Employment: Termination of contract and dismissal

Termination of employment and the relevant payments

Regardless of whether you are an employer or employee, you should give either (1) formal advance notice or (2) wages in lieu of notice to your existing employer/ employee for the termination of an employment contract.

The length of advance notice (or the amount of wages in lieu of notice) for termination of a continuous contract of employment is determined as follows.

With an expressed agreement

Length of notice: As per the agreement, but not less than seven days
Wages in lieu of notice: A sum equivalent to the amount of wages for the notice period

Without an expressed agreement

Length of notice: Not less than one month
Wages in lieu of notice: A sum of not less than one month's wages

The items and amount of payments that are payable to an employee on termination of employment or the expiry of an employment contract depend on a number of factors such as the length of service, the terms of the employment contract and the reason for the termination of the contract. For quick reference, termination payments usually include:

  • outstanding wages;
  • wages in lieu of notice, if any;
  • payment in lieu of any untaken annual leave, and any pro rata annual leave pay for the current leave year;
  • any outstanding sum of end of year payment, and pro rata end of year payment for the current payment period;
  • where appropriate, long service payment or severance payment;
  • other payments under the employment contract, such as, gratuity or provident fund payments.

An employer must pay all termination payments, except for severance payments, to the employee as soon as practicable and in any case not later than seven days after the date of termination or expiry of the contract.

Employers who fail to pay termination payments when they become due are liable to prosecution and, upon conviction, to a fine of $200,000 and to imprisonment for one year.