Annual leave payments by instalments after employee's termination

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Experienced Cover User Shareen
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Annual leave payments by instalments after employee's termination

Hello,

 

After an employee's termination, how should I go about paying the annual leave entitlement by instalments after the termination date?

 

Management have agreed for the leave entitlements not to be paid as a lump sum, however, when I attempt to enter the termination date in Payroll Details, MYOB advises the employee's entitlement balances and standard pay setup will be deleted.

 

I do not want superannuation and annual leave accruing after the termination date.

 

Any help would be much appreciated.

 

Thank you

Shareen

 

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Trusted User TezzaB
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Re: Annual leave payments by instalments after employee's termination

hi @Shareen

 

Without commenting on the legalities of the arrangement, which I presume have been covered off..

 

If you want to continue to payments through the payroll system, then I suggest you dont enter a termination date until such time as you have finalised the payments.   You'd process the payroll for this employee separately whenever you make a payment to them, using an 'Unused Holiday Pay' payroll category-entering hours and dollars for the amount being paid.  You would zero out all other hours &  $ values for other lines.  You'd need to have calculated the correct amount of PAYG to deduct for the payment, and enter that also.

 

To avoid super guarantee being calculated on the unused leave payment, you need to make sure that it is marked as exempt in the setup of the super guarantee payroll category.   You will probably also want to ensure that in the seup of the Holiday Pay payroll category that  Unused Holiday Pay is selected as one of the Linked Wages Categories - such that the employees entitlement balance is progressively reduced as you pay out the unused leave hours.

 

Another option instead of the above could be to process the employees final payroll as you normally would, including for unused leave, but instead of paying the unused leave out of your bank account, you process the credit side of the entry to a creditor account (eg Payroll Clearing creditor) - which reflects that you have an amount of money owing to somebody.   Your future instalment payments would then not be processed through payroll, but rather as a Spend Money transaction, with the "expense" code being the Payroll Clearing creditor account - ie.. you would be processing a debit to this creditor account.  Once all payments are made, this creditor account should be nil.    Processing the unused leave through payroll right at the start this way does mean that you will have also created the full obligation for PAYG in your accounts.

 

Something else to consider is that if the instalment payments were to cross over into a new financial year, you'd have to establish what is the correct amount to show on the employee's payment summary.

 

Hope that helps

Terry

 

 

 

Experienced Cover User Shareen
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Re: Annual leave payments by instalments after employee's termination

Thank you, Terry, for your very informative reply. Your help is much appreciated. Regards, Shareen.

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