Terminations is used to enter Termination details for an employee and to calculate their Termination Pay.
The Termination Date and Termination Reason entered are used to calculate the employee's leave entitlements up to their termination date, allocate pay amounts to the Termination Pay Components and calculate the tax for each component. This information is also added to the Termination Details on the employee record when you process the transaction.
After selecting the Termination Reason, you will be asked if the Termination relates to the current Financial Year. The answer determines which ETP codes are used in the Termination. The codes are:
R - Exclude from Whole of Income for current Financial Year
O - Include in Whole of Income for current Financial Year
S - Exclude from Whole of Income for previous Financial Years
P - Include in Whole of Income for previous Financial Years
ETPs are entered under Total ETP Components, e.g. in lieu of notice, gratuity etc. Depending on the termination reason, employee's age and the component you enter, ETP Payments, ETP Tax and Lump Sum D, if applicable, will be calculated.
Lump Sum D is the tax free portion and used when the termination reason is genuine redundancy payments or applied early retirement scheme payments. The portion that is tax free is calculated based on the number of completed years service.
ETPs can be split between Pre July 83 and Post July 83 based on the employee's length of service, i.e. that they were hired before July 83.
For more information about ETPs and their codes, refer to the ATO link below:
A Termination transaction must be the LAST transaction entered for an employee in a pay period. This ensures that any leave included in other transactions is accounted for when the Termination leave is calculated.
You can include Additions and Deductions after tax in a Termination Transaction. If you need to pay out Additions before tax, either include these in the final Timesheet or enter them in Manual Calculation.
There may be instances where you enter a termination transaction, and there is no entitlement to pay, e.g. you've previously entered the termination payment and need to record the Termination Reason or the employee is a casual with no entitlement. For steps on how to enter these transactions, refer to the section below, 'Entering a Termination Transaction where no payment is required'.
Entering a Termination Transaction
Go to Payroll, Transactions, Processing, Terminations.
Select the Employee.
Enter the Termination Date.
Select the Termination Reason.
Confirm whether all payments relate to the current financial year. Click Yes for the current financial year otherwise, click No.
Select the STP Cessation Reason.
If the employee's Net Pay won't be included in the EFT, untick Generate Payment.
Select Bypass Bank Splits if the entire payment is to be transferred into the employee's primary bank account.
Check the Pre July 1983 days of service, Post June 1983 days of service, Total Days Employed and Total Years Employed values. The days of service are to calculate Employment Termination Payments (ETP).
Check the Average Normal Gross is correct. This value is used to calculate the employee's marginal tax rate. You can amend this if this is the first pay in the financial year or any pays for the current financial year were processed outside MicrOpay Evo. For example, if you migrated from another payroll package and you are reporting values from both payroll systems.
Check the calculated unused leave values in Termination Components and their corresponding Tax values. Update if necessary.
In Termination Pay Summary, click Total ETP Components.
Enter either Hours or Amounts for any ETP payment, e.g. Golden Handshake, Severance, Unused Sick or RDO amounts, into the grid.
In Termination Pay Summary, click Net Pay.
Check the allocation of Net Pay to the employee's bank accounts and make any required changes.
A Termination Advice Message can be entered.
In Termination Pay Summary click on Superannuation.
Check the superannuation calculated.
Click Process to save the transaction.
Entering a Termination Transaction where no payment is required
Go to Payroll, Transactions, Processing, Terminations.
Select the Employee.
Enter the Termination Date.
Select the Termination Reason.
You are prompted to confirm whether all the termination payment relates to the current financial year. Click Yes.
Select the STP Cessation Reason.
Untick Generate Payment.
Enter zero for any component that has a value.
Click Process to save the transaction.