An employee has just told you they are resigning. Whether it lands as a polite two-minute conversation or a late Friday email, it starts a clock: notice begins to run, handover needs organising, and a final pay has to be calculated and paid correctly.
Work through the steps in this guide and you will end up with a resignation that is documented, a handover that is complete, entitlements paid in full and on time, and company information and property secured. Three things people often assume are worth flagging up front: you cannot refuse a resignation, you generally cannot hold back final pay because property has not been returned, and unused sick leave is not paid out on termination.
Before You Start: What You Need on Hand
The process goes faster, and with fewer surprises, if you have these ready before you respond to the resignation:
- Employment contract: the notice clause, duties during the notice period, confidentiality and intellectual property terms, and any post-employment restraints.
- Modern award or enterprise agreement: what it says about employee notice, when final pay must be paid, and any deduction or withholding rules.
- Leave balances: accrued annual leave and whether leave loading applies, plus any long service leave under your state's scheme.
- Pay records: hours worked, penalty rates, allowances and any commissions, so the final pay can be calculated accurately.
- Asset and access register: devices, keys, access cards, software accounts and shared credentials issued to the employee.
One point that trips employers up: the notice requirements in the National Employment Standards apply to employer-initiated termination, not to resignations. An employee's obligation to give notice comes from their contract or an award, and some employees do not have to give any notice at all.
Step 1: Acknowledge the Resignation in Writing
You cannot accept or reject a resignation. The Fair Work Ombudsman is clear that resignation is when an employee decides to leave, and the employer has no power to refuse it. What you can and should do is acknowledge it in writing, promptly.
Your acknowledgement should confirm:
- that you have received the resignation,
- the last day of employment, calculated from whatever notice applies,
- how the notice period will be run: working notice, payment in lieu of notice, or garden leave, and
- the handover arrangements you expect during the notice period.
Getting the last day right matters. If the employee later claims they were dismissed, or you later claim they abandoned their employment, the written record of the resignation and its accepted terms is your best evidence.
Step 2: Confirm the Notice Obligations
Notice comes from the employment contract, a modern award or an enterprise agreement. Where a contract and an award both cover notice, the contract cannot set a requirement below the award's legal minimum, but it can require more.
Key points worth knowing:
- Casual employees: do not have to give notice when they resign.
- Award and agreement free employees: do not have to give notice either, unless their contract requires it.
- If there is no contract term and no award applies, the employee may still need to give reasonable notice.
- The notice period starts the day after the employee gives notice and ends on the last day of employment. Public holidays inside that window do not extend it.
The Fair Work Ombudsman publishes a Notice and Redundancy Calculator if you need to work out what applies to a particular employee.
When an Employee Gives Too Little Notice
If an employee gives less notice than their award requires, most awards let you withhold up to one week's wages, but only where the employee is 18 or over, the shortfall is real, and the deduction is not unreasonable. The withholding can only come from wages payable under the award, never from leave entitlements or over-award payments.
When You Want the Employee Out Early
If you would rather the employee not work out the notice period, you have a few options. You can agree with the employee to end the employment early. You can pay in lieu of notice: under s 117 of the Fair Work Act 2009 (Cth), a payment in lieu of notice must be paid before or on the day of termination. And if the contract allows it, you can place the employee on garden leave, where they stay employed and paid but do not perform their usual duties or contact clients.
Step 3: Run the Notice Period
With the dates locked in, the notice period is your window to transfer knowledge, manage risk and keep customers and the team steady:
- Write a handover plan: projects, deadlines, files, contact lists and the processes that only exist in the employee's head. A written plan survives the last day; memory does not.
- Schedule knowledge transfer: sessions with the person taking over, and a nominated point person for questions after the employee leaves.
- Manage leave requests: an employee can take paid annual leave during the notice period only if you agree. Personal or carer's leave is different. Under the National Employment Standards an employee gets 10 days of paid personal or carer's leave each year and can use it during notice for a genuine illness or injury, or to care for a family or household member. They must tell you as soon as possible and provide evidence if you ask for it.
- Adjust access progressively: move the employee to the least access they need to finish the handover, rather than leaving everything open until the last day.
Do not try to block genuine sick leave because someone is leaving. Personal leave taken during notice counts as authorised absence, not abandonment, and refusing it can turn a routine exit into a dispute about the notice period.
Step 4: Collect Property and Cut Access
Plan the return of everything issued to the employee, and document it. A checklist keeps this quick:
- Hardware: laptop, phone, dongles, tokens, keys and access cards.
- Software and data: email, CRM, cloud storage, code repositories and third-party tools connected through single sign-on.
- Shared credentials: passwords and authenticators the employee may have reset or registered to themselves.
- Client material and work product: files, samples and documents, including anything on personal devices (BYOD).
Confirm in writing what was returned or deleted. If you later need to enforce confidentiality obligations or investigate data removal, the handback record is what you will rely on.
Step 5: Calculate and Pay Final Entitlements
The final pay has to be accurate and it has to be paid on time. Under s 90(2) of the Fair Work Act 2009 (Cth), an employee's untaken annual leave must be paid out at the rate it would have been paid had the leave been taken, which includes annual leave loading where it applies. The Fair Work Ombudsman notes that leave loading must be paid out on termination even where an award says otherwise.
Final pay typically includes:
- wages owing for hours worked to the last day, including penalty rates and allowances,
- accrued annual leave and any leave loading,
- accrued or pro rata long service leave under your state's scheme, and
- payment in lieu of notice, where that is how the exit was structured.
Sick and carer's leave is not paid out on termination.
Timing
Most awards require final pay within seven days of the last day of employment. Where no award or agreement sets a timeframe, the Fair Work Act requires payment at least monthly. Aim for the next pay cycle at the latest.
Superannuation
The ATO's guidance is that employment termination payments and unused leave payments do not form part of ordinary time earnings, so no super guarantee is required on those amounts. The rules differ for leave paid out while employment continues, and an award can require super on amounts the SG regime does not. Check the ATO's current guidance before you pay.
Deductions
Under s 324 of the Fair Work Act, a deduction from wages is only permitted if the employee has authorised it in writing and it is principally for their benefit, or it is authorised by an enterprise agreement, a modern award, a Fair Work Commission order or a law. You cannot deduct for unreturned property or training costs unless such an arrangement exists. Even where an award allows withholding for short notice, accrued entitlements like annual leave must still be paid in full. Unlawful deductions breach a civil remedy provision, so get the basis right before you withhold anything.
Step 6: Confirm Ongoing Obligations
Before the last day, send a short written reminder of the obligations that survive employment:
- Confidentiality: what the employee cannot disclose or use, including client lists, pricing and strategy.
- Intellectual property: work created in the course of employment generally belongs to the employer. Make the position clear in writing where the employee has been a creator.
- Restraints: post-employment restraints are enforceable only to the extent they reasonably protect a legitimate business interest and go no further than necessary for the employee's role and access. A reminder letter does not make a bad restraint enforceable, but it does put the employee on notice of what you will rely on.
- References: there is generally no legal obligation to provide a reference. If you do, keep it accurate and consistent, because a misleading reference can create its own liability.
Step 7: Communicate the Departure
Agree the message with the employee where you can, then tell the team and key clients. Name a point of contact for the transition and keep the announcement factual. Departures handled with a clear, respectful message generate fewer rumours and fewer follow-up questions than silence.
Where the Process Usually Stalls
The process most often goes wrong at one of these four points:
- Withholding pay for unreturned property: deductions need a lawful basis under s 324, and a laptop sitting in the employee's car does not give you one. Chase the property separately and pay the entitlements.
- Saying no to leave during notice: annual leave during notice needs your agreement, but genuine personal or carer's leave does not. Treating a sick employee's notice period as abandonment is a common and expensive error.
- Assuming the NES sets employee notice: it does not. Casual and award-free employees may owe no notice at all, and a contract cannot demand less than the award minimum.
- Paying final pay on your usual cycle: if the award says seven days, that is the deadline, not a guideline.
When to Call in a Lawyer
A well-run resignation should not need a lawyer, but several points in the process are worth advice before you act:
- Reviewing the contract before an exit: so you know whether garden leave, payment in lieu or a restraint is actually available to you.
- Withholding or deductions: the rules are technical and the consequences of getting them wrong can be significant.
- Restraint enforcement: a practitioner can assess whether a restraint is likely to hold up and, if needed, move quickly for an injunction.
- Negotiated exits: a deed of release can settle final payments, confidentiality and non-disparagement in one document.
- Pressured resignations: if an employee is pushed to resign, the resignation can be treated as a dismissal and expose you to unfair dismissal or general protections claims. If a resignation arrives in the middle of a difficult conversation, take advice before you respond.
The First 48 Hours Decide the Rest
The written acknowledgement you send in the first day or two is the step that determines how the rest of the exit goes. It fixes the last day of employment, records the notice basis, and sets the terms of the handover, access, final pay and ongoing obligations that follow. Get it right and the remaining steps are mostly execution. Get it wrong, and an exit that should be routine can become a dispute about dates, entitlements and whether the resignation was really voluntary.
The process in short: confirm the resignation in writing, check the contract and award for notice, run a managed notice period with a written handover, collect property and cut access, pay the final entitlements in full and on time, remind the employee of ongoing obligations, and communicate the departure cleanly. Keep your contracts and checklists current, and the next resignation will be easier than the last.