How you handle this depends on the nature of the payment and the wording of the employee's contract:

  • If the payment is in lieu of notice, and the contract expressly provides for it, then you need to add the ordinary time entries to cover the notice period, override the number of pay periods if necessary (so that tax is calculated fairly - though there's no guarantee that the employee won't need to pay more tax at year end), then process Final Pay.
  • If the payment is a true redundancy and the contract expressly provides for it, then you add an Allowance code (e.g. RETIRE with Category "Redundancy", Units x Rate) and add that to the employee's pay before using Final Pay. There is no need to override the number of pay periods, as the tax is calculated using Extra Pay rules.
  • If the contract provides neither case then the payment is considered to be ex-gratia. Add an allowance code for EXGRATIA (or whatever makes sense to you) with Category "Bonus (ex-gratia)", Units x Rate and optionally check the box that says "Exclude from leave valuation" (to avoid 8% on the ex-gratia payment when Final Pay is calculated).

Final Pay is processed once all other entries have been added to the employee's Pay Input - use Leave Taken..Termination


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