The Termination Transaction in the Other Database allows users to select the payments to include in the termination.
Tax on termination
Often, different tax calculations are specified for termination payments from those used in pay transactions. For this reason, before you process a termination transaction, review the legislation for how to tax terminations in the country your database is for. You should manually calculate the tax for each component to be included in the termination.
To overwrite the tax value, you will need to use a Tax Adjustment. Ensure that you have one set up in Additions and Deductions.
To include leave in the termination
When processing a termination, the included leave types are selected in Leave Parameters:
Go to Payroll, Maintenance, Leave, Leave Parameters.
Select the Termination Options tab.
Select Payout Leave Types to include leave types in a Termination.
Tick Use Percentage Gross for Annual Leave to pay out a percentage of the employee's gross earnings instead of the Annual Leave prorata hours.
If you ticked Use Percentage Gross for Annual Leave, enter the Annual Leave Percentage as the percentage specified in the legislation.
Click OK to save.
When User Percentage Gross for Annual Leave is selected, Termination Annual Leave is paid out as Term AL Gross and Term Annual Leave Prorata.
Term AL Gross is the entitlement as at the last anniversary, less any leave taken since then. This may be negative if the leave taken is greater than the entitlement.
Term Annual Leave Prorata is not based on the employee's prorata hours. The value is a percentage of gross earnings since the employee's last entitlement date. The percent used is nominated in Annual Leave Percentage. This will include any transactions in the current period and the Term AL Gross (if specified). If employment ends within 12 months (before the entitlement date), the employee will only receive this payment.
The components included in the Term Annual Leave Prorata are set up in Transaction Totals. To view the components:
Go to Common, Maintenance, Calculations, Transaction Totals.
Edit the record with code STXXTS0002.
Review the Pay Components, Additions / Deductions, Leave Reasons and User Defined Leave tabs.
To process a termination in an Other Database
The information from the termination transaction updates the termination details on the employee record.
A termination transaction should be the LAST transaction entered for an employee in a pay period. This ensures that the transactions are taken into account when the system calculates the termination pay.
Before entering the transaction, calculate the tax on the components you include in the termination.
Leave paid out on termination will, by default, use normal rate. To use a different rate, change the Rate Type.
Go to Payroll, Transactions, Processing, Terminations.
Select the Employee.
Enter the Termination Date and Termination Reason.
If you are paying the employee manually, i.e., not through a bank file, untick Generate Payment.
Tick Bypass Bank Splits if the payment is to be made to the employee's primary bank account.
Check calculated Termination Leave components included in Termination Components. The Rate Type will be Normal; change this to pay at a different rate.
In Other Components, enter a Term Redundancy/Retirement payment if applicable. If the payment is hours based, enter the number of Hours to calculate the value.
Select Adds Before Tax and Add a line. This will calculate tax. Enter any additions or deductions that need to be included in the termination transaction.
To change the tax, Add another line in Additions and Deductions.
Select your Tax Adjustment as the Adds/Deds. Enter the amount you need to change the tax by in Value. To reduce the tax, enter a negative amount.
In Total Termination Pay, click on Net Pay, check the allocation of Net Pay, and make any required changes.
A Termination Advice Message can be entered.
In Deds After Tax and Superannuation, check that the Employer and any Employee contributions are calculated correctly.
Click Process.