After an employee resigns, the employer must calculate their final payment. When the employee receives this payment depends on the employment agreement, but most final payments are made on the employee’s usual pay day following the last day of employment. In some cases, employees may be entitled to payment for public holidays which fall after the end of their employment.
An employee’s final pay must include the following:
When calculating an employee’s final pay, be aware of any deductions that need to be made.
If an employer does not pay the full amount of an employee’s final pay, they are in breach of the employment agreement. An employee who believes they have been underpaid may raise a claim, seeking both to recover the unpaid wages, and if they deem necessary, seek compensation for the breach.
Whether or not an employee gives proper notice can influence the amount of final pay they receive.
If an employee does give notice of their resignation, they must receive the total amount of final pay to the end of the notice period. An employer can ask the employee to not work the full notice period, but the employee must still receive payment for the full notice period despite not being at work. This can only be done if it is in the employment agreement or both parties mutually agree to it.
Some of the notice period can be waived if requested by the employee, but in the event this occurs, the employer is not required to pay the employee for any time that is waived, unless otherwise agreed.
An employee who does not give proper notice may not be entitled to the same payment benefits as those who do. Because the employee has given less notice than what is stipulated in their employment agreement, this would be considered a breach of contract.
To make up for this, an employer may be able to deduct certain elements of their final pay.
As part of an employee’s final pay, any unused annual holiday entitlements and alternative holiday entitlements must be paid to the employee. This applies to employees who have retired, been terminated, made redundant, or resigned for any other reason.
The final holiday pay calculation will depend on how long the employee has been working for the employer. If an employee has been working for under 12 months, they are not yet entitled to be paid annual leave. In this case, the final payment is calculated at 8% of the gross earnings during the employment period.
If an employee has been working for over 12 months, the calculations are slightly more complicated, please refer to the Employsure guide on Calculating Holiday Pay for more information.
For advice on how to calculate final payments in the workplace, contact Employsure on 0800 675 700.