Pay Up or Lawyer Up? What Bosses Need to Know About Final Pay Timing in 2025

Final pay late? You could be in deep trouble. Here’s the latest on how fast you really need to pay employees after termination, with fresh cases, cheeky commentary, and HR-approved advice.

So… When Do I Have to Pay Someone After Firing Them?

Short answer? Faster than you can say “unfair dismissal.”

Longer answer? On. The. Spot. Yep, as in the day their employment ends. No more “We’ll process that next pay cycle” or “Becky in payroll is on leave.” The courts aren’t here for your excuses, Karen.

 New Year, New Case Law: The Legal Mic Drop

In 2024, the Federal Court turned up the heat. In Bailey v PCL Finance Pty Ltd, the employer copped a $19,000 fine for delaying annual leave payments by just a few weeks. The judge described the delay as “a failure of basic employer responsibilities.”

And just when employers were still processing that bombshell, another ruling in Mitchell v Alpha HR Pty Ltd made it clear: payment in lieu of notice must hit the bank account before the termination kicks in. That’s right. Before. Not during. Not after. Before.

Judges are basically saying: if you can’t do payroll maths, don’t terminate people. 

But What If We’re Broke?

Honestly? Not the court’s problem.

We get it. You’re a small business. Cashflow is tighter than skinny jeans in 2007. But if you terminate someone without having the funds ready, you’re setting your business up for a legal faceplant.

You wouldn’t book a holiday without checking your bank balance, right? So why terminate someone if you can’t afford the exit bill? 

Final Pay Checklist (For Bosses Who Like To Stay Out of Court)

Here’s your “don’t get fined” punch list:

✅ All accrued annual leave

✅ Payment in lieu of notice (if applicable)

✅ Unpaid wages up to the final day

✅ Long service leave (if they’ve been hanging around long enough)

✅ Redundancy pay (if it applies)

And yes, all of the above should be paid on the termination date. Not later. Not next payroll. Not when Mercury’s out of retrograde.

Cautionary Tale Time: The $29k Mistake

One Melbourne business made the classic “next pay run” blunder. After delaying payment of final entitlements for over a month, the former employee took them to the Fair Work Commission. Not only did the business fork out $29,000 in penalties and damages, but their brand reputation was toastier than a café flat white.

They tried the old “we didn’t know the rules” defence. Spoiler: that excuse hasn’t worked since dial-up internet.

Why the Courts Are Cracking Down

The Fair Work Act doesn’t list a crystal-clear date, but that doesn’t mean employers can kick the can down the road. The vibe of the law (and now actual court rulings) is this: final pay = final day.

Delaying payment? It’s not just a technical slip-up. It’s a breach of trust that can cause serious financial stress for employees—something the courts are now recognising in their damages awards.

HR Hack: Plan Before You Fire 

Before you serve that termination letter, do a quick cashflow check and run the numbers. Can you afford:

• Annual leave payout?
• Notice period cash?
• Any extras from the Award or enterprise agreement?

If the answer is no, maybe don’t fire them today. 

Don’t Let Payroll Be the Villain

Too many businesses blame payroll delays for legal missteps. But the court doesn’t care that Cheryl was on leave or that the system glitched. As far as they’re concerned, if someone is fired on Tuesday, they should be paid by Tuesday.

Want to Stay Out of Hot Water?

It’s simple: Know the rules. Follow them. And if you’re not sure? Call an HR expert before you hit “terminate.”

(Like… us. Unlimited support, judgement-free zone, and zero legal jargon.)

FAQs

What if an employee resigns. Do I still have to pay on their last day?

Yes. Whether they resign or you terminate them, the final payment timing rule still applies.

Can I delay the payment with their permission?

Nope. Even if they say “don’t worry about it”, the law still applies. Permission doesn’t override legislation.

What happens if I genuinely make a mistake?

Genuine mistake or not, you may still face penalties. Courts weigh the impact on the employee, not your intent.

Is there a difference for casual employees?

Casuals still get paid their final wages and any entitlements (like unused leave if they’re permanent casuals). Timing rules apply either way.

Do I need to pay redundancy and notice at the same time?

Yes. All entitlements including redundancy, notice, wages and leave must be paid on or before the last working day.

Can I offer installments if I can’t afford to pay in full?

That’s a risky game. It might reduce damages if the employee agrees, but legally, you’re still in breach.

Final pay isn’t optional, and it definitely isn’t “whenever you get around to it.” Courts are throwing the book at employers who mess around with it. So if you want to avoid fines, damage payouts, and the eternal shame of being “that business” in a Fair Work case summary get your payroll act together.

You don’t need to know all the laws, but you do need to know where to get help. So before you make a costly move, book that advice call. Future you will thank you.

🔗 Want to read the full Federal Court decisions? Start with Bailey v PCL Finance Pty Ltd (2024)