There are three ways you can terminate an employee.
- Within a pay run
- Directly within the employee's file
- Within an employee details file import
1. Terminating an employee via the pay run
To terminate an employee via the pay run you need to click on the employee within the pay run and then from the 'Actions' button select 'Terminate employee'.
A pop up will appear as follows:
From here you will need to enter the employee's termination date and the reason for the termination (this article will explain termination reasons further) before clicking 'Save'.
The employee's record will turn pink (as an indicator it is in termination mode) and will display calculated earnings and any accrued leave to be paid out as part of the termination pay.
With regards to the section on 'Leave Taken':
- Any leave category setup to be paid out on termination will automatically be calculated as part of the termination pay. If you do not wish for this to occur, deselect the 'Pay out' option;
- If any leave loading associated with a leave category (for eg annual leave loading) is to be paid out you will need to select the 'Apply loading' checkbox;
- If you want to pay out a balance for an associated leave category that does not have the 'Pay out' option automatically selected, you will need to manually select this option;
- Any leave categories setup to not accrue automatically will not appear in this section.
N.B. If the employee is set up to be paid default standard hours each pay and is terminated mid-pay period then the employee's hours will automatically be re-calculated on a pro-rata basis. We strongly suggest you double check these hours to ensure they are correct.
Once you have finalised the pay run, this employee will no longer be active or eligible to be included in future dated pay runs and the employee line will be highlighted red. If there are any unfinalised pay runs for the employee, you will not be able to terminate until those pay runs have been finalised.
If the terminated employee is included in a pay run for their primary pay schedule dated before their termination date, they will be included with a red asterisk (*) next to their name.
Cancelling a termination
If you want to cancel the termination in a pay run, click on the "Actions" box within the employee's pay details and then click on 'Cancel Termination':
If you want to re-activate an employee, you can do this by going to the employee's file 'Details' section. At the bottom of the page, you will see a 'Re-Activate Employee' button. Clicking this button will bring up a pop-up box in which you need to click 'Activate' to confirm you wish to re-activate the employee thus making them eligible for pay runs. Alternatively you can reactivate the employee using an import file.
Reporting Via STP
If an employee is terminated on a pay run as part of the Single Touch Payroll (STP) process the corresponding Pay event will communicate this to the ATO along with any Employee termination Payments (ETP). As part of this they will automatically be marked as "Is final" and won't show on future STP submissions of the affected pay schedule.
Processing a redundancy/ETP
Instructions on how to process a redundancy or ETP for an employee can be found here.
Termination pays & PAYG
With regard to study and training loan payments withheld on termination, as per the ATO, when working out Marginal Tax Rates you do not withhold any amount for:
- Higher Education Loan Program (HELP) debts;
- Student Start-up Loan (SSL) debts (includes ABSTUDY SSL debts);
- Trade Support Loan (TSL) debts; and/or
- Financial Supplement debts.
Note - As of 1 July 2019, amounts withheld for study and training loans (this includes HELP/SSL/TSL and Student Financial Supplement Scheme) will be amalgamated into just one amount to be withheld. This amount will be calculated using the new Study and Training Support Loans tax tables.
This will be applicable to pay runs with a Paid Date on or after 1 July 2019. In any pay runs with a paid date on or before 30 June 2019 the HELP & SFSS amounts will still be withheld. See here for further information.
This article provides further information on how PAYG is calculated within termination payments.
How is PAYG Calculated on Leave Payouts?
2. Terminating an employee directly within the employee's file
Go to the employee's file, click on the 'Details' section. At the bottom of the page, you will see a 'Terminate Employee' button. Clicking this button will bring up a pop-up box in which you need to enter the termination date. There will also be an option to select a termination reason (This article will explain termination reasons further).
From here, you can then select the 'Terminate' button which will terminate the employee and mark them as inactive. This will mean that they are no longer eligible to be included in pay runs.
Reporting Via STP
If an employee is terminated using this method they will need to be manually marked as "Is final" on their last STP pay event.
NB. Please note that terminating an employee using this method will not process a termination payment and the employee will not be notified.
3. Within an employee details file import
If you go to 'Data Extracts' from the payroll settings section and select the employee data, you can download a template with employee data (including terminated employees). If the fields 'TerminationReason' (this article will explain termination reasons further) is selected along with the 'EndDate' input, when the file is imported into your business the employee will show as terminated. This will mark them as inactive and they will no longer be eligible to be included in pay runs.
Reporting Via STP
As point 2, if this method is used the ATO will not be advised about the termination via STP and the employee will need to have been marked as "Is final" on their final STP pay event.
NB. Please note that terminating an employee using this method will not process a termination payment and the employee will not be notified.
If you have any questions or feedback please let us know via support@yourpayroll.com.au