Termination FAQ

How do I process a Termination Pay?

Please see Termination Pay Runs.

This also includes how to process ETP or Redundancy payments.

Should I perform a Termination Pay for an employee with no payments owing?

Yes.

We recommend that you perform a Termination Pay Run even if the employee has already been paid for all work hours and there are no leave payouts or termination payments to be made.

Although the figures on the pay run will all be zero, it will automatically set the employee's status to 'Terminated', zero any leave balances in Marlin HR and send a pay run journal to Marlin GTX that will clear the accrued leave balances there too.

If you are using Single Touch Payroll and the employee has been included on a pay run in the current tax year, you will need to run a Termination Pay for him so that an STP file is sent to the ATO which tells them that the employment has been terminated and that no further payments should be expected.

Manually setting the employee's status to 'Terminated' in Employee Maintenance will not remove any leave balances in Marlin HR or Marlin GTX.

Even if you did a Leave Balance Adjustment to zero the balances in Marlin HR, no pay journal will be sent to Marlin GTX to remove the balances there.

As a result, the balances in your Provision for Leave liability accounts in Marlin GTX will be incorrect and different to those in Marlin HR.

Why won't the system accept the employee's Termination Date?

The Termination Date on the Termination Pay Run should normally be the last work day for which the employee is to be paid.

If you enter this date but a popup window warns that the employee has a Last Paid To date that is after the Termination Date, it means that you have incorrectly included the employee on a Normal pay run with a Pay To date that is after the Termination Date.

By doing this, you have told the system that the employee worked and has been paid up to that Pay To date and the system therefore won't allow you to terminate the employee on an earlier date.

When an employee's last work day falls before the end of a pay period he should not be included on the Normal pay run for that period, since the tax will be incorrectly calculated based upon the income being earned over the entire pay period and the employee's Paid To date will be set to a date beyond their last day of work (and thus prevent you from entering the correct Termination Date).

Instead, those hours should be included on the Termination Pay Run.

What is considered an ETP and how is it calculated and taxed?

Payment in Lieu of Notice, for example, may be deemed an ETP.

Please refer to your employer organisation or accountant for information specific to the termination you are about to perform. The ATO provides an online ETP Calculator to assist you.

How do I determine the required notice and redundancy pay details?

You will need to contact your tax accountant or Fair Work (13 13 94 or www.fairwork.gov.au) to determine the required amount of notice of termination to be given to the employee and details of the calculation of any applicable redundancy pay.

What are the different types of Lump Sum Payments?

You should always check current information with your Employer Organisation, Accountant or the ATO.

According to the ATO website (at July 2013):

Is Super payable on accrued Leave payouts on Termination?

Accrued annual leave paid out at termination is not considered OTE (Ordinary Time Earnings) and thus does not attract the superannuation guarantee rate.

This also applies to other leave payouts such as Long Service Leave and Personal Leave (note that Personal Leave should be processed as an ETP payment if paid out at termination).

Is Annual Leave Loading payable upon Termination?

Yes.

This is despite the contrary views of employer organisations and the fact that even some modern awards explicitly or implicitly provide that the loading is not payable upon termination.

The confusion surrounding this issue has revolved around the interpretation of section 90(2) of the Fair Work Act introduced in 2009.

The Fair Work Ombudsman supported the interpretation that employees who were entitled to leave loading during their employment were also entitled to it on annual leave payouts on termination, then in March 2015 the Federal Court held that the 17.5% annual leave loading is payable on annual leave termination payments and this will be the case even if an award or enterprise agreement expressly states otherwise (this is because they must comply with the National Employment Standards and section 90(2) of the Act is part of the National Employment Standards).

Employees that were entitled to the 17.5% leave loading during their employment and weren't paid the leave loading on their annual leave payout at termination, have been underpaid. Employees are able to seek to recover past underpayments for a period of six years.

If you have any queries or concerns we recommend that you seek appropriate legal advice.