How Much Notice Must an Employer Give?
When an employer dismisses an employee, the NES require a minimum notice period, based on the employee’s continuous service on the day notice is given. The employee can work the notice period or the employer can pay it out. The notice period starts the day after the employer tells the employee and ends on the last day of employment.
| Continuous service | Minimum notice |
|---|---|
| 1 year or less | 1 week |
| More than 1 year, up to 3 years | 2 weeks |
| More than 3 years, up to 5 years | 3 weeks |
| More than 5 years | 4 weeks |
Fair Work Ombudsman, Dismissal (content last updated 28 August 2026), read 5 October 2026. Employees over 45 years old with at least 2 years of continuous service get one extra week on top of the figure above.
An award, enterprise agreement or employment contract can set longer notice but cannot provide for less than the NES. Continuous service counts unpaid leave such as unpaid parental leave, and does not count unauthorised absence. Time worked as a casual usually does not count towards continuous service for notice. Employees are entitled to notice even during probation.
What Is Payment in Lieu of Notice?
Payment in lieu of notice (PILON) happens when your employment ends on the day you are given notice and you are paid what you would have been paid had you worked out the notice period. The amount must equal the full amount you would have been paid. That means it includes incentive-based payments and bonuses, loadings, monetary allowances, overtime, penalty rates and any other separately identifiable amounts, not just your base rate.
Because employment ends on your last working day, you stop accruing leave from that day. An employer can also combine the two: let you work part of the notice and pay out the rest. For example, if a worker with 5 months of service is told on a Tuesday that they have 1 week of notice, works until Friday and is paid out the remaining 2 days, their final pay includes the hours worked, 2 days of payment in lieu, and their unused annual leave up to that Friday (the Fair Work Ombudsman’s own example).
Worked Example: 6 Years of Service on $2,000 a Week
Dana has worked for 6 years, normally earns $2,000 a week including regular allowances, and has $90,000 of other taxable income so far this year. She is told her job is ending today.
- Notice: more than 5 years is 4 weeks.
- Payment in lieu: 4 × $2,000 = $8,000.
- Tax: Dana has $90,000 left under the whole-of-income cap, so the whole payment is taxed at 32% (including Medicare levy, under preservation age): about $2,560, leaving $5,440.
- Super on top: 12% × $8,000 = $960, paid to her fund.
If Dana were over 45 the notice would be 5 weeks, and the payment $10,000. Her unused annual leave, any long service leave and any redundancy pay are paid separately; see the final pay calculator for the whole picture.
How Payment in Lieu of Notice Is Taxed
The ATO lists payments in lieu of notice among the payments that can make up an employment termination payment (ETP). A payment in lieu is a non-excluded ETP, so its taxable component is concessionally taxed up to the smaller of two caps:
- the ETP cap, $270,000 for 2026-27; and
- the whole-of-income cap, $180,000 (not indexed), reduced by your other taxable income in the year, such as the wages you earned before you left.
| Part of the payment | Tax rate |
|---|---|
| Up to the cap, not yet at preservation age | 32% (incl. Medicare levy) |
| Up to the cap, at or past preservation age | 17% (incl. Medicare levy) |
| Above the cap | 47% (45% plus 2% Medicare levy) |
ATO, How ETP components are taxed (last updated 5 June 2026), read 5 October 2026. The whole-of-income cap applies to non-excluded ETPs like a payment in lieu. Preservation age is 60 for people born after 30 June 1964.
The effect depends on your income. Someone on $90,000 gets the 32% rate on a payment in lieu, similar to the 32% marginal rate on salary at that level. Someone already above $180,000 for the year has no concessional cap left, so the whole payment is taxed at the top rate. The termination payment tax calculator covers redundancy, severance and other ETPs in full. The tax your employer withholds is an estimate and the final tax is settled in your return.
Super on Payment in Lieu of Notice
Unlike unused leave, a payment in lieu of notice attracts super. The ATO treats it, for all termination reasons, as ordinary time earnings and qualifying earnings, so the employer must pay super guarantee on it. The ATO’s worked example is a $10,000 payment in lieu of 4 weeks’ wages: super guarantee of $10,000 × 12% = $1,200. A redundancy payment above the tax-free limit, severance pay and unused leave on termination are not qualifying earnings. See super guarantee rate history and the super calculator.
Notice, Redundancy Pay and Final Pay
Notice is one part of what you are owed when you leave. Redundancy pay is a separate amount based on years of service and is paid in addition to notice (see the redundancy pay calculator). Final pay also includes wages owed, unused annual leave with any loading and, in some cases, long service leave (see leave payout calculator and long service leave calculator). To check the notice and redundancy entitlements in your award, the Fair Work Ombudsman also publishes a notice and redundancy calculator.
Related Calculators and Guides
- Final Pay Calculator: everything owed when you leave
- Termination Payment Tax Calculator: ETP and redundancy tax
- Redundancy Pay Calculator: NES severance by years of service
- Leave Payout Calculator: unused annual leave and loading
- Annual Leave Calculator: your balance and what it is worth
Frequently Asked Questions
Payment in lieu of notice questions and answers
What is payment in lieu of notice?
Payment in lieu of notice (PILON) is what an employer pays when it ends your employment on the day it gives notice, instead of making you work out the notice period. You are paid what you would have been paid if you had worked until the end of the notice period. Your employment ends on your last working day and you stop accruing leave.
How much notice must an employer give in Australia?
Under the National Employment Standards: 1 week if you have 1 year of continuous service or less; 2 weeks for more than 1 year and up to 3 years; 3 weeks for more than 3 years and up to 5 years; and 4 weeks for more than 5 years. Employees over 45 with at least 2 years of continuous service get an extra week. An award, agreement or contract can require longer notice.
What must a payment in lieu of notice include?
It must equal the full amount you would have been paid if you had worked the notice period. That includes incentive-based payments and bonuses, loadings, monetary allowances, overtime, penalty rates and any other separately identifiable amounts you would normally have earned, not just base pay.
How is payment in lieu of notice taxed?
The ATO treats a payment in lieu of notice as a non-excluded employment termination payment (ETP). It is taxed at a concessional rate up to the smaller of the ETP cap and the whole-of-income cap ($180,000, reduced by your other taxable income in the year): 17% if you have reached preservation age and 32% if you have not, including the Medicare levy. Amounts above the cap are taxed at the top rate of 45% plus 2% Medicare levy.
Is super paid on a payment in lieu of notice?
Yes. The ATO treats a payment in lieu of notice, for all termination reasons, as ordinary time earnings and qualifying earnings, so the employer must pay super guarantee on it. The ATO's own example is $10,000 in lieu of notice with 12% super of $1,200. Unused annual leave and long service leave on termination, by contrast, do not attract super.
Is payment in lieu of notice the same as redundancy pay?
No. Notice, or payment in lieu of it, is separate from redundancy pay. A redundancy payment under the NES is based on years of service and is paid in addition to notice. Final pay also includes any unused annual leave and, in some cases, long service leave. See the final pay and redundancy pay calculators for the whole entitlement.
Can I choose to leave early during my notice period?
If you have been dismissed, your employer can agree to shorten the notice period. If you cannot agree, you can choose to resign and give your own minimum notice instead. Any time you have already worked in the notice period does not count towards the notice you would owe as a resigning employee.
Do casual employees get notice or payment in lieu?
Not under the NES in the same way. Certain employees, including casuals, are not entitled to written notice of termination under the National Employment Standards, and time worked as a casual usually does not count towards continuous service for notice. Employees dismissed for serious misconduct are also not entitled to notice. Check your award or agreement.
Does the over-45 extra week change the amount?
Yes. An employee who is over 45 years old and has at least 2 years of continuous service gets one more week of notice, so a payment in lieu includes that week as well. For example, 6 years of service is 4 weeks, but over 45 it is 5 weeks.
How we worked this out▼
Notice weeks come from the Fair Work Ombudsman’s NES table, using continuous service on the day notice is given, with one extra week for an employee over 45 years old with at least 2 years of continuous service. The payment in lieu is the weeks paid out × normal weekly pay. Tax is estimated on the ATO’s ETP treatment for a non-excluded payment: the concessional rate (32%, or 17% from preservation age, both including the Medicare levy) up to the smaller of the ETP cap and ($180,000 less other taxable income), and 47% above it. Super is the super guarantee rate on the payment.
Assumes an Australian resident and a payment made in 2026-27. It does not model unused leave, long service leave, redundancy pay, or the 12-month rule. Your award, agreement or contract may give more notice. General information, not legal or tax advice.
Sources & References
- 1Dismissal: notice of termination and payment in lieu of notice— Fair Work Ombudsman
- 2Notice of termination and redundancy pay fact sheet— Fair Work Ombudsman
- 3Employment termination payments for employees— Australian Taxation Office
- 4How ETP components are taxed— Australian Taxation Office
- 5What payments are qualifying earnings— Australian Taxation Office
- 6Fair Work Act 2009, section 117— Federal Register of Legislation
Last verified: 5 October 2026. Our content is based on the latest information from official Australian government sources.
Anita Bell
AuthorFounder & Senior Bookkeeper
Accountancy degree (2015); certified in Xero, QuickBooks Online, MYOB, Saasu, Zoho and Reckon One
Anita Bell earned her accountancy degree in 2015 and has worked as a senior bookkeeper with Prime Bookkeeping for over 5 years. This built her skills in Australian and New Zealand tax legislation and industry regulations. She is certified in Xero, QuickBooks Online, MYOB, Saasu, Zoho and Reckon One, and works with payroll and rostering software including Gusto, Deputy, Tsheets and KeyPay. She has strong experience in hospitality, building and construction, financial services, real estate, ecommerce, and medical and health services.
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