In Lieu of Notice

If you terminated the employee without Notice

If you did not give an employee the required notice of termination you may be obliged to make a payment to the employee in lieu of notice given.

The ATO requires the employer to enter this payment as an ETP payment and to pay superannuation on it (it is the only termination payment that must be included in the Superannuation Guarantee calculation).

As the Payment In Lieu of Notice allowance in Marlin HR is already flagged as an OTE payment, it will automatically be included in the Superannuation Guarantee calculation.

If the Payment In Lieu of Notice allowance is not displayed in your system, select System > Allowances from the menu and then click on the Refresh icon.

To determine the payment amount simply multiply the number of hours you are obliged to pay by the employee's Standard Pay Rate (check the amount and tax rate with your employer organisation or tax accountant).

Click on the A/T or Term Allowance field then click on the button and add Payment in Lieu of Notice.

If the Employee resigned without giving the required Notice

The Fair Work Centre website advises that:

So, if your employee was required to provide you with say 2 weeks of notice but gave no notice, the equivalent of two weeks pay may be forfeited by the employee from any wages outstanding at the time of termination.

This is considered a permitted deduction under the Fair Work Act 2009 (s324(1)(c)).

However, annual leave payable on termination is not deductible because the Act (s90(2)) requires the employer to pay accrued annual leave at the end of the employment.

The NES overrides any provision in a modern award or enterprise agreement where there is an inconsistency.

If you are permitted to make a deduction from the employee's outstanding wages, you will need to use an Earnings type called In Lieu of Notice by Employee or similar (see below) and enter negative hours on it to offset these hours against other payments on the Termination Pay (e.g. Standard Hours and/or unused Leave payouts) and reduce the amount posting to your Salaries & Wages expense account (It is not appropriate to use a Deduction in this scenario as deductions post the withheld amounts to a Liability account in the GL for payment to a 3rd party such as ATO or a Super Fund).

If you don't already have one, select System > Earnings and create a new Earnings Type called In Lieu of Notice by Employee configured as follows.

On the Termination Pay, click on the Earnings field and then on the button and select In Lieu of Notice by Employee from the picker.

Enter the number of hours notice that the employee failed to provide and click on Reduce Hours.