Final pay when you resign: leave, notice and long service leave
Resigning brings no redundancy pay, but leave and sometimes long service leave must be paid out. Enter your salary, service and leave balance.
An employee who resigns in Australia is entitled to a final pay made up of outstanding wages to the last day worked, all accrued and untaken annual leave, leave loading where it would have been paid had the leave been taken, and any long service leave that the law of the state or territory makes payable on resignation. Redundancy pay and payment in lieu of the employer’s notice are not part of it. For a salary of $85,000, four years of service and 12 days of unused annual leave, the leave payout is $3,923 before tax and $2,668 after tax at the marginal rate. Long service leave is where the states differ most: Victoria pays it pro rata on resignation after seven years, while New South Wales pays it on resignation between five and ten years only for illness, incapacity or domestic necessity. Most awards require final pay within 7 days.
Final pay when you resign
Leave paid out after tax
$2,668
| Annual leave, gross | $3,923 |
| Long service leave, NSW rules | $0 |
| Tax at your marginal rate | $1,255 |
| Redundancy pay | $0 |
Updated on · Radif Partners · Editorial policy
Resignation payouts: examples
| Salary | Service | Unused leave | Annual leave pay | Long service leave, NSW | Long service leave, VIC | Total after tax, NSW |
|---|---|---|---|---|---|---|
| $60,000 | 2 years | 8 days | $1,846 | $0 | $0 | $1,228 |
| $85,000 | 4 years | 12 days | $3,923 | $0 | $0 | $2,668 |
| $85,000 | 8 years | 12 days | $3,923 | $0 | $11,334 | $2,668 |
| $110,000 | 6 years | 20 days | $8,462 | $0 | $0 | $5,754 |
| $140,000 | 11 years | 25 days | $13,462 | $25,668 | $25,668 | $23,869 |
The two long service leave columns show the same employee under two state laws. At eight years of service, the Victorian employee is paid the leave accrued, and the New South Wales employee who simply resigns is paid nothing until the tenth year. The last column is the New South Wales total after tax.
Annual leave: always paid, at the right rate
Accrued annual leave must be paid out on any termination, at the amount the employee would have received had the leave been taken. That means the base rate plus, where the award or agreement provides it, the leave loading of 17.5%. Leave accrues up to the last day of employment, including during a notice period that is worked. An employer cannot force a departing employee to take leave during notice instead of being paid for it, unless the employee agrees.
Long service leave when you resign
Each state and territory has its own Act. All of them pay the full entitlement once it has been reached, generally after ten years of continuous service and after seven in Victoria and the Australian Capital Territory. Before that point, a pro rata payment on resignation depends on the state: paid for any reason after seven years in Victoria, Western Australia and South Australia; restricted in New South Wales, Queensland, Tasmania, the Australian Capital Territory and the Northern Territory to resignation for illness, incapacity, or domestic or other pressing necessity. The long service leave calculator applies the rule of your state, and each state has its own page on this site.
Giving notice, and what happens if you do not
Put the resignation in writing with the date of your last day. Notice starts the day after it is given. The employer may accept an earlier finish, in which case employment ends on the agreed day and you are paid only up to it; an employer who tells you to leave immediately, without your agreement, must pay out the notice. If you leave without giving the notice your award requires, the employer may deduct up to a week’s wages where the award allows. Notice and leave can overlap: you may take approved annual leave during notice, and sick leave during notice is paid if you provide the usual evidence.
What you do not receive
Redundancy pay is owed only when the employer ends the job because it is no longer needed. Accrued personal leave is not paid out, as the sick leave payout guide explains. Bonuses and commissions depend on the scheme’s terms: many require you to be employed on the payment date, and whether such a clause is enforceable depends on its wording. Share and option plans commonly treat a resigning employee as a leaver who forfeits unvested awards.
Tax on a resignation payout
Final wages are taxed as usual. Unused annual leave and long service leave are added to assessable income and taxed at marginal rates; the employer uses the ATO’s lump sum method to withhold. Leave accrued before 18 August 1993 and long service leave accrued before 16 August 1978 have their own older, lower rates, which now matter only for very long service. Because the whole payout lands in one financial year, a resignation in June can push part of it into a higher bracket than one in July, when a new tax year begins with no other income yet earned.
Super, payslip and separation certificate
Superannuation is payable on the final wages but not on leave paid out, as set out in the guide to super on termination pay. You must receive a payslip within one working day of the payment. If you intend to claim a Centrelink payment, ask for an Employment Separation Certificate, which the employer must supply within 14 days of the request. Someone who leaves a job voluntarily without a good reason may face a non-payment period before income support starts.