How Do I Process A Final Pay For A Departing Employee?

Lightning Payroll has a dedicated termination form that calculates leave payouts, applies the correct tax treatment to each component, and adjusts KiwiSaver contributions for the final pay.

Before starting the final pay

Before opening the final pay, review the employee's leave records so that the termination form has accurate data to work from:

1. Check Employees >> Leave >> Leave Entitlement Adjustments to confirm annual holidays and alternative holidays balances are correct.
2. Check Employees >> Leave >> Historic Pay to confirm the pay history that feeds leave valuation is complete.
3. Confirm the employment finish date is set on the employee record.

See also: What Should I Check Before Running A Final Pay?

In the desktop app

1. Open the employee's pay for the final period.
2. From the pay screen, open the Termination dialog. The dialog is titled Termination payouts and prompts you to choose an employment finish date.
3. Enter the employment finish date. The form calculates leave payout amounts from the employee's leave balances and pay history.
4. Review the calculated payout components (see below).
5. Tick Enter leave amounts manually if you need to override any calculated leave figure, then enter the amounts yourself.
6. Tick Pay payment in lieu of notice and enter the amount if applicable.
7. Save the termination and complete the pay in the normal way.

In the online (web/mobile) app

1. Open the employee's pay for the final period.
2. The pay screen shows an Employment Finish section. Select the Employment finish date. The form calculates leave payout amounts and extra pay tax rates automatically.
3. Review the calculated amounts. Tick Enter leave amounts manually to override any figure, then edit the Annual holidays or Alternative holidays amounts directly.
4. Tick Pay payment in lieu of notice and enter the Payment in lieu amount if applicable.
5. Enter a Redundancy amount or an Additional termination amount if applicable.
6. Review YTD taxable to finish date to confirm the year-to-date taxable figure is correct before saving.
7. Click Save Termination, then complete and process the pay.

What the termination form calculates

• Annual holidays: unused entitled weeks, valued at the higher of Average Weekly Earnings (AWE) or Ordinary Weekly Pay (OWP).
• 8% holiday pay component: holiday pay accrued since the last anniversary, for employees not on pay-as-you-go holiday pay.
• Alternative holidays: unused alternative holidays, paid at Relevant Daily Pay or Average Daily Pay.
• Payment in lieu of notice: entered manually when applicable.
• Redundancy or additional termination amount: entered manually; taxed as an extra pay.

For the tax treatment of each component, see How Are Final Leave And Cash-Up Payments Taxed?. For KiwiSaver on redundancy amounts, see Why Doesn't Redundancy Trigger KiwiSaver Contributions In A Final Pay?. For employees on pay-as-you-go holiday pay, see How Does Pay-As-You-Go Holiday Pay Work In A Final Pay?.