Grievance Pay: Paying Staff During Workplace Disputes In Australia

Workplace issues happen, even in healthy teams.

Sometimes it’s a simple misunderstanding. Other times, it’s a formal complaint (a “grievance”) about conduct, bullying, safety, rostering, pay, performance management or disciplinary action.

When a grievance is raised, many small business owners immediately ask the same practical question: do we have to keep paying the employee while we sort this out?

This is where people often talk about grievance pay. It’s not a formal legal category in Australia, but it’s a common way of describing the pay questions that can come up during disputes and investigations.

Below, we’ll break down what you need to know about grievance pay in Australia, the common scenarios where disputes overlap with pay, and the safest ways to manage the situation while protecting your business and treating your staff fairly.

What Is Grievance Pay (And Is It A Legal Entitlement)?

“Grievance pay” usually refers to the wages (and sometimes leave payments) an employee receives while a grievance, complaint or workplace dispute is being handled.

In Australia, there is no single “grievance pay” law that automatically sets a rule like “you must pay an employee in every grievance situation”. Instead, what you have to pay depends on a mix of:

• the Fair Work Act and the National Employment Standards (NES);
• the employee’s award or enterprise agreement (if any);
• the employee’s employment contract (including any policies incorporated into it);
• what is actually happening during the grievance (for example, are they still working, or have they been directed not to attend work?); and
• whether any separate legal risks are in play (for example, adverse action, discrimination, bullying, or work health and safety issues).

From a practical small business perspective, it helps to treat grievance pay as a question of paying employees according to their normal rights and duties while you run a fair process.

In other words: if someone is ready, willing and able to work, and the business directs them not to work, you should be cautious about stopping pay unless you’ve confirmed you have a lawful basis to do so under the Fair Work Act, the applicable award/enterprise agreement and the employment contract.

When Do You Have To Pay Staff During A Grievance?

There isn’t a one-line answer, but there are a few guiding principles that will steer you in the right direction.

1) If They Are Working Their Normal Hours, You Pay Them

If the employee continues working their rostered hours while the grievance is assessed or investigated, this is business-as-usual from a payroll perspective.

Even if the grievance relates to performance management or conduct, the fact a complaint exists doesn’t pause your obligation to pay wages for hours worked.

2) If You Direct Them Not To Work, Pay Becomes A Key Risk Point

Where it gets tricky is when the grievance process involves removing someone from the workplace, changing duties, or telling them not to attend work.

If you’re telling an employee not to work (for example, to protect other staff, preserve evidence, or manage workplace safety), you should carefully consider whether the direction should be:

• paid suspension (common during investigations, subject to any award/enterprise agreement or contract terms);
• standing down (only permitted in limited circumstances); or
• leave (annual leave, personal leave, or unpaid leave depending on eligibility and agreement).

This is often the core of grievance pay disputes: the employee says “I’m not working, but that’s your decision, so I should be paid.”

3) Awards, Enterprise Agreements And Contracts Can Add Extra Rules

Some modern awards or enterprise agreements include grievance handling clauses and dispute-resolution steps. They may not explicitly use the phrase “grievance pay”, but they can affect:

• what consultation steps you must take;
• timeframes;
• whether the employee can be required to perform alternative duties; and
• how disputes about pay and entitlements are handled.

Your starting point should be checking:

• the employee’s classification under the relevant award or enterprise agreement; and
• their Employment Contract (and any incorporated policies).

Common Grievance Pay Scenarios For Small Businesses (And How They Usually Work)

Here are the most common “grievance pay” situations we see for small businesses, and what you should think about in each.

Scenario 1: The Employee Lodges A Grievance But Keeps Working

This is usually the simplest setup: you keep paying normal wages, and you run a fair grievance process in the background.

Practical tip: even when the employee remains at work, consider interim steps that reduce the risk of escalation, such as:

• adjusting reporting lines temporarily;
• separating the employee from the person they complained about (where possible); and
• setting clear expectations about workplace conduct while the matter is reviewed.

Scenario 2: You Temporarily Suspend The Employee While You Investigate

Many small businesses consider suspension when allegations are serious or there is a genuine risk in keeping the employee at work.

The crucial point: suspension is not automatically unpaid. In many cases, a paid suspension (where it’s permitted under the contract and any applicable award/enterprise agreement, and issued as a lawful and reasonable direction) can be the lowest-risk interim option while you investigate, because it reduces arguments that the employee was financially punished before the facts were established.

It’s also important to ensure suspension is used for a proper purpose (for example, to allow a fair investigation), not as a shortcut to discipline.

If you’re considering this pathway, it’s worth reading about suspending an employee pending investigation so you understand the legal and process risks.

Scenario 3: You Stand The Employee Down

“Standing down” has a specific meaning under the Fair Work Act. You generally can’t stand employees down just because there’s a grievance or you’d prefer them not to be at work.

A lawful stand down typically requires particular circumstances (for example, a stoppage of work outside your control). If the stand down isn’t lawful, you may be exposed to claims for unpaid wages.

If you’re thinking about this option, review the rules on standing down an employee pending investigation before taking any action.

Scenario 4: The Employee Refuses To Work While The Grievance Is Ongoing

This can happen where an employee says they feel unsafe, bullied, or that continuing to work would worsen their mental health.

From a pay perspective, your response depends on why they are not working and what evidence is available.

Common approaches include:

• Alternative duties or location (where it’s reasonable and safe);
• Personal/carer’s leave if they are unfit for work and meet the requirements (often supported by medical evidence);
• Annual leave if they request it and you approve it; or
• Unpaid leave by agreement (be careful here-unpaid arrangements during disputes can become contentious if not genuinely agreed and properly documented).

In this scenario, a big part of managing grievance pay is managing communication and evidence: what is the employee saying, what medical evidence exists, what adjustments are available, and what is reasonable in the circumstances?

Scenario 5: You Want To Withhold Pay Because You Think They’re “At Fault”

This is one of the highest-risk mistakes small businesses make during disputes.

In most cases, you can’t simply withhold wages because an allegation has been made or because you believe the employee has done something wrong. Wages are generally payable for work performed, and deductions/withholding are tightly regulated.

Even if you are ultimately able to discipline or terminate employment after a proper process, you still need to deal with pay lawfully along the way.

If you’re unsure, it’s worth checking the rules around withholding pay before making a call that could trigger underpayment allegations.

Scenario 6: The Dispute Escalates And The Employee Resigns (Or You Terminate)

Sometimes grievances don’t resolve neatly. The employee may resign mid-process, or you may decide (after investigation and procedural fairness) that termination is appropriate.

If the employment ends, grievance pay questions often shift to:

• final pay (including untaken annual leave and other entitlements);
• notice and whether you want the employee to work it; and
• whether you will make a payment instead of requiring notice to be worked.

Where you decide the employee should not attend the workplace during their notice period, you may be considering payment in lieu of notice. This can be a cleaner option than having a tense workplace while a dispute is still fresh, but it needs to be handled properly.

How To Manage Grievance Pay Without Making The Dispute Worse

When disputes happen, it’s completely normal to want quick answers. But with grievance pay, quick decisions can become expensive decisions if they’re made without a plan.

Here’s a practical approach small businesses can use to stay on track.

Step 1: Separate The “People Issue” From The “Pay Issue”

The grievance itself might involve misconduct, bullying, performance, or another workplace issue.

The pay question is usually about something different: is the employee working, and if not, why not?

Keeping these separate helps you avoid a common pitfall-using pay as a punishment before the facts are established.

Step 2: Check The Basics (Award, Contract, Policies)

Before deciding whether the employee stays at work, moves duties, or is suspended, check:

• any stand down/suspension rules in the award or enterprise agreement;
• the terms of the employee’s contract; and
• your internal grievance and investigation procedures, usually contained in your Workplace Policy suite.

If your documents are vague or outdated, it’s much harder to manage expectations (and much easier for a grievance pay issue to escalate into a formal complaint).

Step 3: Choose The Least Disruptive Interim Measure That Still Keeps People Safe

In many small businesses, you don’t have multiple sites or large teams. So “just separate them” isn’t always realistic.

Still, it’s worth considering options in this order:

• Continue work as normal (if safe and appropriate);
• Temporary change of duties/reporting line (document it clearly, keep it genuinely temporary);
• Work from home (where the role allows);
• Paid suspension (commonly used for serious allegations or where workplace safety is a concern, subject to your legal obligations and documents).

For many small businesses, a short paid suspension while you investigate can be less costly than a long-running dispute about unpaid time.

Step 4: Document Every Pay-Related Decision In Writing

You don’t need to write a novel, but you do need a clear paper trail. Confirm things like:

• what the interim arrangement is (for example, paid suspension);
• the reason (for example, neutral measure while investigating);
• the expected timeframe (or when it will be reviewed); and
• what the employee should do during that time (for example, remain available by phone, not contact certain staff, return company property if relevant).

This is one of the simplest ways to prevent grievance pay misunderstandings from spiralling into a wage dispute.

Step 5: Run A Fair Process (Because Pay Problems Often Follow Process Problems)

In practice, grievance pay disputes often flare up when an employee feels the process is unfair, delayed, or biased.

Focus on:

• acknowledging the grievance promptly;
• explaining the investigation steps at a high level;
• keeping timeframes realistic (and updating the employee if they change);
• giving the employee a chance to respond to allegations; and
• making a decision based on evidence.

Even if the outcome is disciplinary action, you’re in a much stronger position if the process is calm, structured, and well-documented.

What Documents And Systems Help Prevent Grievance Pay Issues?

When you’re in the middle of a workplace dispute, it’s hard to “retrofit” good systems. The best time to reduce grievance pay risk is before a grievance happens.

For small businesses, these are the foundations that make the biggest difference.

Employment Contracts That Set Expectations Early

A clear Employment Contract helps you manage disputes because it can clarify:

• ordinary hours and pay structure;
• lawful and reasonable directions;
• confidentiality expectations (important during investigations); and
• termination and notice provisions.

When a dispute arises, a well-drafted contract reduces “grey areas” that employees and employers might otherwise interpret differently.

Workplace Policies (Especially Grievance, Bullying, Code Of Conduct)

Policies don’t just help with culture-they help with process.

A good set of workplace policies can outline:

• how grievances are raised;
• how investigations are run;
• confidentiality requirements; and
• what happens if behaviour breaches standards.

This is why having up-to-date Workplace Policy documents can make grievance pay decisions easier to explain and defend.

Payroll Controls And A “No Surprises” Approach

From a commercial point of view, workplace disputes can become expensive when they create messy payroll outcomes (for example, confusion about paid vs unpaid time, leave balances, or altered rosters).

Simple controls help, such as:

• one person responsible for confirming pay changes in writing;
• keeping investigation-related directions consistent across managers; and
• ensuring any leave taken during a dispute is properly requested and recorded.

Key Takeaways

• “Grievance pay” isn’t a standalone legal entitlement in Australia, but it’s a common way to describe pay issues that arise during workplace disputes and investigations.
• If an employee is working their normal hours, you must pay them as usual, even if a grievance is ongoing.
• If you direct an employee not to work (for example, suspension during an investigation), you need to be careful: depending on the Fair Work Act, any award/enterprise agreement and the contract, paid suspension is often used to avoid creating a separate wage dispute while the facts are established.
• Standing down an employee is only lawful in limited circumstances and generally isn’t a simple tool for managing grievances.
• Withholding pay can quickly escalate risk (including underpayment claims), so it’s important to confirm what you can and can’t do before making changes.
• Strong contracts and workplace policies reduce confusion and help you run a fair process, which in turn reduces the chance of grievance pay becoming a second dispute.

This article is general information only and isn’t legal advice. For advice about your specific situation, get in touch with a lawyer.

If you’d like help managing a workplace grievance (including the safest way to handle grievance pay), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.