QuickBooks HelpQuickBooksHelpIntuit

Terminate an Employee from within QuickBooks Online

SOLVED•by QuickBooks•184•Updated 3 weeks ago
Psst! Before you get started, have you heard about apps?
What would you say if we told you that you could reduce the time you spend on payroll bookkeeping? Well, that's exactly what we're offering you with a whole suite of payroll and HR management apps that seamlessly integrate with QuickBooks Online! Explore the possibilities in the App Centre.

This page will take you through everything you need to know when terminating an employee within QuickBooks Online. Just select the heading to find the information you need.

Before you start

It’s important to note that you won’t be able to terminate an employee until all their associated pay runs have been finalised.

  1. Select Employees from the left-hand menu 
  2. Select the employee you wish to terminate
  3. Scroll to the bottom and select Terminate Employee 
  4. Enter the Terminate Date and then select Terminate 

Note: Terminating an employee will mark them as inactive and you will no longer be able to process pay runs for them.

  1. Select Employees from the left-hand menu 
  2. Select New Pay Run 
  3. Enter in the relevant fields, then select Create 
  4. Select the employee you wish to terminate 
  5. Select the Actions button then select Terminate Employee 
  6. Enter the employee's Termination Date and then select Save

Note: The employee's record will turn pink and will display calculated earnings and any accrued leave to be paid out as part of the termination pay.

  • Any leave category set up to be paid out on termination will automatically be calculated as part of the termination pay. If you do not wish for this to occur, deselect the Pay out option.  
  • Select the Apply x% loading checkbox to apply any leave loading associated with a leave category (eg annual leave loading).   
  • If you want to pay out a balance for an associated leave category that does not have the Pay out option automatically selected, you will need to manually select this option. 
  • Any leave categories setup to not accrue automatically will not appear in this section.
  • If the employee is set up to be paid default standard hours each pay and is terminated mid-pay period, the employee's hours will automatically be re-calculated on a pro-rata basis. We strongly suggest you double-check these hours to ensure they are correct.
  • Once you have finalised the pay run, this employee will no longer be active or eligible to be included in future pay runs and the employee line will be highlighted red. 

Note: If there are any unfinalised pay run for the employee, you will not be able to terminate until those pay runs have been finalised. 

As of 1 July 2019, amounts withheld for study and training loans (this includes HELP/SSL/TSL and Student Financial Supplement Scheme) will be amalgamated into just one amount to be withheld. This amount will be calculated using the new Study and Training Support Loans tax tables (updated every year). 

See here for further information from the ATO for unused leave payments upon termination of employment. 

Learn how is PAYG Calculated on Leave Payouts.

Single Touch Payroll Phase 2 has brought new payment classifications that need to be assigned to certain pay categories used to terminate employees.

If any of the below apply to you, create a new pay category and assign it with the specified payment classification in bold before processing that pay in the pay run:

  • ETP (Death benefit) - Code B: This is a multiple payment for a death benefit ETP code N for the same deceased person, where the later payment is paid in a subsequent financial year from the original code N payment. 
  • ETP (Death benefit) - Code D: This is a death benefit payment directly to a dependant of the deceased employee. A dependant may include a spouse of the deceased, a minor child, a person who had an interdependency relationship with the deceased or a person who was a dependant of the deceased just before the latter died.
  • ETP (Death benefit) - Code N: This is a death benefit payment directly to a non-dependant of the deceased employee. A non-dependant is a person who is not a dependant of the deceased and not a trustee of the deceased estate.
  • ETP (Death benefit) - Code T: This a death benefit payment directly to a trustee of the deceased estate. This person may be an executor or administrator who has been granted probate or letters of administration by a court.
  • ETP (Life benefit) - Code O: This is a life benefit payment as a consequence of employment, paid for reasons other than those provided in "ETP (Life benefit) - Code R". Examples include an ex-gratia payment, gratuity or golden handshake, non-genuine redundancy payments, payments in lieu of notice and some types of unused leave, under specific circumstances. This is the non-excluded part of the ETP.
  • ETP (Life benefit) - Code R: This is a life benefit payment as a consequence of employment, paid only for reasons of genuine redundancy (ie, where the employer decides the job no longer exists), invalidity (the employee sustained a permanent disability), early retirement scheme (an ATO-approved plan that offers employees incentives to retire early or resign when the employer is rationalising or reorganising their business operations) or compensation for personal injury, unfair dismissal, harassment or discrimination. This is the excluded part of the ETP.
  • ETP (Multiple payments) - Code P: This is a multiple payment for life benefit ETP code O for the same termination of employment, where the later payment is paid in a subsequent financial year from the original code O payment. This is the non-excluded part of the ETP.
  • ETP (Multiple payments) - Code S: This is a multiple payment for life benefit ETP code R for the same termination of employment, where the later payment is paid in a subsequent financial year from the original code R payment. This is the excluded part of the ETP.
  • Lump Sum A (Type R): All unused annual leave or annual leave loading, and that component of long service leave that accrued from 16/08/1978, that is paid out on termination only for genuine redundancy, invalidity or early retirement scheme reasons. 
  • Lump Sum A (Type T): Unused annual leave or annual leave loading that accrued before 17/08/1993, and long service leave accrued between 16/08/1978 and 17/08/1993, that is paid out on termination for normal termination (that is, other than for a genuine redundancy, invalidity or early retirement scheme reason). 
  • Lump Sum B: Long service leave that accrued prior to 16/08/1978 that is paid out on termination, regardless of the reason for such termination. 
  • Lump Sum D: This represents the tax-free amount of a genuine redundancy payment or early retirement scheme payment, up to the limit, based on the employee's years of service. 

Leave - unused leave on termination: Any leave balances paid out on termination that are otherwise not deemed an ETP or lump sum payment. This is a new payment classification introduced for Phase 2 reporting.

Read more on the Single Touch Payroll Phase 2 changes here.

  1. Select Employees from the left-hand menu 
  2. Select the employee you wish to cancel a termination for
  3. Scroll to the bottom and select Re-Activate Employee 
  4. Select Activate
Have any other questions for our team?

If any of your questions were left unanswered, we'd love to hear them!
Pop over to our QuickBooks Community's discussion on payroll processes where you can ask your questions, have them answered by qualified QuickBooks Online experts, and hopefully help others with the same questions out in the process.

Was this helpful?

You must sign in to vote, reply, or post
QuickBooks Online Payroll Standard

Sign in for the best experience

Ask questions, get answers, and join our large community of QuickBooks users.

More like this