The most common termination occurs where an employee resigns, gives notice and is terminated with the payment of some unused annual leave and perhaps some unused long service leave. Tax is deducted at the employee’s standard marginal rate and the Payment Summary is issued with those of the rest of the staff at year’s end, or earlier if requested by the employee.
Where a staff member is retiring, has died, is being dismissed or is being made redundant then the termination payment may be treated differently.
The complete guide to Termination of employees is available for downloading from the ATO website at Eligible termination payments for businesses:
www.ato.gov.au/super/content.asp?doc=/content/22585.htm&page=1
This guide explains the procedures you need to follow when paying common types of eligible termination payments (ETPs).
When an employee is terminated there are a number of steps to ensure all wages and accruals are paid correctly.
Step 1 - Pay for actual time worked
Before paying accrued leave etc, create a normal wage entry that represents actual time worked since the last pay date. This allows leave to accrue on all time worked before the accrued leave is paid out. Do not include accrued leave in this wage entry, as there are significant differences in the super treatment. Do not mark this entry as a Termination Pay.
Step 2 - Pay out accruals
Open another wage entry, and this one is marked Termination Pay. Enter the Termination date of the employee. Enter the hours of unused leave to be paid and remove all other values for hours, salary, extra tax, allowances etc. Note that no SGC is payable on unused leave paid on termination. The pay entry for the unused leave should use the “manual tax” flag, and calculate tax at the employee’s marginal rate or as determined by referring to the ATO.
Pay outstanding commissions to a terminated employee
Further Wage entries can be created for a terminated employee, however no leave will accrue. From the Pay Wages window, open the Employee selection and tick Show Terminated Employees. |
Terminate an employee where nothing is payable
It is possible to Terminate an employee without creating a Termination Wage Entry by simply adding the Termination date to the Employee Maintenance screen. This is used where there are no accrued entitlements, such as commission only, casual labour etc, and no actual time worked to be paid for. Use the “Terminate Employee Without Payslip” button on the Employee Maintenance screen. You will be prompted to enter the Termination date, then press OK. |
"Unterminate" a terminated employee
If an employee has an incorrect Termination date recorded, they may be “unterminated” using the “Unterminate Employee” located on the Terminated Employees tab of the Employee Maintenance screen. Only use this to correct the termination date. If you have re-hired the employee do not use this function. Each instance of hiring requires a new employee record. |