Summary

When you terminate an employee, the type X. Termination allowance generates payments for an employee's outstanding entitlements, which may include annual leave, long service leave and leave credits. PayGlobal calculates the annual leave payment to be what their entitlement will be when this pay is closed.

Example

Before Wayne Gresson is terminated, his Annual Leave tab page shows that he has:

• 24 units of outstanding leave
• 64.6156 units that he has accrued for the current year from a Gross qualifying ($) value of $25032.00.

 When you open a manual pay, insert a Termination transaction for Wayne, and process the pay, PayGlobal generates two leave transaction allowances.

Note: Use the Leave Details column to view information about the leave payments.

The Quantity of 24 (with a total value of $536.40) is the 24 units of outstanding leave that Wayne has, multiplied by the rate rule on his annual leave table. In this example, on the Annual Leave Tables - Rules tab, Outstanding unit payout rate/rule is the greater of the 52 Week Average versus the Ordinary Hourly Rate.

 The remaining annual leave value of $1534.10 is calculated by multiplying the annual leave Gross qualifying ($) by the Entitlement (percentage of gross) value on the Annual Leave | Values tab.

Include in Annual Leave

On the Allowances - Details (iii) tab page of the annual leave allowance, if Include in Annual Leave = Yes, then the value of the outstanding leave payment is added to the employee's Gross qualifying value.

Note: If you do not want to pay the additional leave payment, then create a new allowance by modelling your original leave allowance and ensure Include in Annual Leave = No. The termination payment will use the first L. Annual Leave type allowance code, so make sure that the new allowance code is before the original allowance code. For example, use code 99A for the leave on termination payment and code 100 for standard annual leave payments.

Outcome

The leave on termination transaction uses the following equation:

(Employee's Gross Qualifying + Gross Qualifying from Termination Pay) x Entitlement (percentage of gross).

This equation in the above example is:

(25032.00 + 536.40) x 6% = 1534.10

Taxation

As of March 2016, changes were made to how leave on termination is taxed. As per IRD requirements annual leave, long service leave and leave credits that are paid out on termination will now be taxed as extra pay.