The Price of Delay in Termination Pay

What Every Employer Must Know About Termination Pay

When an employee’s employment ends, employers often focus on the operational and people management aspects of the exit. What is sometimes underestimated is how unforgiving the law can be when it comes to the process and timing of final pay.

A recent decision of the Federal Circuit and Family Court of Australia (the Court) confirms that even short delays in making termination entitlements can expose employers to financial penalties, regardless of whether the delay was intentional.

Termination pay under the Fair Work Act

Under of the Fair Work Act 2009 (Cth) (the FW Act), certain entitlements must be paid on an employee’s last day of work, including:

• accrued but unused annual leave (s 90(2));

• payment in lieu of notice where an employee’s notice period is not worked (s 117(2));

• redundancy pay, where applicable (s 119(1)); and

• any other outstanding entitlements under an applicable award or the National Employment Standards.

Failure to pay these amounts on time is not simply a payroll issue. Each unpaid entitlement can amount to a separate contravention of the FW Act, carrying its own penalty exposure.

A recent example: Jewell v Magnium Australia Pty Ltd (No 2)

The consequences of getting this wrong were illustrated in Jewell v Magnium Australia Pty Ltd (No 2) [2025] FedCFamC2G 676.

Dr Jewell’s employment with Magnium Australia Pty Ltd (Magnium Australia) ended due to redundancy. On his final day, Magnium Australia failed to pay Dr Jewell’s:

• accrued annual leave;

• payment in lieu of notice; and

• redundancy entitlement.

The annual leave and notice amounts were not processed by Magnium until the next payroll cycle, around 12 days after the termination date. The redundancy payment was delayed further, with payment not made until around two and a half months after the termination date. The late payments amounted to $72,784.

Notably, Magnium introduced evidence to suggest that it did not withhold Dr Jewell’s redundancy pay deliberately. The delay stemmed from its mistaken belief that it qualified as a small business employer and was therefore exempt from redundancy obligations. The Court made clear, however, that a genuine but incorrect interpretation of the law does not absolve an employer from liability.

Ultimately, despite the relatively short delay of 12 days, the Court awarded penalties against the employer for its failure to comply with its statutory obligations.

How the Court approached the case

In determining liability and penalty, the Court adopted a structured and principled approach, carefully distinguishing between the existence of statutory contraventions and the appropriate regulatory response to those contraventions.

First, the Court made clear that compliance with the FW Act turns on objective timing obligations, not on the employer’s intention or interpretation of its obligations. The fact that Magnium ultimately paid all outstanding entitlements did not alter the legal position that the payments were made outside the statutory timeframe. Once the final day of employment passed without payment, the contraventions were complete.

Further, the Court considered the character of the employer’s conduct. While accepting that Magnium had not acted dishonestly or with deliberate disregard for its obligations, the Court found that its failures to uphold its statutory obligations stemmed from carelessness and a misunderstanding of legal requirements. It emphasised that a genuine but mistaken interpretation of the law does not operate as a defence, particularly where employers have access to professional advice.

The Court also examined the impact of delayed payments on employees, observing that termination entitlements are designed to provide certainty and financial security at a vulnerable point in the employment relationship. Delayed payment undermines that statutory protection and is treated seriously, even where the breaches are later rectified.

Finally, in addressing the penalty, the Court applied established principles of civil deterrence. It took into account the absence of prior contraventions, the employer’s cooperation once the errors were identified, and the lack of any deliberate misconduct on the employer’s part. At the same time, the Court reinforced that penalties must be enforced meaningfully to encourage employers to treat termination payment obligations as strict legal deadlines, not flexible administrative targets..

The Judgment Makes Clear that:

• timing matters as much as the payment itself;

• misunderstandings of legal obligations do not excuse non-compliance; and

• each unpaid entitlement gives rise to its own breach.

In other words, good intentions and subsequent correction of errors do not negate the fact that a contravention has occurred once the deadline has passed.

Ultimately, the decision delivers a clear judicial message. While intent may influence the penalty, it does not excuse the breach. Employers are expected to maintain systems that ensure termination payments are made accurately and on time, and failures in those systems will attract regulatory consequences.

Final Warning to Employers

This decision should be treated as a clear cautionary tale for businesses of all sizes. Termination payments are not an area where employers can afford to be casual, flexible or reactive. The law imposes strict deadlines, and courts are prepared to enforce them even where mistakes arise from genuine oversights.

The content in this Article is intended only to provide a summary and general overview on matters of interest. It is not intended to be comprehensive nor does it constitute legal advice. It should not be relied upon as such. You should seek legal or other professional advice before acting or relying on any of the content.

The solicitors at BlackBay Lawyers can provide specialised and detailed legal advice. If you require advice, please feel free to contact BlackBay Lawyers on (02) 8005 3077 or via www.blackbaylawyers.com.au  for a confidential discussion with one of our solicitors.