payroll item setup
Hi, can someone please help me. i have a termination today, November 5th, termination pay is unused annual leave only, the rest is OTE. Employee is on salary, 80hr fortnight. Employee has 135.03hrs unused annual leave to be paid out. How do i set up the payroll item for this? its the 1st three windows i'm having trouble with, everything i do is not letting the pay calculate properly.
Window 1, payroll type - Window 2, wages - Window 3, wages
I can't work out how to set this up, it calculates incorrectly, changes the OTE etc..
can someone please help, i'm a bit desperate
thank you
regards
sue
Comments
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Hi Sue
Unused Annual Leave (AL) paid out upon normal voluntary/involuntary termination is included in Gross Wages. You should have a Reckon default Hourly Pay Item for Holiday (eg Annual) Leave which you can utilise for this.
You may prefer to pay the ordinary Salary component on 1 Paycheque & create a 2nd Paycheque for the leave payout.
The ATO has specific tax tables for the calculation of PAYG Tax on lump sums (including leave payouts) however they are complex, long-winded & are usually lower than the RA auto calculations anyway, so for simplicity, I go with what Reckon calculates as any additional PAYG withheld above the employee's overall tax liability at EOFY will come back to them as a refund 😁
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Hi Sue,
With STP phase 2 coming in I have read we are to report as Lump sum A
Lump sum A
Lump sum A is for certain unused leave that is paid out on termination.
When reporting lump sum A, you need to report the lump sum type code of R or T.
- Lump sum type code R – for all unused annual leave or annual leave loading, and the component of long service leave that accrued from 16 August 1978 that is paid out on termination only for genuine redundancy, invalidity or early retirement scheme reasons.
- Lump sum type code T – for unused annual leave or annual leave loading that accrued before 17 August 1993, and long service leave that accrued between 16 August 1978 and 17 August 1993 that is paid out on termination for reasons other than genuine redundancy, invalidity or an early retirement scheme.
Should we have been doing this before? I can see it is a simple thing to add this as a new payroll item. When should we create this item for use?
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@Jilly Singleton Lump Sum A is only applicable for very long term employees (eg those who have been working for the employer for at least 29 years!) who leave.
The majority of “leave payouts at termination” won’t be for the above & - at the moment (under the current process) - the leave pay out for standard terminations/resignations is just included in Gross ☺️
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Thanks Sue for the clarification.... :)
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