Skip to main content

Leave Paid on Termination

When an employee leaves your organisation, you are required to pay out any accrued but untaken annual leave (and long service leave where applicable). Personal/carer's leave is generally not paid out on termination unless specified in an award or agreement.

Step 1: Set the Termination Date​

  1. Navigate to Payroll > Employees and select the employee.
  2. Open the Employment Details tab.
  3. Enter the Termination Date and select the Termination Reason from the dropdown.
  4. Click Save.

Step 2: Process the Final Pay Run​

  1. Go to Payroll > Pay Runs and open or create the final pay run for this employee.
  2. If the employee is not already in the pay run, click Add Employee to include them.
  3. Enter any remaining ordinary hours worked up to the termination date.
  4. Click Add Pay Item and select Annual Leave Payout on Termination.
  5. Enter the total accrued annual leave hours to be paid out. You can check the balance under the employee's Leave tab.
  6. If applicable, add Long Service Leave Payout as a separate pay item.
  7. Review the tax calculations — leave paid on termination may be taxed at a different rate depending on the type of leave and the employee's circumstances.

Step 3: Submit via STP​

  1. Finalise the pay run and submit it to the ATO via STP.
  2. If this is the employee's final payment for the financial year, you should also complete an STP Finalisation for that employee.
caution

Ensure you use the correct termination pay items so that the ATO receives the right payment classifications. Incorrectly categorised termination payments may cause issues with the employee's tax return.