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Employers – make sure you don't slip up with employees' payments

Written by

Martin Dunne
Special Counsel
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A decision by the Federal Circuit Court on 28 June 2013 highlights the often forgotten obligation of employers to give pay slips to employees as required by the Fair Work Act 2009 (Cth) (Act) and the Fair Work Regulations 2009 (Cth) (Regulations).

In Lai v Symantec (Australia) Pty Limited, the Court was asked to determine whether an employee's employment had been terminated for a prohibited reason when she was made redundant whilst on maternity leave. This would have been in breach of the general protections (adverse action) provisions in the Act.

Although the Court dismissed the adverse action claim brought by the employee, the Court subsequently found that the employer had breached section 536 of the Act which requires an employer to "give a payslip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work."

The employee's position was made redundant and her employment was terminated effective on 2 March 2012.  However, the payslip, which included reference to her basic salary, was not printed by the employer until 15 March 2012 and was not received by the employee until 16 March 2012. 

The Court rejected the employer's argument that as the payment was related to redundancy, the pay advice didn't cover a payment "in relation to the performance of work".  The Court took this view because the pay slip included a reference to "basic salary".

As the Act required the employer to provide a payslip no later than 3 March 2012, the employer had breached the Act and was liable for a civil penalty of up to $16,500 (now $25,500).  The Court adjourned proceedings to allow the parties to address the question of the amount of the penalty.

This undoubtedly left a sour taste in the employer's mouth, after it was successful in defending the employee's primary claim.

Lessons for employers

Employers must ensure that their employees receive a pay slip compliant with the Act and Regulations within one working day of paying an amount to the employee, which can be in electronic form, such as by email, or in hard copy.

This obligation applies not only to the final payment to an employee following their termination from employment, by way of redundancy or any other reason, but also applies to each payment made to an employee in relation to their performance of work including their weekly, fortnightly or monthly wage or salary.

Often employers wait until their usual pay cycle to prepare and provide a pay slip for an employee whose employment is terminated before the usual payment date.  However the Act is clear – a pay slip must be given to employees within one working day of payment.

What must be included in a pay slip?

Under the Regulations, a pay slip must specify the following information:

  • The employee's and the employer's names (including the employer's ABN)
  • The period to which the pay slip relates
  • The date on which the payment to which the pay slip relates was made
  • The gross and the net amounts of the payment
  • Any amount paid to the employee that is a bonus, loading, allowance, penalty rate, incentive-based payment or other separately identifiable entitlement.

If an amount is deducted from the gross amount of the payment, the pay slip must also include the name, or the name and number, of the fund or account into which the deduction was paid.

If the employee is paid at an hourly rate of pay, the pay slip must also include:

  • The rate of pay for the employee's ordinary hours
  • The number of hours in that period for which the employee was employed at that rate
  • The amount of the payment made at that rate

If the employee is paid at an annual rate of pay, the pay slip must also include the rate as at the latest date to which the payment relates.

Lastly, if the employer is required to make superannuation contributions for the benefit of the employee (see our previous update on this issue on 1 May 2013), the pay slip must also include:

  • The amount of each contribution that the employer made during the period, and the name of any fund to which the contribution was made (other than in relation to defined benefit schemes); or
  • The amount of contributions that the employer is liable to make in relation to the period, and the name of any fund to which the contributions will be made (other than in relation to defined benefit schemes).

Failure to comply with these requirements will expose an employer to a maximum civil penalty, for each breach, of now up to $25,500.  Where multiple breaches occur in  relation to the same issue, the penalty claimed can potentially be reduced on the basis that the breaches arise out of the same course of conduct, meaning that the maximum penalty is the maximum for one offence.

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Martin Dunne +61 2 9391 3211
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