When a job ends, your final pay usually has up to four parts: wages for the hours you've worked but not yet been paid for, pay for holiday you've earned but not taken, notice pay (or pay in lieu of notice), and, in some cases, severance. What you're owed depends on how the job ended (resigning, dismissal or redundancy), how long you've worked there, and your contract. This guide explains each part, works through a full final payslip with real numbers, and shows how to check it and raise a problem calmly in writing.
Rules on notice, final pay and severance are set by each country's labour law, and often by contracts or collective agreements on top. This guide explains how things usually work. It isn't legal advice. For the exact rules where you work, check your contract and your labour department.
1. How the job ended matters
The first question is how the job is ending, because it changes what you're owed.
- Resigning. You choose to leave. You usually have to give notice, and you're usually owed your last wages and unused holiday. Severance is often not paid when you resign, though some places and contracts pay a service benefit regardless.
- Dismissal. Your employer ends the job, for example for misconduct or poor performance. In many places you're still owed notice (or pay in lieu), your last wages and unused holiday. Serious misconduct can remove the right to notice in some places.
- Redundancy (or lay-off, or retrenchment). The job ends because the work has gone: the business is closing, cutting back, or reorganising. This is where severance most often applies.
- End of a fixed-term contract. The job ends on the agreed date. Notice may not apply, but your last wages and unused holiday usually do, and some places pay a benefit based on service.
The international benchmark is the International Labour Organization's Termination of Employment Convention, 1982 (No. 158). It says a job shouldn't be ended without a valid reason, and that a worker being let go should get reasonable notice or pay instead, and, where the law provides for it, a severance allowance or similar benefit. Countries apply these ideas in very different ways.
2. Notice and pay in lieu of notice
Notice is the warning period between being told the job will end and the last day.
How long? It's usually set by your contract or the law, whichever is longer. It often grows with service: for example, one week for a short-serving worker, rising to several weeks or a month after some years. Your contract may give more than the legal minimum, but usually not less.
Working your notice. Normally you keep working and keep being paid as usual until the end date.
Pay in lieu of notice. Your employer may ask you to leave straight away and pay you for the notice period instead. That pay should normally be what you'd have earned if you'd worked it, including regular allowances.
When you resign, you usually have to give notice too. If you leave without giving it, some contracts let the employer hold back pay for the missing notice. Check whether that's allowed where you work before you agree to it.
3. What goes into your final pay
A full final pay usually includes:
- Wages for hours already worked since your last payday, including overtime and any premiums.
- Unused holiday (vacation) pay: holiday you've earned this year, and any carried over, that you haven't taken.
- Notice pay, if you're paid in lieu, or your normal wages for the notice period if you work it.
- Severance or a service payment, where it applies.
- Other money owed: commission, bonuses you've earned under your contract, expenses you've paid out, or service charge and tips due to you.
The International Labour Organization's Holidays with Pay Convention (Revised), 1970 (No. 132) is the benchmark for holiday here. It sets a minimum of three working weeks' holiday for a year's service, and says that a worker whose job ends should receive holiday pay, or equivalent leave, for holiday earned but not taken. Most places follow that idea, though the details differ.
4. Worked example: a final payslip
Ana Morales is paid US$ 12.00 an hour for a 40-hour week (US$ 480.00 a week, or US$ 96.00 for an 8-hour day). She's been there for 5 years. Her job is made redundant.
Her employer pays her 2 weeks in lieu of notice. The severance rule in this example is one week's pay for each full year of service (an example rule only; yours may be very different). She has 6 days of unused holiday, and she's worked 28 hours since her last payday.
| Item | Working | Amount (US$) |
|---|---|---|
| Last hours worked | 28 h × 12.00 | 336.00 |
| Unused holiday | 6 days × 96.00 | 576.00 |
| Pay in lieu of notice | 2 weeks × 480.00 | 960.00 |
| Severance | 5 years × 1 week × 480.00 | 2,400.00 |
| Total before deductions | 4,272.00 |
Check it step by step: 336.00 + 576.00 = 912.00. Add 960.00 = 1,872.00. Add 2,400.00 = 4,272.00.
Then lawful deductions come off, such as income tax and social security. Each item can be treated differently. In many places wages, holiday pay and notice pay are taxed like normal pay, while severance may be taxed differently, partly exempt, or free of social security. Your final payslip should show each item on its own line so you can check it.
Watch out for: holiday days paid at a basic rate when your normal pay includes regular allowances; notice pay worked out on fewer hours than you usually work; and the last few days of work missing altogether because they fell after the payroll cut-off.
5. Severance: usually based on service
Severance (also called redundancy pay, a separation payment or a service benefit) is extra money paid when your job ends, most often because of redundancy. Where it exists, it's usually based on three things:
- Length of service: how many years you've worked there without a break.
- Your pay: often your normal weekly or monthly pay, sometimes an average of recent months.
- A formula: so many days or weeks of pay for each year of service, sometimes in bands, and sometimes with a cap.
There's often a qualifying period, such as one or two years' service, before any severance is due.
Worked example: a banded formula
José Rivera has worked for 7 years. His weekly pay is US$ 550.00. In this example, severance is 2 weeks' pay for each of the first 4 years, and 3 weeks' pay for each year after that.
| Band | Years | Weeks per year | Weeks |
|---|---|---|---|
| First 4 years | 4 | 2 | 8 |
| Years 5 to 7 | 3 | 3 | 9 |
| Total | 7 | 17 |
17 weeks × 550.00 = US$ 9,350.00.
Part years. If José had worked 7 years and 6 months, some places count only full years, some round, and some pay the part year pro rata. Pro rata would add half a year at 3 weeks: 1.5 weeks × 550.00 = US$ 825.00, for a total of US$ 10,175.00.
Caps. Some places cap the weekly pay used, the number of years counted, or the total. If your figure looks smaller than expected, ask whether a cap was applied.
6. Deductions from final pay
Your employer can usually only deduct from your pay what the law allows (like tax and social security), or what you've agreed to in writing. Common final-pay deductions include:
- Tax and social security, as on any payslip.
- A loan or advance you agreed to repay from your wages.
- Holiday taken in advance: if you've taken more holiday than you'd earned by your leaving date, some contracts allow the extra to be deducted.
- Unreturned property, such as a uniform or equipment, but only where your contract or the law allows it, and usually only at a fair value.
Deductions that are often not allowed without your clear written agreement include fines, general "training costs", and shortages in a till or stock. If something has been taken off that you don't recognise, ask for it in writing.
7. Deadlines for final pay
In many places, final pay must be paid by a set deadline: on your last day, within a few days, or by the next normal payday. The International Labour Organization's Protection of Wages Convention, 1949 (No. 95) says that when a job ends, the final settlement of all wages due should be made within a reasonable period.
If your final pay is late:
- Check your contract and ask your labour department what the deadline is where you work.
- Ask in writing when it will be paid.
- Keep note of the dates. Some places add interest or a penalty for late final pay.
Also ask for your final payslip and any year-end tax or social security forms you'll need.
8. References and leaving paperwork
In many places your employer doesn't have to give you a reference, but if they do, it should be accurate and fair. Some places require employers to give a basic letter confirming your job title and dates of employment, often called a certificate of service. It's reasonable to ask for one.
Before you leave, ask for:
- A letter confirming your dates of employment and job title.
- Your final payslip, showing each item separately.
- Written confirmation of your last day and why the job ended (resignation, redundancy, end of contract). This can matter for unemployment benefits.
- Any social security, pension or tax records you'll need.
If you're asked to sign a settlement agreement or a "full and final" release in exchange for a payment, read it slowly. It may stop you making any later claim. In many places, it's wise to get independent advice first, and some places require it for the agreement to be valid.
9. Checking your final pay and raising a problem
Work through your final payslip item by item, using the example above as a guide. Then gather what you need.
What to keep and what to check
- Your contract, especially the notice, holiday and severance clauses.
- Your resignation letter or the letter ending your job, with dates.
- Your own record of the hours you worked since your last payday.
- Your holiday balance: days earned, days taken, days carried over.
- Your last few payslips, to check your normal pay and allowances.
- Your start date, to work out your years of service.
- The final payslip, with each item on its own line.
- Any deduction you didn't agree to in writing.
- The date final pay was due, and the date it arrived.
Sample message
Keep it factual and friendly. Payroll mistakes on final pay are common, because it's a one-off calculation.
10. Frequently asked questions
Do I get paid for unused holiday when I leave?
In most places, yes. Holiday you've earned but not taken is usually paid out in your final pay. The rate is usually your normal daily pay. Check your contract and local rules on carried-over days.
What is pay in lieu of notice?
It's pay for the notice period when your employer asks you to leave straight away instead of working your notice. It should normally match what you'd have earned if you'd worked it.
Do I get severance if I resign?
Often not. Severance is most often paid on redundancy. Some places and contracts pay a service benefit however the job ends, including resignation after long service. Check your contract and your labour department.
How is severance calculated?
Usually as a number of days or weeks of pay for each year of service, sometimes in bands and sometimes with a cap. There's often a minimum length of service before it applies.
When should I get my final pay?
It depends on where you work. Common deadlines are your last day, within a few days, or the next normal payday. If it's late, ask in writing and contact your labour department.
Can my employer take money out of my final pay?
Usually only tax, social security and deductions you've agreed to in writing, or that the law allows. Fines, till shortages and training costs often can't be taken without clear agreement.
Should I sign a settlement agreement?
Read it carefully first. It may stop you making a later claim. It's wise to get independent advice before signing, and in some places that advice is required.
Is severance taxed?
It varies. In many places severance is taxed differently from normal wages, and part of it may be tax-free or free of social security. Your final payslip should show it as its own line.
11. Where to get help
If you can't sort it out directly, you have options.
- Your labour department (sometimes called the labour office, ministry of labour or labour commissioner) can explain notice, final pay and severance rules where you work, and help you make a claim. Many will contact the employer for you.
- Your union or staff representative, if you have one, can check your figures against your collective agreement and support you in meetings, especially in a redundancy.
- Legal aid or a workers' advice centre may advise for free or at low cost, especially before you sign a settlement agreement.
Act quickly. Claims about the end of a job often have short time limits, sometimes only a few weeks or months from your last day. If overtime is part of what you're owed, our overtime guide shows how to check the maths, and our unpaid overtime guide covers claiming it.