Setting Up Termination Pay Items and Entitlements

Default pay items have you covered for most situations

MYOB Acumatica — Payroll includes default pay items for unused leave and other region-specific entitlements:

  • New Zealand: unused alternative days and public holidays.
  • Australia: unused lump sum payments.
These pay items cover standard termination payments. If necessary, you can also create pay items for non-standard entitlements agreed to in an employee's contract.
Warning:
Do not edit the default pay items. This can cause issues with terminations.

If an employee has contractual leave, create a custom termination pay item

You can find the basic steps of creating a pay item in our knowledge base article. The steps below only cover some settings required for termination pay items.

  1. Go to the Pay Items form (MP.PP.22.10).
  2. Set the Type to Unused Leave.
  3. The Taxation setting depends on the region you're in. Here are some guidelines, but your situation might require a different setup:
    • For New Zealand, it should usually be set to Taxable : Extra Pay because paying out unused leave is considered a lump sum payment.
    • For Australia, usually an employment termination payment (ETP) should be set to Taxable : Termination and other payments should be set to Taxable : Standard PAYG.

You also need to include the contractual leave entitlement in termination payments:

  1. Go to the Entitlements form (MP.PP.33.00).
  2. On the Rules tab, in the Termination Treatment section, select the Pay Entitlement balance upon termination checkbox.
    Note:
    In New Zealand, you need to select this checkbox for annual leave, public holidays and alternative days. For other leave and non-leave entitlements, it depends on employee contracts.
  3. Set the Termination treat As dropdown to Other.
  4. Choose a termination pay item in the Pay Item field to determine how the entitlement is treated.
  5. On the form toolbar, click the Save icon.

Recording termination payments in the general ledger

Whether you're using the default termination pay items or creating your own, all pay items need a general ledger purpose, which determines how it should behave when being posted to GL journals. The default pay items have preset general ledger purposes, but you can change them if necessary on the Additional Info tab of the Pay Items form (MP.PP.22.10).

A common way of recording termination payments is to journal the leave accrual (debit the expense, credit the liability account), so when leave is paid out, it will debit the liability account instead of the expense account.

If you change a the general ledger purpose for a default pay item, your change won't be undone when you upgrade to a new version of MYOB Acumatica.