AccountRight Plus and Premier
This is task 2 of 7 for processing a final pay (see previous task or an overview of all tasks).
After you've paid the employee's final standard pay, you can work out how much paid leave they're owed so you can pay it out.
Voluntary resignation or retirement?
If the employee is leaving voluntarily (resignation or retirement) and your company file is online, there's a simple process for paying unused annual leave.
Start by paying the employee's last regular pay. Then, start a new pay run (Payroll > Process Payroll) and choose Final Pay as the pay frequency.
You'll then be prompted to open your file in a web browser to continue. Just choose Final pay as the Pay cycle to continue. Here's all the steps.
If the employee is leaving for any other reason
If the employee is leaving for any other reason, or your company file isn't online, you'll need to run the Entitlement Balance Detail report to determine how much unused annual leave you need to pay.
To run the Entitlement Balance Detail report
Go to the Reports menu and select Index to Reports. The Index to Reports window appears.
Click the Payroll tab and select the Balance Detail report (under the Entitlements category).
For the report's date range, enter the employee's final pay date in the To field and any earlier date in the Dated From field. For example, if their final pay date is 15 January, enter the date range of 1 January to 15 January.
Click Display report. The report appears.
In the Filters tab, type or select the employee’s name in the Employees field. The report display changes to show only the selected employee's entitlements.
Check the Available Hours column to determine the total hours outstanding for each entitlement category (you'll need to know this when you record the employee's final pay). The total recorded in the employee's card, such as an opening leave balance, is displayed (Card balance), as well as the leave the employee has accrued in pay runs (Hours from pays). These amounts should match, and the Difference field should show 0.00. This example shows the employee is owed 23 hours of annual leave and there's a zero Difference.
If an amount appears in the Difference field, this means an amount has been entered in the pay history of the employee card for the entitlement. You will need to work out if the amount was entered in error, or if the amount should have been included in a previous pay run. You will then need to correct the error before processing the termination pay.
Print or save the report for your records.
Proceed to the next task: Create payroll categories for termination payments.
Unused long service leave
If the employee has unused long service leave, you'll need to pay it out along with any other unused leave in a single pay. This ensures the correct PAYG tax is calculated on the entire unused leave payment.
For help working out how much you need to pay and how much tax to withhold, speak to your accounting advisor. If you've invited your advisor to your AccountRight company file, they'll help you make this payment in MYOB. For all the rules and some helpful examples on paying unused long service leave, see this ATO information.
FAQs
What if the employee has a negative leave balance?
Generally, a negative value for an entitlement means the employee has taken more leave than they have accrued. When you record the employee's final termination pay, enter the leave hours as a negative value against the unused annual leave payroll category.
Here's an example:
This will reduce the final pay's net amount to reflect the negative leave balance.
If you're facing this scenario, we recommend speaking to the ATO, your accounting advisor, or Fair Work Australia as it might also impact the employee's PAYG and superannuation.