Termination payments: why “on the final day” really means on the final day
Termination payments may not be the most glamorous part of running a business , but they are among the most critical. Ensuring employees are paid correctly and on time when they leave your organisation is both a legal obligation and a reputational imperative.
You may think, “We’ve always sorted it out within a few days. What’s the big deal?” A recent court decision has clarified that even minor delays can result in significant penalties.
The case sets a new precendent
In the 2025 case of Jewell v Magnium Australia Pty Ltd, the Federal Circuit and Family Court of Australia delivered a ruling that should serve as a serious warning to all employers.
The issue at hand? Magnium Australia failed to pay an employee’s full termination entitlements on their final day. While some payments were only 12 days late, redundancy pay was delayed by nearly three months.
The total entitlements owed amounted to $72,784. Despite eventually making the payments, Magnium was fined $6,200 for each of the three breaches – a total of $18,600.
Can employers be penalised even if they pay later?
Yes. That’s exactly what this case confirmed. The court accepted that Magnium’s delay was not deliberate or malicious but rather due to oversight and a lack of understanding. However, these mitigating factors were not enough to avoid penalties.
The Fair Work Act is explicit: termination entitlements must be paid on the employee’s final day of employment. Not after payroll cycles. Not once the paperwork is sorted. On the day.
What are termination entitlements?
When an employee leaves – whether due to resignation, redundancy, or dismissal – they are typically entitled to:
- Accrued but unused annual leave
- Payment in lieu of notice (if applicable)
- Redundancy pay (if eligible)
- Long service leave (where applicable)
These payments are not optional. They are statutory requirements and must be made promptly.
Why does this ruling matter?
Historically, late termination payments have often been treated as technical or administrative breaches. Some employers assumed that as long as payments were eventually made, they were compliant. Others delayed entitlements as part of broader exit negotiations.
The Jewell decision makes it clear that such assumptions no longer apply. Even a technical breach may lead to serious legal consequences
Common employer pitfalls
Delaying final payments
Even minor delays – as seen in the Jewell v Magnium case – can trigger penalties. Employers often underestimate how strictly these rules are enforced.
Misunderstanding what’s owed, some employers miscalculate or overlook
- Accrued but unused leave
- Long service leave (especially for long-term employees)
- Redundancy entitlements
- Superannuation obligations
Even small errors can result in disputes and penalties.
Relying on verbal agreements
Termination terms should always be documented. Verbal agreements can easily be disputed and lead to conflict.
Using payments as leverage
Delaying statutory entitlements to encourage agreement on exit terms is risky and unlawful. Basic entitlements must be paid on time, regardless of any ongoing negotiations.
Misaligned payroll cycles
Employers may struggle to process payments on time if payroll systems don’t align with termination dates. Advance planning is key.
Overlooking notice or gardening leave periods
These periods can be used to prepare and calculate final entitlements. Missing this opportunity can lead to rushed decisions and errors.
Insufficient management training
Senior staff involved in terminations may not be fully aware of their obligations, leading to unintended non-compliance.
Not consulting HR or legal advisors
In complex cases , such as redundancies or disputed exits , failing to seek professional advice increases the risk of mistakes and legal exposure.
Practical steps to ensure compliance
To protect your organisation and uphold your obligations, consider the following:
Get your systems in order
Ensure payroll and HR systems are capable of processing termination payments on the final day. This may involve reviewing internal workflows or upgrading software.
Plan ahead
Use notice or gardening leave periods to prepare final calculations and align with payroll dates. Avoid last-minute complications.
Do not delay for negotiations
Even if exit negotiations are ongoing, all statutory entitlements must be paid by the final day. Enhanced packages can follow, but the legal minimum cannot be deferred.
Train your leadership team
Educate management on termination payment obligations. In Jewell v Magnium, the court noted senior leadership was involved in the breach – a major warning sign.
Employer checklist
Use this checklist to ensure your termination processes are compliant:
- Ensure termination entitlements are paid on the final day of employment to avoid penalties.
- Accurately calculate accrued leave, notice in lieu, redundancy pay, long service leave and superannuation obligations.
- Document all termination terms to avoid misunderstandings.
- Pay statutory entitlements on time, regardless of ongoing negotiations.
- Align payroll cycles with termination dates to ensure timely payments.
- Use notice periods or gardening leave to prepare for final payments.
- Educate senior staff on legal obligations related to termination payments.
- Consult an HR professional in complex terminations.
A strategic opportunity
Here’s the silver lining: this isn’t just about avoiding penalties. It’s also a chance to build trust with your employees—even as they’re walking out the door.
Paying people correctly and on time shows that you respect them and take your obligations seriously—that kind of reputation matters, especially in today’s competitive job market.
Key takeaways
The Jewell v Magnium case sends a clear message: courts will no longer tolerate even minor breaches of the Fair Work Act regarding termination payments.
Now is the time for employers to review and refine their processes. When it comes to final payments, “better late than never” is no longer good enough.
How Akyra Strategy & Development can help?
If you would like expert support in managing employee exits, ensuring payroll compliance or mitigating employment risk, we invite you to connect with the team at Akyra Strategy & Development.
Contact us today to schedule a confidential discussion about how we can support your organisation in meeting its workforce compliance obligations with clarity and confidence.
Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not intended to be legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice concerning your specific situation.
