There are two ways you can terminate an employee:
- Within the employee file
- Within a pay run
Terminating an Employee within the Employee File
The first, and simplest way is to open up the employee file, click on the 'Details' section and down the bottom of the page you’ll see a 'Terminate Employee' button:
Clicking this button simply marks the employee as inactive and will no longer be eligible for pay runs.
NB. Please note that terminating an employee by using the Terminate Employee button at the bottom of the employee record/details page will not process a termination payment and the employee will not be notified. Similarly, if you reactivate an employee by using that option at the bottom of the details page of the employee record (of a terminated employee) the employee will not be notified.
Terminating an employee via the pay run
To do this, click on the employee within the pay run and then from the blue 'Actions' button select Terminate Employee:
A pop up will appear as follows:
Enter the employee's termination date and then click on 'Save'.
N.B. If there are any unfinalised pay run for the employee, you will not be able to terminate until those pay runs have been finalised.
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.
Once you have chosen to terminate an employee from within the pay run, any leave that they are entitled to can be paid out by ticking the 'Pay out' checkbox as shown below:
NB: Any leave category that has the 'Exclude from termination pay out' checkbox ticked on the Payroll settings > Leave categories page will not have this checkbox displayed.
What happens when an employee has received leave accrual in advance?
If an employee has received leave entitlements in advance, the system will calculate the actual 'accrued' equivalent and only pay what the employee would have accrued during employment. Any leave taken in advance will be deducted from earnings. There are a few scenarios which may occur, including:
- Employee has had upfront leave accruals applied AND employee takes annual leave from this 'upfront' balance: Upon termination, the advance leave is to be deducted from earnings.
- Employee has had upfront leave accruals applied AND employee has NOT taken any annual leave from this 'upfront' balance: Upon termination, the entitled accrued annual leave balance for the employee will be paid out to them. This includes the leave amount accrued up to the date of termination, not beyond.
- Employee has had upfront leave accruals applied AND employee takes a portion of annual leave from this 'upfront' balance with some remaining accrued leave remaining: Upon termination, the entitled accrued annual leave balance for the employee will be paid out to them so long as the annual leave taken was leave already accrued.
The below example shows an employee who is being terminated, and has taken more sick leave than they would have accrued at the termination:
You will see there is a negative earnings line for the repayment of the negative sick leave.
There are also two leave adjustment lines, the negative line is the balance of the leave that was accrued in advance minus the leave the employee would have been entitled to at termination. In this example, the employee received 14 days sick leave up front, they would have accrued 3.8 days at termination (14 - 3.8 = 10.2).
The second adjustment line is for the leave that is being repaid, 3.2 days. In this example, the employee took 7 days sick leave (of the 14 they were given up front), when they only had 3.8 days available (7 - 3.8 = 3.2 days to repay). This value is a positive to balance out the employees leave balance to zero.
Breaking down the accrual calculation
The system calculates the leave accrual as follows:
- Number of days that have passed between the employee anniversary date and termination date: e.g. a leave anniversary date of 10 May and a termination date of 3 September is 116 days. When calculated in proportion to a full year, it is 116 / 365 = 0.31780822.
- That value (0.31780822) is multiplied by the number of days leave that the employee received. For example, 6 days annual leave would calculate as 0.31780822 X 6 = 1.90684932. Therefore, this is the amount of days being accrued at termination.
- The system then does some rounding where that value is multiplied by 10, rounded up to the nearest number and then divided by 10 to get the actual accrued leave value. Using the above example this would give the result of 2 days annual leave accrued.
- If the employee hadn't taken any leave during the period, the 2 days annual leave will be paid out in the final pay run. However, if the employee had taken 3 days annual leave for example, they will need to repay 1 days annual leave in the final pay run, and the earnings will be reduced by that amount. As shown in the image above.
- Public holidays do not impact the leave pay out
Once you have finalised the pay run, this employee will no longer be active or eligible to be included in future pay runs and the employee line will be highlighted red.
Cancelling a Termination
If you want to cancel the termination, click on the blue 'Actions' box within the employee's pay details and then click on 'Cancel Termination':
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