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When an employee leaves, you'll need to process a final pay for them. You'll need to calculate any termination amounts you owe the employee—for example, unused annual leave amounts or a golden handshake—in addition to processing their final standard pay.
Final payments are taxed at different rates depending on your employee's age, how long they were employed with you and the reason they're leaving (such as voluntary redundancy or retirement).
If the employee returns, you can reinstate them.
Check the rules!
It’s important to follow the rules about dismissal, notice and final pay. The Fair Work website is a great place to start.
Working out the final payment amount
Final payments can get complicated as there are a number of awards and employment contract provisions that determine what needs to be paid. You may also make an additional payment in lieu of good service or workplace policy. The procedures we've outlined explain how you record the different elements of a final payment. However, you'll need to work out the payment amount and how the payment needs to be reported to the ATO (for example, are the amounts reported as ETP payments or lump sum payments).
Before you begin, check the relevant award or employment contract for exact details of what needs to be paid to the employee on leaving. We also suggest you read the ETP information on the ATO's website, as it explains what's classified as an ETP (Employment Termination Payment) or a lump sum payment. If you're unsure about how to handle a payment, please speak to the ATO.
How to process a final pay
Do the following tasks to process a final pay. Made a mistake? Learn how to change a recorded pay.
|1||Process the final standard pay|
|2||Determine any outstanding entitlements|
|3||Create payroll categories for termination payments|
|4||Exclude termination payroll categories from superannuation calculations|
|5||Record the final termination pay|
|6||Enter termination details|
If you haven't reported pays for the employee via STP, you'll need to Prepare an ETP summary instead.
Need to provide an Employment Separation Certificate? Visit the Department of Human Services website for details.