Forum Discussion

Ann31's avatar
4 months ago

Final pay - including payment of 2 weeks in lieu of notice period

Hi, I need to do a final pay for 2 employees who have ceased employment with us, we are paying out their 2 weeks notice instead of them working this time out.

If I add '80 hours' into their final pay, along with their actual hours worked for this last week + annual holidays won't the tax rate be incorrect (i.e it will be 1 large payment, taxed at a higher than normal tax rate).

How do I amend their tax rate so it taxes them correctly.

Or can I do 2 or 3 pay runs with todays 'payment' date, but for future periods? (i.e the next 2 weeks?)

  • Hi Ann31 - thanks for your question.

     

    Payments in lieu of notice are classified by the ATO as an employment termination payment (ETP). These are taxed differently to other final payments and should be paid in a separate pay to any other final payments, like unused leave.

     

    Take a look at this help topic that steps you through how to process an ETP.

     

    Once you've paid the ETP, you can then process their other final payments.

     

    I hope this helps!

     

    Adrian