise agreements may allow you to withhold wages if your employee gives insufficient notice of their resignation.

Do exiting employees need to work for the entire notice period?

As an employer, you do not need to make your employees work for your business for the entire notice period. Additionally, you can pay them in lieu of all or part of their notice period.

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