Create payroll categories for termination payments

Paying your employees > Processing termination payments > Task 3: Create payroll categories for termination payments

Task 3: Create payroll categories for termination payments

Termination payments are normally taxed at different rates and may not accrue superannuation.

note : Calculations required to make employment termination payments

Consult your accountant or visit the ATO at ato.gov.au/businesses for advice on how to calculate ETP and bona fide redundancy payments.

▪	If the employee whose services you are terminating is entitled to a redundancy payment, you may need to pay an employment termination payment (ETP) and a bona fide redundancy payment. You will need to set up payroll categories for these payments, such as ETP and ETP tax.

▪	If the employee you are terminating has unused holiday pay, you will need to create a wage category for unused holiday pay if one does not already exist.

To create a termination payroll category

1	Go to the Payroll command centre and click Payroll Categories. The Payroll Category List window appears.

2	Click the Wages tab.

3	Click New. The Wages Information window appears.

4	Type the name of the wage category in the Wages Name field. For example, if you need to create a wage category for unused holiday pay, use a name such as Unused Holiday Pay.

5	Choose the type of wages—Salary or Hourly—according to the type of payment: Hourly for unused holiday pay, Salary for ETP amounts, etc.

6	Click Employee. The Linked Employee window appears.

7	In the select column (), click next to the employee who is leaving.

8	Click OK and then OK again. The Payroll Category List window reappears with the new payroll category in the list.

9

If you are creating a payroll category to pay an entitlement balance (such as unused holiday leave), and the payroll category used to accrue the entitlement is set up to calculate leave based on a percentage of gross hours, you need to exclude the new payroll category from the entitlement accrual calculation.

a	Click the Entitlements tab. The list of entitlement payroll categories appears.

b	Select the payroll category used to calculate the accrual, for example, Holiday Entitlement, and click Edit. The Entitlements Information window appears.

c	Click Exempt. The Entitlements Exemptions window appears.

d	In the select column (), click next to the payroll category name to exclude any hours entered for this payroll category from being included in the entitlement accrual calculation.

e	Click OK and then OK again. The Payroll Category List window reappears.

10	Repeat from step 2 for each required termination payroll category.

▪	Task 4: Exclude termination payroll categories from superannuation calculation

▪	Processing termination payments

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