When ending an employment relationship — whether due to redundancy, performance issues, or resignation — one key decision for Australian employers is:
Should the employee work through their notice period — or be paid in lieu?
The Fair Work Act provides flexibility, but your choice can have real consequences for your business, culture, and legal risk. Here’s how to make the right decision.
(Click here to read our article on redundancy processes)
What the Fair Work Act Says About Notice Periods
Under the Fair Work Act 2009 (Cth), employers are required to either:
- Let the employee work through their required notice period, or
- Pay the employee in lieu of notice (i.e. pay out the full notice period and end employment immediately)
This means you are not legally required to allow the employee to work out their notice, so long as the correct payment is made. click to read legislation
Why Letting Employees Work Notice Periods Can Be Risky
While letting an employee work out their notice might seem like a fair and practical option, it can also create risks. In my work advising employers across Australia, I often ask:
Is this in the best interest of the employee — or just what “feels” right to the manager?
Here are three key risks:
1. Emotional or Cultural Fallout
Employees who are redundant or have been terminated for poor performance may feel disengaged, embarrassed, or even resentful. Their presence can:
- Impact team morale
- Fuel gossip or speculation
- Undermine trust in leadership
2. Business and IT Risk
The longer an exiting employee stays, the more opportunity they have to:
- Access sensitive data
- Disrupt client relationships
- Influence colleagues or interfere with operations
3. Safety and Wellbeing Concerns
Where emotions run high — especially in non-voluntary exits — the risk of workplace tension, conflict, or even WHS issues rises.
Optics Matter: Redundancy Is Not Misconduct
Unlike a misconduct termination, redundancy is not a reflection of wrongdoing. It’s a business decision — and should be treated as such.
But when an employee is:
- Marched out of the office
- Escorted by HR
- Suddenly locked out of systems
…it can look and feel like punishment to everyone involved.
This can damage morale and signal to remaining staff that they could be next.
Instead:
- Consider using garden leave
- Communicate with sensitivity and transparency
- Avoid actions that imply blame
When Should Employees Work Their Notice Period?
There are cases where working out the notice period is appropriate:
- Voluntary resignation on good terms
- A clear operational need for handover
- Low risk of disruption or distress
- High-trust, senior roles with transition duties
In such cases, set clear expectations and consider offering flexible work arrangements during the notice period.
Garden Leave: A Safe Middle Ground
Garden leave is when an employee is still employed and paid during their notice period but is not required to attend work or perform duties. It’s often used in executive roles or sensitive exits.
Benefits of garden leave:
- Limits access to systems or sensitive information
- Reduces workplace disruption
- Gives the employee time to process and move on
Note: This must be permitted in the employee’s contract or agreed upon mutually.
Frequently Asked Questions
Q: Do I have to let an employee work their notice period in Australia?
A: No. You can lawfully pay the employee in lieu of notice under the Fair Work Act.
Q: Is it better to pay out the notice or let them work it?
A: It depends. Pay in lieu is often safer in redundancies or sensitive terminations. Letting them work notice can be useful for resignations with low risk.
Q: What is garden leave and when should I use it?
A: Garden leave keeps the employee employed (and paid) without attending work. It protects the business while complying with notice requirements.
Q: Will paying out notice cost more?
A: No. The cost is the same — you’re simply accelerating the final payment and exit date.
Q: Can I end employment immediately?
A: Yes, if you provide full pay in lieu of the notice period.
Final Word: Don’t Let Guilt Drive the Process
Employers often feel bad about ending the employment relationship abruptly. But in many cases, paying out notice is more respectful, less stressful for the employee, and better for the broader workplace.
Need Advice on Terminations or Notice Periods?
At ER Focus, we support employers across Australia in managing redundancies, terminations, and notice periods the right way — legally, strategically, and with care.
David Haydon, an experienced Employment Relations Specialist, has helped hundreds of businesses handle sensitive exits with minimum risk and maximum professionalism.
Contact David Haydon for expert advice on pay in lieu, garden leave, and termination processes.
Contact ER Focus or email david@erfocus.com.au
Disclaimer:
This article contains general information only and is not legal advice. Employment obligations and entitlements vary based on individual circumstances. Employers should seek tailored advice before making termination or redundancy decisions. For confidential guidance, contact David Haydon at ER Focus.