Managing an employee resignation in Australia — an employer's step-by-step guide

A team member hands in their resignation. That moment sets a compliance clock running — notice periods, handover obligations, access controls, and final pay calculations all need to land correctly before the last day arrives.

This guide walks Australian small business owners and operators through the full resignation process in the order it needs to happen. By the end you'll have a clear picture of what the law requires, where the decisions lie, and what to have documented before the employee walks out the door.

Before you start — what to have in front of you

Before you do anything else, pull together:

• The employee's signed employment contract (the primary source of notice obligations and your rights during notice — including garden leave and payment in lieu provisions).
• The applicable modern award or enterprise agreement, if one covers this employee. Awards often set the minimum notice the employee must give, and govern what deductions (if any) you can make if notice isn't worked.
• Any written workplace policies that refer to resignation, notice, or departing employee obligations.
• The employee's leave balance records — you will need the accrued but unused annual leave figure to calculate final pay.
• Access to the Fair Work Ombudsman's Pay and Conditions Tool (fairwork.gov.au) if you're unsure which award applies or what it says.

The two documents that actually trip employers up are the award and the contract. If you rely only on one or the other, you risk applying the wrong notice period or making a deduction you're not entitled to make.

Step 1: Confirm the resignation in writing

As soon as the employee informs you they are resigning — whether in person, by email, or by any other means — ask them to confirm it in writing. If they've already sent an email, that email is sufficient. The written record should capture:

• the date they gave notice;
• their proposed last day of employment.

Reply in writing to confirm the notice period that applies, the last day as you understand it, and that you'll be in touch about handover and final pay arrangements. This exchange creates a clear record if there is ever a dispute about whether a resignation was given or accepted.

If an employee later claims they didn't resign, a written response from you acknowledging the resignation and confirming the last day significantly reduces your exposure.

Step 2: Determine the applicable notice period

The notice an employee must give when resigning is not set by the National Employment Standards (NES). The NES notice of termination obligations apply to employers when ending employment — not to employees who choose to resign.

Employee resignation notice is governed by:

• the employment contract (which may set a fixed notice period for different roles or seniority levels);
• the applicable modern award or enterprise agreement (many awards set a minimum resignation notice period, often mirroring what the employer would need to give under the NES, but the specific term varies by award);
• if neither applies, any reasonable implied term — which is uncertain ground and best avoided through a proper contract.

A few specific rules worth noting:

• Casual employees generally have no obligation to give notice when they resign, unless their award or contract specifically requires it.
• Seniority matters. Senior or specialist employees often have longer contractual notice periods. Check the contract first.
• The notice period in the contract cannot be set below any minimum in the applicable award; the higher of the two governs.

Check the specific award clause rather than assuming. If you can't locate the award, search at fairwork.gov.au or contact the Fair Work Infoline on 13 13 94.

Step 3: Decide how notice will be served — working notice, payment in lieu, or garden leave

Once you know the notice period, you have a commercial and legal decision to make about how the employee will serve it. The three main options are:

Working the notice period

The default position under most contracts and awards: the employee continues to work, you continue to pay them, and the focus shifts to handover. You can direct the employee's work during this time consistent with their contract and the applicable award.

Payment in lieu of notice

Where your employment contract and the applicable industrial instrument permit it, you can end the employment before the notice period expires and pay the employee what they would have earned had they worked out the full notice. The Fair Work Ombudsman confirms that if an employer takes this option, the payment must equal the full amount the employee would have been paid for the notice period. Note that annual leave and other entitlements do not accrue during a payment in lieu period.

Always check your contract first — if it doesn't contain a payment in lieu clause, you should take legal advice before using this option.

Garden leave

Where the contract expressly authorises it, you may direct the employee not to attend the workplace (and perhaps not to perform active duties) while remaining employed and on full pay for the duration of the notice period. Garden leave is most appropriate where the employee has access to sensitive client relationships, confidential commercial information, or systems that create a real risk if used in the transition to a competitor.

Important: an employer cannot require an employee to take annual leave as part of a notice period without agreement. Garden leave (paid leave under contract direction) is a separate concept and requires express contractual authority.

Mutual agreement to shorten notice

You and the employee can agree in writing to a shorter notice period than the contract or award requires. Put the agreement in writing, state the revised last day, and confirm how final pay will be calculated.

Where people get held up here:

• Assuming any contract has a payment in lieu clause. Many standard contracts don't. Ending employment early without this clause can expose you to a claim for breach of contract.
• Conflating garden leave with directing annual leave. The two are legally different; one requires contractual authority, the other requires agreement.
• Not putting the chosen arrangement in writing. A brief email exchange is sufficient, but the silence of a handshake is not.

Step 4: Plan and manage the handover

During the notice period — however it is served — your operational priority is protecting continuity:

• Identify the employee's critical responsibilities, client relationships, system accesses, and undocumented knowledge.
• Assign an internal owner for the handover plan.
• Schedule structured time with the departing employee to document processes, transfer files, and brief colleagues or successors.
• Communicate the change to clients whose relationships need to transition, giving them a clear new point of contact.

Even where an employee is on payment in lieu or garden leave, document any knowledge transfer achieved and the date access was removed.

Step 5: Handle leave during the notice period

Two types of leave commonly arise during notice periods.

Annual leave: An employee can take annual leave during a notice period if you agree to it. You can decline a request that would unreasonably disrupt operations, subject to any relevant award term. If annual leave is taken, the last day of employment does not change — the leave runs concurrently with the notice period.

Personal/carer's leave: An employee can take personal or carer's leave during a notice period in the usual way — they must notify you as soon as practicable and advise the expected duration. The notice period continues to run. You may request evidence (such as a medical certificate) consistent with your policy, contract, and the applicable award term.

Step 6: Respond if the employee won't work their notice

If an employee walks off before working the full notice period required by their award or contract, your options are limited but not zero.

Many — though not all — modern awards contain a model term that allows an employer to deduct up to one week's wages from an employee's final pay if the employee did not give the required notice under the award. The Fair Work Ombudsman confirms the following restrictions apply:

• the deduction can only come from wages due under the award (ordinary hours, penalties, allowances covered by the award);
• you cannot deduct from accrued annual leave, over-award payments, or other entitlements;
• your specific award must contain this provision — not all do;
• you cannot make any deduction from the wages of an employee under 18 without the written consent of their parent or guardian.

If your award does not contain such a term, you may have no right to deduct anything. In that case, a civil claim for breach of contract is theoretically available but is rarely commercially worth pursuing. Check the specific award clause before making any deduction, and record it clearly on the final payslip.

Step 7: Calculate and pay final entitlements correctly

Final pay must include:

• all outstanding wages for ordinary hours worked, including any applicable penalties, allowances, and loadings;
• any notice period payment (either worked or paid in lieu);
• all accrued but unused annual leave — this must be paid out even if the employee did not take it and is not conditional on the reason employment ended;
• annual leave loading, if the employee would have been entitled to it when taking leave during employment;
• any other entitlements payable under the contract or applicable award.

The Fair Work Ombudsman states that most awards require employers to pay final pay within 7 days of the last day of employment. Check the specific timing provision in your award or enterprise agreement — it can vary.

What people miss:

• Annual leave loading. Even where an award or contract clause purports to exclude leave loading on termination, the Fair Work Ombudsman's position is that loading must generally be included. Take advice if your award has such a clause.
• Allowances that have been running. Vehicle, tool, or uniform allowances that formed part of normal remuneration should be included for any final period worked.
• Overstating deductions. A deduction for insufficient notice (where permitted by the award) must be recorded on the payslip and cannot exceed the permitted amount.

Step 8: Secure systems, property, and confidential information

On or before the last day, complete the following:

• Remove or adjust the employee's access to systems, premises, and accounts on the date agreed in your arrangement.
• Collect company property (devices, keys, access cards, uniforms).
• Remind the employee in writing of any post-employment obligations — confidentiality, intellectual property, non-solicitation, or non-compete clauses — that survive the end of employment.
• Retain employment records in accordance with your obligations under the Fair Work Act 2009 (Cth) and any applicable payroll record-keeping legislation.

Where a departing employee has access to valuable trade secrets or key client relationships, and your contract contains enforceable post-employment restraints, take legal advice on whether any steps to enforce those obligations are warranted before the last day arrives.

Step 9: Close out documentation and records

Issue a written acknowledgement of the end of employment, confirm the final pay amount and date, and update your payroll and HR records. If your employment contract or onboarding documentation contains a Fair Work Information Statement acknowledgment, file it with the employee's records.

This is a useful moment to review your standard employment contract template. If it lacks clear notice, payment in lieu, garden leave, confidentiality, or restraint clauses, the next resignation may be harder to manage.

Where Artificer Legal can help

Artificer Legal practitioners can assist at any stage of the resignation process, including:

• Reviewing your employment contracts to confirm they contain the clauses you need — payment in lieu, garden leave, confidentiality, and post-employment restraints — before the next resignation arrives.
• Advising on a specific resignation where the notice period, award entitlements, or deduction rights are unclear.
• Calculating final pay for complex arrangements involving multiple award entitlements, bonus provisions, or senior employee contracts.
• Drafting written arrangements with departing employees — agreed short-notice exits, separation deeds, or deeds of release.
• Enforcing post-employment obligations where a departing employee appears to be in breach of restraint or confidentiality clauses.

The step that determines whether this goes smoothly

The single greatest determinant of how well a resignation is managed is whether you have a clearly drafted employment contract before the resignation is handed in. Contract gaps — missing payment in lieu clauses, silent garden leave provisions, vague confidentiality terms — force you into difficult conversations and uncertain legal territory at exactly the moment when speed and clarity matter most. Every other step in this process runs more smoothly when the contract says clearly what both parties agreed to from the outset.

To recap: confirm the resignation in writing as soon as it is given; identify the notice period from the contract and award; decide early how notice will be served; plan the handover; manage leave requests and any non-attendance issues; calculate final pay correctly including accrued leave and any applicable leave loading; pay by the award deadline; and close out access, property, and records on the last day.