Terminating an Employee

There are three ways you can terminate an employee.

1. Directly within the employee's file
2. Within an employee details file import
3. Within a pay run

1. 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.

NB. Please note that terminating an employee using this method will not process a termination payment and the employee will not be notified.  

2. 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.  

NB. Please note that terminating an employee using this method will not process a termination payment and the employee will not be notified. 

3.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. You will also have the option of selecting a termination reason (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 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;
• The 'Pay out' option will be deselected by default if the employee has not been employed for at least 3 months;
• Any leave categories setup to not accrue automatically will not appear in this section;
• Leave being paid out is paid at the gross rate of pay, which uses the earnings from the pay run which have been configured to include in 'gross rate of pay' within the pay categories;
• Leave paid out will be paid from the termination date i.e. if an employee is terminated on Friday 15th of the month and they are being paid out 5 days leave, the leave will cover Monday 18th - Friday 22nd of the month;
• If the employee works part time but doesn't have advanced work hours set up, the system will assume the work days are Mon - Fri. If the employee works 3 days a week the system will pay leave based on work days Mon - Wed;
• The 'i' icon displayed opens a context panel which shows how the leave pay out was calculated:

N.B. If the employee is set up to be paid default standard hours each pay and is terminated mid-pay period, the system will calculate the 'actual days/hours' worked. We strongly suggest you double check these to ensure they are correct.

The 'Leave accrual' section will display pro-rata values if the employee leaves part way through the month. The formula for this pro-rata calculation is as follows:

Accrued amount = accrued leave * pro-rata ratio

Pro-rata ratio = ((termination date + 1) - pay period start date) / ((pay period end date + 1) - pay period start date)

Example

Pay period: 1 May - 31 May 2021

Termination Date: 29 May 2021

Pro-rata ratio = (29/5/21 - 1/5/21) / (1/6/21 - 1/5/21)
= 28 / 31
= 0.9032258064516129

Accrued leave =  0.58333 * 0.9032258064516129
= 0.5268787096774194 days

If you wish to make any lump sum payments as part of the termination select the 'Lump sum payments' checkbox to enable the lump sum section. Add amounts against the relevant payment type, the 'tax free component' and 'taxable component' values will be reported as income and the 'tax withheld' values will be reported as withholding tax to the IRAS.

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. 

When an employee terminates mid-month

If the employee terminates mid-month, the system will use the work week settings on the Employee file > Pay run defaults page in order to work out the actual hours/days worked.

Example: Employee is included in a March 2022 pay run, and is terminated on the 14/3/2022 (which means they worked 10 days). If the employee's standard work week is usually a 40 hour week, the system will display a total hours worked of 80 hours. 

You are able to click the information modal against the pay rate in the earnings line in order to view a context panel that breaks down the calculation:

The calculation used in the above context panel is the following:

(Monthly gross rate of pay) / (Total number of working days in that month) x Total number of days the employee actually worked in that month.

If the employee works hours/days other than the standard business hours, it is strongly encouraged to use the 'advanced standard hours' function in order to allow the system to pay the correct hours. 

A few things of note in regards to the 'incomplete month' context panel:

• It only displays when the employee joined or was terminated during the month and they have been paid pro-rata earnings for the month;
• It will not display where an employee has:
  • advanced hours
  • split earnings
  • a pay rate change during the pay period
• The context panel will include the following:
  • Base rate of pay
  • Number of working days in month
  • Number of working days in month converted to hours - employee's hours * work days
  • Number of days actually worked in month - days worked are based off the employees pay run default settings, and uses the business 'work week
  • Number of days actually worked in month converted to hours - employee's hours * days worked
  • Hourly rate used for current period - base rate of pay / number of work hours in month

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.

If you have any feedback or questions please contact us via support@yourpayroll.io