Resignations in the Workplace: What Australian SME Owners Need to Know

A resignation is when an employee voluntarily ends their own employment — but it only counts as a true resignation if it’s genuinely their choice. Under the Fair Work Act 2009, if an employer’s conduct effectively forces the resignation, it can legally be treated as a dismissal, not a resignation, opening the door to an unfair dismissal or general protections claim. For SME owners without an internal HR team, most resignation problems come down to three things: notice periods, final pay, and knowing the difference between a genuine resignation and a “forced” one. This guide covers each in plain English.

What Is a Resignation, Legally?

A resignation happens when an employee makes a clear decision to end their own employment. It needs to reflect the employee’s genuine, voluntary intention — not words said in the heat of an argument, and not a decision made because they felt they had no real alternative.

The Fair Work Commission has confirmed that a resignation only takes effect where the employee actually demonstrates an intention not to be bound by their employment contract — in one case, an employee who continued attending work after a heated exchange was found not to have resigned, because that intention wasn’t clearly shown.

Notice Periods When an Employee Resigns

Unlike an employer’s notice obligations (which are set out in the NES), the NES doesn’t set a minimum notice period an employee must give when they resign. Instead, the required notice period usually comes from the applicable Modern Award, enterprise agreement, or the employee’s written employment contract.

Key points:

• Casual employees generally don’t need to give notice unless their award, agreement or contract says otherwise.
• Notice periods for other employees are usually based on the employee’s length of continuous service, similar in structure to employer notice periods under the NES.
• Employment continues as normal during the notice period — the employee keeps working, keeps accruing entitlements, and the employment only ends on the last day of that notice period.
• Notice can include public holidays falling within it, but public holidays don’t extend the notice period.

If an employee resigns without giving the required notice, an employer can’t force them to keep working — but there are specific, limited options for recovering the shortfall (see below).

Can an Employer Withhold Pay if Notice Isn’t Given?

In some circumstances, yes — but only if it’s authorised. Most Modern Awards include a model term allowing an employer to deduct up to one week’s wages from an employee’s final pay where:

• The employee didn’t give the notice period required under their award, and
• The employer didn’t agree to a shorter notice period or ask the employee not to work out their notice.

Importantly, this deduction can only come from wages owed under the award — it can’t be taken from other entitlements, such as accrued annual leave, or from over-award payments the employee was receiving. Some awards (such as the Black Coal Award, Marine Towage Award and others) have their own specific versions of this rule, so it’s worth checking the exact wording of the applicable award rather than assuming the general model term applies.

Ending the Notice Period Early

Sometimes an employer decides they don’t want an employee to work out their full notice period after resigning. In that situation, the employer can end the employment earlier than the notice period would otherwise run, provided they pay the employee for the remainder of the notice period as a payment in lieu of notice. This payment must be made on or before the day employment ends.

An employee can also take paid annual leave during a notice period if the employer agrees, and can take paid personal/carer’s leave during a notice period where they meet the usual evidence requirements.

When Is a “Resignation” Actually a Dismissal?

This is one of the more legally significant issues in this area. Under the Fair Work Act, a resignation can be treated as a dismissal — often called a forced resignation or constructive dismissal — where the employer’s conduct was intended to bring the employment to an end, or where that conduct would, on any reasonable view, probably have that effect, such that the employee had no real choice but to resign.

Examples the Fair Work Commission and Fair Work Ombudsman have identified as potentially amounting to forced resignation include:

• Telling an employee to “resign or be terminated”
• Making major, unilateral changes to core terms of employment (such as a drastic pay cut or demotion) without a lawful basis or genuine consultation
• Creating conditions so difficult that the employee reasonably feels they have no alternative but to leave

If a forced resignation is found to have occurred, the employee may be able to pursue an unfair dismissal or general protections claim, assessed against the same criteria the Fair Work Commission applies to any other dismissal. This is a genuinely complex area of employment law, and where there’s any risk a resignation might later be characterised as forced — particularly following a difficult performance or conduct conversation — getting advice before acting is far cheaper than defending a claim afterwards.

Final Pay After a Resignation

When an employee resigns, they’re entitled to be paid all outstanding entitlements in their final pay, including:

• Outstanding wages for hours worked
• Any accrued but untaken annual leave (plus leave loading, if it would have applied)
• Any other amounts owed under the award, agreement or NES

Most awards require final pay to be made within 7 days of the employee’s last day of employment. Where an award or agreement doesn’t specify a timeframe, the Fair Work Act requires employers to pay employees at least monthly. Where the NES requires something to be paid sooner than the award or agreement does, the NES timeframe takes priority.

Practical Examples

Example 1 — An employee resigns without giving full notice. An employee at a retail store covered by the General Retail Industry Award resigns and gives one week’s notice instead of the two weeks required under the award. Because the award includes the standard model term, the employer can deduct up to one week’s wages (calculated on award wages only) from the employee’s final pay — but only because the employer didn’t ask the employee to leave early or agree to the shorter notice. The employer correctly avoids deducting from the employee’s accrued annual leave payout, since that’s not permitted under the model term.

Example 2 — A resignation following a difficult meeting. An employee at a small business is told during a heated performance discussion, “maybe it’s best if you just resign.” Feeling pressured, the employee says “fine, I quit” and leaves. The business owner, aware this could later be characterised as a forced resignation, follows up in writing the next day to confirm whether the employee genuinely intends to resign, rather than immediately processing it as a resignation and finalising the employee’s pay — a small step that meaningfully reduces the risk of a later constructive dismissal claim.

Common Mistakes SMEs Make with Resignations

• Deducting more than a week’s wages, or deducting from leave entitlements, when an award only permits a limited deduction from award wages.
• Treating an emotional, “heat of the moment” resignation as final without confirming the employee’s genuine intention.
• Pressuring an employee to resign instead of managing a performance or conduct issue properly — this is one of the clearest paths to a forced resignation claim.
• Not paying out final pay within the required timeframe.
• Assuming casual employees must give notice when their award, agreement or contract doesn’t require it.
• Failing to confirm the resignation in writing, leaving ambiguity about the actual last day of employment.
• Not seeking advice before accepting a resignation that followed a disciplinary conversation — exactly the kind of situation where a proper workplace investigation or independent review can clarify what actually happened before it becomes a dispute.

Resignation Checklist for Employers

[ ] Confirmed the resignation reflects the employee’s genuine, voluntary intention

[ ] Confirmed the notice period required under the applicable award, agreement or contract

[ ] Confirmed in writing the employee’s last day of employment

[ ] Checked whether any notice shortfall deduction applies, and if so, calculated it correctly (award wages only, up to one week)

[ ] Decided whether the employee will work out their notice or be paid in lieu, and processed any payment in lieu on or before the last day

[ ] Calculated final pay correctly, including accrued annual leave and loading

[ ] Paid final pay within the timeframe required by the award, agreement or Fair Work Act

[ ] Considered whether the circumstances leading to the resignation could be characterised as a forced resignation, and sought advice if in doubt

Related Reading from the HR Knowledge Centre

• Managing Poor Performance: A Practical Guide for Australian SME Owners
• What Are the National Employment Standards (NES)? A Plain-English Guide for SMEs
• Annual Leave in Australia: What SME Owners Need to Know

How HR Excellence Partners Supports SMEs

Resignations can look straightforward — until they’re not. A miscalculated final pay, an unclear notice arrangement, or a resignation that followed a tense conversation can all turn into disputes that cost far more time and money than getting the process right the first time.

HR Excellence Partners helps Australian SMEs manage resignations correctly as part of broader HR compliance support — from confirming notice and final pay obligations to advising on situations where a resignation may need closer scrutiny. Where the circumstances around a resignation are unclear or contested, we also provide independent workplace investigations to establish the facts before they become a Fair Work Commission matter.

The best place to start is our free HR Health Check, which reviews your current offboarding processes against the Fair Work Act and relevant award. Use code HEPFREE at checkout to have the cost of your HR Health Check waived.

Book your free HR Health Check →

Vas Papadopoulos
Founder & Principal HR Consultant
HR Excellence Partners
vas@hrexcellencepartners.com.au
hrexcellencepartners.com.au
+61 432 244 744

References

1. Fair Work Ombudsman, Resignation — https://www.fairwork.gov.au/ending-employment/resignation
2. Fair Work Ombudsman, Resignation – notice period — https://library.fairwork.gov.au/viewer/?krn=k600628
3. Fair Work Ombudsman, Minimum employee notice and withholding final pay — https://www.fairwork.gov.au/tools-and-resources/library/K600464_Minimum-employee-notice-withholding-final-pay
4. Fair Work Ombudsman, My employee left without giving notice — https://www.fairwork.gov.au/workplace-problems/common-workplace-problems/my-employee-left-without-giving-notice
5. Fair Work Ombudsman, Final pay — https://www.fairwork.gov.au/ending-employment/final-pay
6. Fair Work Ombudsman, Dismissal — https://www.fairwork.gov.au/ending-employment/dismissal
7. Fair Work Ombudsman, Unfair dismissal — https://www.fairwork.gov.au/ending-employment/help-with-termination/unfair-dismissal
8. Fair Work Commission, Forced resignation (Unfair Dismissals Benchbook) — https://www.fwc.gov.au/forced-resignation
9. Fair Work Ombudsman, Ending employment during leave — https://library.fairwork.gov.au/viewer/?krn=K600433
10. Fair Work Act 2009 (Cth), s.386 — https://www.legislation.gov.au/Details/C2024C00622

This article is general information only and does not constitute legal advice. Notice periods, deduction rules and award terms vary and should be confirmed against current Fair Work Ombudsman guidance, the applicable Modern Award, or a qualified HR/workplace relations advisor for your specific circumstances.