Support Top 10: Processing termination pay in MYOB EXO Payroll

Get the answer to one of our most frequently asked questions about EXO – how to process payments for departing employees.

One of the most frequently asked support questions is how to process termination pays for employees in EXO Payroll.

In this article, we break the question down into three components:

• Processing
• Holiday pay – how are the calculations made and why 8 percent is added to outstanding
• Why the termination amount on the Holiday Pay report is different to the figure in the termination wizard

1. Processing – termination (no payment)

When processing the termination of an employee, there are two different possible scenarios:

1. Instant termination of employee without any payout – appropriate for casuals and contractors
2. Paying out all holiday pay and leave owing – appropriate for permanent staff

The first method is used mostly for casuals and contractors in your payroll who are no longer required. They are not owed any further monies because they are paid their holiday pay as they go and have no entitlements owing as a contractor.

To remove them from your payroll, simply terminate them through an option available under your File menu called Terminate/Reinstate

(see picture)

Once terminated, this employee/contractor will no longer appear active in your employee list or in your current pay run. If you wish to bring back any previously terminated employee/contractor, use this same process through the File Menu and from the [Find: F9] function key, bring up your employee list and tick the Show Terminated Employees option at the bottom. You will then see all your terminated employees in grey. Select the one you wish to make active again.  

2. Processing – termination with holiday pay paid out

The second method used is for all other employees that have leave entitlements and are accruing annual holidays or 8 percent (fixed term). You can do this termination payment either in your current pay period or in a one off pay. Make sure you have all final payments and deductions given to you to process for this last pay.

To pay out your final payment of holiday pay owing, you will need to go into the Holiday Pay Tab and click ‘Termination Wizard’. This will be at the bottom of the Holiday Pay Screen.

You will go through a Termination Holiday Pay Wizard which calculates in three steps:

1. Outstanding leave older than one year plus 8 percent added (explained in next component)
2. Current Year – 8 percent of gross earnings liable for holiday pay
3. Summary and Report – total amount and termination holiday pay report with the breakdown of how everything is calculated.

At the last step, print out the termination pay report [Print:F9], and then [Finish:F10] you’re asked Terminate employee automatically after update? – chose the option YES.

Holiday pay – how are the calculations made and why eight percent is added to outstanding leave paid?

Holiday Pay is a calculation made from the higher of the employee’s current ordinary daily/hourly rate or their last 12 month average daily/hourly rate. These rates are calculated based on what is set up and processed for the employee.

The reason the employee receives 8 percent on top of their outstanding holiday pay when terminating is that value is regarded as part of the employee’s current year’s gross earnings, and is therefore included in the 8 percent calculation of total current year gross. This is in accordance with our Holidays Act 2003 Section 25 (2) – An employer must pay the employee 8 percent of the employee’s gross earnings since the employee last became entitled to the annual holidays.

3. Why is the termination amount on the Holiday Pay report different to the figure in the termination wizard?

The most common reason for a variance to occur is other payments that are made upon termination, such as:

• Public Holidays owing
• Commission/Bonus payments made
• Other leave types paid on termination – Alternative leave, Long Service Leave, etc

These payments would generally be added as part of earnings liable for holiday pay 8 percent to be paid.

If you are not sure about how to process any of the above, we would recommend attending one of our EXO New User training courses. We run these both as a whole day workshop in Auckland, or as separate webinars on payroll setup and payroll processing – click here to learn more.