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Processing a termination pay

You can complete all termination processes within a single pay run. This will ensure values are reported correctly to the ATO as part of the STP submission.

Reckon Payroll will allocate the reporting categories based on the termination reason entered. These can be adjusted within the termination pay run if required.

Terminating an employee

  1. Select the employee from the Employees list.
  2. Select Terminate employment under Options
  3. Enter the End date and select the Reason for termination from the drop-down list.
  4. Select Terminate employment
  5. Select to Create the final pay run
If you Cancel the creation of the pay run, you can select to Create final pay run from the employee profile.
  1. A pay run drawer will be displayed. You can edit the Pay date or the Pay period. Select Archive employee once the pay run is marked as paid to ensure the employee is set to inactive.
  2. The pay run screen will be displayed and selecting edit against the employee, will open the pay run drawer. If the employee's leave is set to pay on termination, the leave pay item will be calculated and the ATO reporting category displayed.
  3. Make any adjustments necessary to the termination pay and select Done
  4. Select Mark as paid and Continue to declaration to submit to the ATO.

Assigning different reporting categories

When processing a termination pay, the Reason for termination will determine what reporting category will be allocated to any unused leave balances.

Where the termination reason is Redundancy or Ill health, any unused leave that has been selected to pay out on termination will be allocated to Lump sum A code R. For reasons, Voluntary Cessation, Dismissal, Contract Cessation or Transfer, these will be allocated to Unused leave on termination.

If you need to report unused leave to a different reporting category, this can be done within the termination process within the pay run.

In the following example, I have an employee that left the company voluntarily. They have the following leave balances
- 80 hours annual leave,
- 160 hours of Long service leave. 20 hours of which, were accrued before 16/08/1978 (and therefore this value needs to be reported as part of Lump Sum B.
  1. Run through steps 1 to 8, above. As this employee was terminated using the reason Voluntary Cessation, the unused leave has been assigned to the reporting category Unused leave on termination
  2. Select Long service leave and reduce the Quantity from 160 to 140
  3. Select Done
  4. Select Add against Earnings & leave and select Long service leave from the drop-down list
  5. Enter the Rate and the Quantity as 20 and select Lump sum B
  6. Select Add. The changes will be reflected in the pay run drawer and display the relevant reporting category.
  7. As Lump sum B is taxed at a different rate, scroll down to PAYG Tax section and select Tax withheld
  8. Override the calculated tax value in the Custom tax withheld amount field
  9. Select Done

For more information on tax calculations for unused leave, see the ATO's Schedule 7 – Tax table for unused leave payments on termination of employment

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