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Termination pay when employee owes business

DG13

We need to make a final payment of wages for an employee who has just left our business. Unfortunately he owes us for holiday pay taken in advance and this comes to more than his final pay. How do I process this in the pay system MYOB Business - NZ? Do I account for the negative amount in the final pay? If so how?

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DG13

Many thanks Earl, your explanations are crystal clear. I appreciate you taking the time to work through this issue for me.

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DG13

Many thanks for getting back to me, however your response hasn't helped resolve the issues I have.

Our employee’s last pay was Thurs 5th March 2026, so your response did not arrive in time for me to action any solution before I prepared his final pay.

The deduction method you suggest might possibly work if the employee was continuing to work for us, enabling us to make deductions over a number of pays, but this is not the case – the amount to be repaid is over $1,500. It might also possibly work if the employee was making a one off payment for the overpaid unearned annual leave, but this is not the case either. The plan is that he needs time before he can begin making instalments to pay off this debt.

If we had applied a deduction in his final pay it would have resulted in a negative balance.

My concern is that IRD will have a slightly inflated record of his earnings and the amount of PAYE paid for this income year. I was hoping that the MYOB pay system would have a way of dealing with correcting this issue when preparing the final pay so that the Payday Filing report sent to IRD reflected his reduction in earnings and PAYE for the year.

Do I need to re-do the employee’s final pay? If so I need a clearer understanding of how to process this via MYOB please. I’ve no idea what you mean by your comment ‘then manually pop the repayment amount against that deduction in the employee’s final pay’. He hasn’t actually repaid anything.

Doreen_P

Hi @DG13,

You’ve mapped out the situation clearly with the final pay. The cleanest way to process the owed amount is to set up a before tax deduction and then manually pop the repayment amount against that deduction in the employee’s final pay. That way, the system recognises the recovery properly without trying to push the pay into the negative. Once that deduction is added, the pay run will process smoothly and the repayment will be recorded exactly where it should be.

Cheers,

Doreen