When processing a genuine redundancy in Definitiv, it is important that the correct pay items are used to ensure the employee is correctly paid, the correct tax is applied, and the categories on their annual statements are displayed correctly.
Steps to process a redundancy
1. | Ensure you have the employee's full Redundancy Entitlement amounts ready to process, this can include but is not limited to:
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2. | You have the option to enter the Term Date in the employee record prior to processing the termination in a payroll; however, this is not a requirement, as you can also enter the term date in the pay run. Entering the term date in the employee record prior may prompt you to update their email address to a personal email address so the terminated employee can still access their payslips, annual statements, etc. |
3. | Change the employee's User Role to Terminated Employee. |
4. | In a pay run for the applicable employee, select View and then process termination. |
5. | Select the termination date, the termination type (Redundancy), and the termination reason (Redundancy). |
6. | Select Process. |
7. | Select the pay item In Lieu of Notice and enter the applicable amount for the employee in Lieu of Notice. |
8. | The remainder of the Redundancy Entitlements (less the In Lieu of Notice) needs to be processed under pay item “Lump Sum D”. |
9. | Enter any applicable unused leave pay items, such as Annual Leave or Long Service Leave, and the applicable hours to be paid out. This will form Lump Sum A and be taxed accordingly. Note: Ensure that if you pay leave loading to employees, this is also paid out in the termination pay; this can be added as a line item within the pay run. |
10. | Select Process. |
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12. | Check all Gross, Taxable, Tax Withheld, Super, and Net Pay and ensure these replicate your calculation for the Redundancy. |
Important Information
Any pay items that do not relate to the employee’s termination should be processed as the applicable pay item and taxed accordingly.
Dependant on how RDO or TOIL is accrued will determine if Super is applicable. This is best processed as a Line Item in the pay run as either ETP Taxable or ETP Taxable – Superable.
Also, keep in mind that when paying out accruals such as RDO or TOIL, you may like to enter a Line Item using the Accrual Pay Item to bring the balance down to 0 when paid out as an ETP. This looks clean when the employee is terminated, as all their leave accruals will show as 0.
Please review this ATO document on leaving your job when considering paying a redundancy.
Another good document on what ETP Code to use by the ATO is Schedule 11 - Tax table for employment termination payments - ETP Reporting