In Brief - It happens: because of illness, accident, age or misadventure. Sometimes our colleagues die at work or while employed.

Such loss leaves a large hole in workplaces. Beyond that is the legal quagmire employers must navigate as part of the administration of the estate, while supporting family members through issues they may have no familiarity with.
 
When an employee passes it is often not as simple as scheduling a final payment. An employer's obligations can extend to superannuation, taxation, who to make the payment to and how. If an employee dies at work an employer is also faced with supporting the workforce and notifying the family and authorities (police, OHS and WorkCover). These issues become more complex where the employee dies intestate (without a will).
 
The scope of this article is limited to identifying considerations for employers when an employee passes away outside of the workplace.

Deceased Estates

When an individual passes away, their assets and liabilities coalesce to form their 'estate'. Their estate is essentially a trust which operates to hold the deceased's assets until such time as the estate's legal personal representative (LPR) has called in the assets of the deceased, discharged their debts, and distributed any remaining assets.

LPR

When a deceased person has a will, they are said to have died 'testate'. The will details who is allocated the authority to manage the deceased's estate (Executor). The appointed Executor(s) will need to seek a 'Grant of Probate' from the Supreme Court to administer the estate.
 
In the absence of a will, the deceased is deemed to have died 'intestate,' and the statutory intestacy rules will govern asset distribution. In such cases, the Court typically appoints an Administrator, by issuing 'Letters of Administration'. An Administrator has largely the same responsibilities as an Executor.

The timeframe for processing applications for probate and letters of administration varies between each state, and will also fluctuate depending on the number of applications before the Court, however generally they are as follows:

  • Queensland - four to eight weeks

  • New South Wales - four to twelve weeks

  • Victoria - two to six weeks

  • Western Australia - six to eight weeks

  • Northern Territory - five to six weeks

  • Tasmania - three to eighteen weeks

  • South Australia - three to four weeks

Upon obtaining a Grant of Probate or Letters of Administration, the executor(s) or administrator(s) become the LPR of the deceased's estate.

Relevance to Employers

Whether an employee dies testate or intestate does not greatly change an employer's responsibility. What is of importance is understanding the role and authority of the LPR and other parties. Generally, employers should refrain from disbursing wages owing, accrued entitlements or personal property unless directed by a confirmed LPR.

Deceased Employee Personal Information and Documents

The employee may also have stored personal information on work devices, like phones or laptops. The family may want to access photos and other information stored on employer devices. Before wiping devices it may be respectful to review any personal information contained (irrespective of what your policy might say about storing such information), to take copies and to offer to provide that information back to the family. Where a deceased person has no right to privacy, little risk should attach to the provision of family photos or financial records.
 
The LPR may also seek information regarding payments made (or to be made) to the employee, superannuation contributions, lease arrangements, accrued leave, share schemes, incentives and bonuses the employee may have been entitled to. Preparing a summary of information and supporting documentation might be a useful support.
 
In circumstances where an LPR has yet to be identified, the employer may be requested to search work devices for a copy of a Will and, if found, provide a copy. The people entitled to view a copy of a Will upon request vary in each state. In QLD they include:

  • A person named in the will;

  • A spouse, parent or child;

  • A person who would be entitled to a share of the estate if the deceased died intestate;

  • A parent or guardian of a minor person mentioned in the will;

  • A creditor or other person who has a claim at law or in equity against the estate; and

  • A person who was dependant on the deceased and can apply for an order for maintenance. 

Dealing with Payments to a Deceased Employee

 The Australian Taxation Office (ATO) provides guidance on managing the death of an employee. We have summarised this guidance below.
 

Step

Action

1.

Prepare a payment summary for payments made to the employee in the current financial year, showing gross payments and amounts withheld before date of death.

2.

Prepare the employee's entitlements including:

  • payments for work or services, including retrospective pay and bonus or commission payments, accrued but not paid prior to the date of death (these payments are included in assessable income if an estate tax return is required).

  • payments for unused entitlements (eg annual and long service leave) which are tax-free and not included in assessable income if an estate tax return is required.

Do not:

  • withhold an amount from the payment; or

  • include details of these payments in the employee's payment summary (Step 1).

3.

Calculate the amount of death benefit employee termination payment (ETP) (the amount owing from Step 2 above) and withhold the required amount. For more information please see Schedule 11 – Tax table for employment termination payments, on the ATO website.

4.

Payments for work or services made after the death of the employee are made to either:

  • the estate of the deceased employee; or

  • the person entitled to the money under the relevant law, industrial award or agreement (typically a dependent such as a surviving spouse or child of the deceased who is less than 18 years old).

 

Death Benefit Termination Payments

A death benefit ETP payment (described in Step 3 above), is an ETP received by a person, after a person’s death, in consequence of termination of the other person’s employment.
 
A payment can only be claimed as a death benefit ETP if it also meets the following criteria:

  1. the payment is received no later than 12 months after the termination; and
  2. the payment is not expressly excluded from being an ETP.

It is important to note that employers have 12 months from the date of termination to make these payments. Therefore, in the event of an employee’s passing, employers should not rush to process any final payments and take their time to obtain the required legal documents to identify the LPR of the deceased's estate.

What Happens if the Deceased Employee had an open Worker's Compensation Claim?

Should the employee be in receipt of compensation benefits prior to their death, all benefits that were payable to them will cease on the date of death. This includes, for example, incapacity payments, gardening assistance, household help or attendant care services.

Superannuation

Any unpaid super contributions can be paid into the deceased employee’s nominated fund, provided the fund is still active and the fund is willing to accept the payment after the employee is deceased.
 
Employers can further assist LPRs by providing a list of superannuation funds nominated by the employee for the employer to pay their superannuation entitlements into during their employment. The LPR can then engage with the fund to determine where the employee's superannuation will be paid.

Other supports

Whether an employee died at work or outside of the workplace, there will be an impact on your workforce. Consider whether you should engage grief counsellors to come to the workplace. You might offer your staff EAP if they are struggling to deal with the death. You may consider who should/will attend any end of life commemoration and what leave might be available to staff to manage their own wellbeing.
 
There may also be an issue surrounding the recovery and return of employer property. If the employee had an at home office, you may need to recover certain property which belongs to the employer. The employee may have had personal items stored at work. You will need to be sensitive to the family and their priorities in working out how to exchange such property.
 
To make the question of resolving the estate administration easier it could be prudent for employers to ask their employees if they have a will, and if they do not you might offer guidance as to where they can get one. We would be happy to assist any client to support their staff around such issues.
 
Beyond these immediate supports an employer may play an important role in finalising the estate. It is important to be led by the wishes of the family, to provide one point of contact for any questions they might have and to ensure that staff are also supported at what might be a confronting time.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2024.

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