The closure budget uses base wages for every payment in lieu of notice

The estimate starts with the easiest payroll number

A hypothetical company planning a closure estimates payment instead of notice using each employee's base hourly wage. Its payroll contains regular allowances and other pay components that the preparer has not examined. Ask the payroll specialist and employment adviser to check the calculation basis before communicating the amount. A readily available rate is not necessarily the correct rate for every final-pay component.

Confirm which entitlement is being calculated

Identify whether the proposed amount concerns worked notice, payment instead of notice, redundancy or another entitlement. Keep those calculations separate. Check the employee's applicable instrument, service history and relevant arrangement with the adviser. Do not assume that the same number of weeks or rate applies to all components simply because they appear together in a closure spreadsheet.

Use the applicable full-rate rule

Fair Work Ombudsman's notice guidance explains that payment instead of the minimum notice period is at the employee's full pay rate as if they had worked that period. Ask the adviser which components and hours apply to the actual employee. The guide's general explanation is not a substitute for reviewing the award, agreement, contract and any relevant exception.

Source: Fair Work Ombudsman: Notice of termination and redundancy pay

Make the calculation traceable

In the hypothetical example, list the components considered and the evidence behind each, rather than multiplying a single rate without explanation. Record questions about variable payments for the specialist. Do not include every historical payment automatically, or remove a component solely to bring the total within the cash available. The entitlement assessment and funding problem need separate answers.

Check the resulting payroll and cash figures

Have the appropriate specialists confirm the payroll treatment and timing of the amounts. Keep gross entitlement, deductions and the expected bank payment distinguishable, without guessing tax or superannuation treatment. If the revised estimate exceeds the closure budget, tell the insolvency adviser promptly. An unsupported lower estimate does not resolve an inability to pay the properly assessed amount.

Communicate from the reviewed calculation

Provide a clear explanation of confirmed amounts and unresolved questions through the authorised process. Retain the calculation version and supporting instructions so corrections can be traced. CRP can help organise the financial implications of the closure. The useful safeguard is a component-based calculation checked for the relevant entitlement, rather than an apparently precise figure built from the wrong starting rate.