How to pay an employee after they have been terminated

KB270

Overview

On occasion it may be necessary to pay an employee after they have been terminated. This can be done if the employee was terminated in the current financial year. If the employee was terminated in a prior financial year they will need to be set up as a new employee.

When processing the pay for a terminated employee, careful consideration will need to be given to the tax and leave for the employee. Leave will not accrue once an employee has been terminated, so a manual adjustment may be needed. Remember to add lots of notes to the pay run detailing what has been done.

If you have finalised the Single Touch Payroll (STP) for the employee, you will need to re-finalise the STP once the final pay has been completed.

Process

  1. Create a Pay run
  2. Click Select employees
  3. On the Employee list, change the display filters to:
    • Status: Either
    • Terminated: Terminated

  4. Select the Employee.
  5. Adjust the Pay run date
    • This would usually be the date Pay run is processed but can be any date you choose.
  6. Double-click the Employee to open the Pay run details form
  7. Set the date range.
    • The Pay from date will default to the date the employee was last paid.
    • The Pay to date will default to the end of the last normal pay cycle.
    • The dates should be changed to reflect the actual period they are being paid for.
  8. Removal all unnecessary pay items that have auto-populated.
  9. Enter any additional Pay items required.
  10. You may need to add the EXTRA TAX Pay item to adjust the calculated tax.
    • When tax is calculated, it does not take into account any other Pay runs processed for the same period.
    • As the employee has been terminated, there may be other tax considerations that need to apply so it is recommended that you seek advice from a payroll professional.
  11. Depending on how the tax is to be reported, you may need to create a new Pay item with the correct STP payment type.
  12. Click OK when completed.
  13. Click Update, apply the Pay run and lodge Single Touch Payroll (STP) as normal.

Additional Notes

If you need to adjust the leave balances for the terminated employee, please see KB154 - How to adjust leave balances for terminated employees.

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Last edit: 16/02/24