When an employee is leaving your company, there are some actions the FlexiTime Administrator must take to ensure that the employee's termination payment is processed correctly and that IRD is informed.
- Create a new pay for the employee as normal. The pay can be for your regular pay cycle, regardless of when the employee is finishing - if your pay cycle is monthly but the employee's finishing just a week into the month, you can still put them in a regular monthly pay. However if you're not using Timesheets it may be necessary to adjust the employee's ordinary or salary hours to accurately reflect the time worked in the final period.
- Tick the Final Pay box on the Employee Pay Details screen. An Employment Finish Date field will show where you should enter their final date of employment.
- Click the Calculate Pay button, this will automatically add any outstanding annual leave, alternate leave and holiday pay due. Please see this article for further explanation of the tax calculation on final pays.
- When the pay is finalised, the employee's finish date will be updated on the Employee settings and included in the Employer Monthly Schedule (IR 348) for this pay period. This will notify IRD that the employee no longer works for you.
If the employee accrued Alternative Leave in the final pay period, the employee’s final pay should be processed as two separate pays.
- The first pay should include the Alternate Leave accrued for the pay period, this will update Leave entitlements.
- The second pay should then be the pay flagged as the Final Pay, this will then correctly pay out any alternate leave entitlement.
Holiday Pay and Annual Leave
A final pay will include:
- The Holiday Pay accrued since the employee's anniversary date
- The Annual Leave Due as at the employee's last anniversary date, paid at the higher of the employee's Average Pay Rate, Ordinary Rate or Normal Rate
- Less Annual Leave Taken since the employee's anniversary date paid back at the same rate that it was originally paid at
- Any Alternate Leave owed to the employee
Note: if an employee takes annual leave in their Final Pay then the leave they've taken will be rolled into a single line with any leave being paid out or deducted in the Final Pay.
Holiday Pay will include 8% of any other gross earnings or pre-tax deductions in the final pay, including any Annual Leave Due payments.
If the employee has Annual Leave Due at the end of their employment, they may be entitled to any public holidays that fall within that leave period. FlexiTime cannot calculate this automatically as there are too many possible variables in an employee's work pattern. This article from MBIE explains how to work out the employee's entitlement. If the employee is entitled to a public holiday, you can add the Public Holiday pay code to their final pay.
Please see this article for more details about how Holiday Pay and Annual Leave payments in a final pay are taxed.
Please see this article for more details on Holiday Pay and Annual Leave.
Please see this article for details on the Leave History Report.
Please see this MBIE article for more information about Termination Pays.
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