Employee Leaving Work / Terminating an Employment
Article ID: 2024653 Last updated: 12 August 2015
When an employee finishes their employment, you need to ensure that AccountEdge recognises the employee as having left and that the details are reported correctly to HMRC. With the introduction of Real Time Information for payroll, an employee's leaving information, including their year to date values and leaving date are included in the employee's last Full Payment Submission (FPS).
Follow the steps below as a guide to terminating and employee's employment and reporting their leaving informaiton to HMRC.
Note! If you encounter a situation where you have already sent an employee's last FPS and then subsequently need to send an additional FPS to inform HMRC about an employee's leaving information, please see Sending Leaving Date to HMRC if forgotten or not previously sent.
1. Determine any Outstanding Entitlements
If you use AccountEdge to accrue entitlements e.g. holidays, then print your Entitlement Balance (Detail) Report to show the amount of hours/holiday owing to that employee. Please also note that in addition to the figures showing on the report which cover up to the last period processed, you will have to include any current entitlements that would have been included as part of the last period being paid for (this can be done manually or as indicated in step 4 below by editing the paycheque and using the figures being accrued in addition to the report).
Note that it is important that the Dated From and To period for the report be set from 01/01/01 to the date of leaving, thus ensuring that it shows the Entitlement balance for not only the current year, but also any amount carried over from previous payroll years (if applicable). This is particularly important for Holiday, as for most awards it is carried from previous periods. Check with your accountant for exact details of what needs to be paid out to the employee on termination.
2. Create Payroll Wage Categories if required
As Termination Payments might be taxed at different rates or may be exempt from tax (i.e. redundancy pay), you should create new categories for these types of payments, if required.
3. Enter a Leaving Date on the Employee's Card
You must include the leaver's leaving date as part of the final Full Payment Submission (FPS) in which the leaving employee will be included. There is no longer a separate process for informing HMRC of leavers.
• Go to Card File> Card List> Employee and open the leaving employee's card.
• Click the Payroll Details tab and enter the Leaving Date.
• Click OK to save the change.
4. Process Payroll
• Process the payroll for the period; ensure that you open the leaver's payroll window to check / edit their payment details.
• If necessary, take a note of the hours being accrued in the Entitlement section of the Paycheque.
• If necessary, take the figure from the Entitlement Balance report and add the unused hours/value accrued to this final paycheque.
• If the leaver didn't work for the full duration of the last pay period, reduce their usual hours/salary to reflect any pro-rated amounts. Make any other adjustments as necessary.
Note! AccountEdge Payroll will tax the Gross Wages on a pay cheque as if they were all earned in that pay period.
5. Send Full Payment Submission (FPS)
When preparing to send the FPS for the period, click to Review the FPS Information and ensure the employee's leaving date is included in the FPS information.
6. Print a P45 for the Employee
You must give all employees a P45 when they stop working for you.
A P45 should be printed and given to a leaving employee after you have sent the employee's last paycheque information and leaving date to HMRC via the employee's last FPS (point 5, above).
Print a P45 from AccountEdge by clicking here.
7. Mark the Employee Card as Inactive
Finally, go back to the leaving employee's card details and tick the card as Inactive to prevent this employee appearing when you next process payroll.
Disclaimer: This information is of a generic nature. For specific advice regarding your particular circumstances please seek assistance from your Accountant or HMRC as appropriate.