Terminating Employment

MYOB Acumatica — Payroll has features to handle the payroll requirements when an employee's employment is terminated due to resignation, redundancy, dismissal, etc.
Note:
MYOB Acumatica — Payroll currently supports terminations for Australian companies. Future releases will expand support for more jurisdictions.

Before Terminating Employment

Any entitlements that should be paid out on termination must be set up in the Payroll system. On the Entitlements (MPPP3300) form, tick the Pay Entitlement balance upon termination option on the Rules tab for all leave accruals and other entitlements that should be paid out on termination: When this option is ticked, the Treat As: field becomes available. Select an option to specify how the entitlement should be treated when paying it out on termination. If you select "Other", you can then select the specific pay item that the entitlement should be treated as.

Note:
When terminating an employee, the system processes only one entitlement for each leave type.

If the employee has taken extended leave without pay, or if there is any other period of their employment that should not be included in their period of continuous service, go to the Employment History tab of the Employees (EP203000) form and make sure that the Service Break option is ticked for these periods. Any periods that have this option ticked will not be included when calculating the employees period of continuous service.

If you are terminating an employee who is in more than one pay group, any open pays that include the employee should be completed or cancelled before the termination pay run is done, as the termination pay items will only be in the Current Pay for the pay group that the termination is initiated from.

Terminating Employment in a Pay

When processing a pay that includes an employee's final pay, you need to perform extra steps to ensure that unused leave balances are paid out and the employee is marked as terminated.
  1. Create the pay as normal, ensuring that any leave the employee is taking in the final pay period has been entered.
  2. Open the Employee's Current Pay (MPPP3130) form for the employee being terminated.
  3. Click the Termination button on the form toolbar to open the Termination (AU) (MPPP5300) window.
  4. On the Details tab, select the Reason:
    • Resignation – for all terminations initiated by the employee
    • Genuine Redundancy – for terminations that meet the ATO criteria for genuine redundancy or approved early retirement
    • Dismissal – for all other terminations initiated by the employer
  5. Set the Last day of employment and Date when notice was given dates.
  6. The system calculates the employee's period of continuous service and minimum notice period. (You can override these values if necessary.) The calculations and details will differ between employee- and employer-initiated terminations, i.e. Resignation vs. Genuine Redundancy or Dismissal.
    • For Resignation: If the Total notice period not worked value is greater than zero, tick or clear the Deduct from this pay options depending on whether or not the unworked notice period should be deducted from their pay. The deduction will be inserted into the employee's Current Pay when the window is saved and closed.
    • For Genuine Redundancy and Dismissal: Tick or clear the Make a Payment in Lieu of Notice option depending on whether or not the unworked notice period should be paid to the employee. The full period of notice will be paid. The payment will be added to the Other Termination Payments tab of the Termination window, and then injected into the employee’s current pay when the window is saved and closed.
    Note:
    The minimum notice is period is calculated according to National Employment Standards—see the Fair Work website for more information on how notice periods are calculated.
  7. All unused leave balances for the employee are calculated and displayed on the Unused Annual and Long Service Leave or the Unused Other Leave tabs. You can override the calculated amounts if necessary by ticking the Override box and entering a new amount in the Override Amount column. You can enter a comment explaining why the amount was overridden into the Comment field.

    For Unused Other leave items, the ETP checkbox (read-only) indicates whether the leave type is an ETP or not—TOIL is not, while all other types are (the taxation treatment of the pay item determines this). The Excluded Payment checkbox can be ticked if appropriate. The combination of these two checkboxes determines the ETP code and ATO Reporting category (read-only) that will be used in the STP submission. The exception to this is when the entitlement is configured to use your own pay item (Treat As: is set to "Other"), which cannot be overridden on the Termination window.

  8. The Other Termination Payments tab is used for other lump sum payments.
    • If the reason is Genuine Redundancy, a minimum redundancy payment will be automatically added, and the Excluded checkbox ticked. It can be manually added if the reason is Dismissal, note that the Excluded checkbox will be unticked by default but can be ticked if appropriate.
    • If the Make a payment in lieu of notice option is ticked on the Details tab, it will be automatically added.
    • Use the + button to add a row, and select a pay item from the available options.
    • The ETP checkbox (read-only) indicates whether the pay item type is an ETP or not. The Excluded Payment checkbox can be ticked if appropriate. The combination of these two checkboxes determines the ETP code and ATO Reporting category (read-only) that will be used in the STP submission.
  9. Click Save & Close to close the Termination window and add the appropriate pay items to the employee's current pay—see below. (A Normal Earnings field appears in the table footer when an Unused Leave pay item is selected; this value is used when calculating the tax on the pay item.)
  10. Select Termination Summary from the Reports dropdown to generate a Termination Summary report, which shows how the pay items have been handled.
  11. Process and complete the pay as normal.
Note:
The unused leave calculations take into account any leave taken by the employee at the time the Termination window is opened (including any leave entered for the Current Pay). Entering leave (or making any other changes to the pay) after the Unused Leave pay items have been added to the employee's pay will not update the Unused Leave pay items to reflect the new leave balance. To update these pay items, you must re-open the Termination window to calculate and add new Unused Leave pay items—see "Reversing or Editing a Termination Pay" below.
Note:
If the terminating employee has a Reducing Balance deduction, and the balance will not be cleared in this pay, a warning will be displayed so you can consider if you need to take action e.g. set up a debt collection record.

Effects on the Employee's Pay

When the Termination form has been completed, allowance and/or deduction pay items are added to the employee's pay to reflect the totals on the Termination form:

  • "Termination – unused leave" pay items are added for any unpaid leave balances.
  • If the termination's Total notice period not worked value is greater than zero and the Deduct from this pay option is ticked, a deduction pay item will be added to deduct the appropriate amount from the employee's pay.
  • If the Make a payment in lieu of notice option is ticked, a payment item will be added to pay the total amount of notice
  • Various income pay items are added for lump sum payments.
  • Pay items with the tax treatment of “Termination” may have a tax-free component. The tax-free and taxable components are added to the Tax free income and Gross income totals respectively—this will flow through to all places where these totals are displayed, e.g. the Employee's Current Pay, the Pay Run Details screen, reporting etc.
Note:
If an employee is in more than one pay group, the termination pay items will be in the current pay for the pay group that the termination is initiated from. Any other pay group’s current pay will be a normal pay run, and should be completed or cancelled before the termination pay run is done.

Effects on the Employee Record

Once the pay including the employee's termination has been completed, the employee's record is updated as follows:
  • The termination date is copied to the Employee End Date field on the Employment tab of the Pay Details (MPPP2310) form and the Expiry Date column on the Employee Pay Groups (MPPP2250) form.
  • If there is an active row on the Employment History tab of the Employees (EP203000) form, it will be updated to reflect the employee's termination.
  • The status of the employee record is set to "Inactive" on the Pay Details and Employees forms.
  • The Single Touch Payroll submission for the pay that included the employee's termination will report a finalisation declaration for the employee. The ETP pay items will be included in the Termination tab of the Single Touch Payroll batch for the pay run; all other pay items will be included in the tab corresponding to the employee's recorded Payment Summary type. ETPs are listed individually in the batch tab, and consolidated by date of payment and ETP code in the submission.

Reversing or Editing a Termination Pay

The steps to reverse or edit an employee's termination differ depending on whether or not the pay containing their termination has been completed.

If the pay is still open, then open the employee's Current Pay, click the Termination button to open the Termination window again, then:
  • To edit the termination, enter new details, then slick Save & Close to re-generate the termination pay items.
  • To reverse the termination, click the Delete icon on the Termination window. This will remove all termination pay items from the employee's pay.
If the pay has been completed, you will need to reverse the pay. Reversing a pay with a termination in it undoes all changes to the employee record—see "Effects on the Employee Record" above. The replacement pay that is generated will contain all of the termination pay items from the pay that was reversed—you can then click the Termination button in the employee's pay to open the Termination window and edit or delete the termination as necessary. If you keep the termination in the replacement pay, then when it is completed, the employee's record will be updated again, i.e. the record will be set back to "Inactive", etc.
Note:
When a termination is reversed, the employee's next pay run will un-finalise the employee in Single Touch Payroll reporting, and they will see a continuation of their YTD balance in their myGov account.

Alternatively, you can adjust a completed pay for one or more employees. If that pay, or any subsequent pay for the employee, has a saved termination, then this should be recalculated, as the tax-free components and/or concessional tax rates may change.