Terminating an employee in QuickBooks Online Advanced Payroll

Learn how to terminate an employee in QuickBooks Online Advanced Payroll. We'll also show you how to re-activate the employee or cancel a termination, as well as how to make termination payments.

How to terminate and delete an employee

You can terminate an employee from the Employee's details page:

1. In the Payroll homepage select the Employees tab.
2. Select the employee you wish to terminate from payroll.
3. On the employee's details page, scroll down until you see the Terminate Employee button.
4. Enter the Termination Date.
   • This will mark the employee as inactive and they will no longer be eligible for pay runs and they will not be paid any termination pay. Keep reading for help on making termination payments.
5. Select Terminate.
6. If you wish to delete the employee, select Delete Employee and then Delete to confirm.
   • Important: Deleting an employee cannot be undone and that by doing so, you will not be able to retrieve their data.

To terminate an employee via a pay run

Note: You won't be able to terminate the employee if they're included in pay runs that have not yet been finalised.

1. In Payroll, select the Pay Runs tab and choose the pay run period.
2. Select arrow next to the employee's name to expand their Earnings details.
3. Select Actions and then Terminate employee.
4. Enter the Termination Date and then Save to confirm. The employee's record will then turn red and will show their earnings and accrued leave. Once you have finalised the pay run, this employee will no longer be active or eligible to be included in pay runs

When you Save, any relevant termination payments will be calculated for the employee. The breakdown of payments (and associated hours) details will include:

• Annual Leave payout, this box must be selected for this to occur.
• Option for Sick Leave to be paid out, the box must be selected for this to occur.

How to re-activate a terminated employee

1. In the Payroll homepage select the Employees tab.
2. Use the filter option and select All Employees to show all your employees, including inactive employees.
3. Select the employee you wish re-activate.
4. Select the Re-Activate Employee button at the bottom of the employee's details page. This will activate them employee and make them eligible for pay runs again.
5. Select Activate to confirm.

Make a termination payment

1. Go to Payroll and select Pay runs.
2. Open the applicable pay run period.
3. Select arrow next to the employee's name to expand their earnings details.
4. Select Actions and then Terminate employee.
5. Enter the Termination date and select Save.
   • Note: Any annual leave owed to the employee will be calculated and the ‘Pay Out’ option is automatically ticked. Any holiday entitlement will be paid within this pay run, if the employee has used all their entitlement they will not be entitled to any annual leave payout.
6. To make the termination payment, select Actions and then Add earnings. A new field will show under Earnings.
7. Select Termination Payment from the dropdown menu. The following info box will show Tax and Class 1A legislation will be applied to this payment. This is to remind you that:
   • Tax and National Insurance (NI) Class 1A will be applied to any termination payment over £30,000. Tax and NI will not be payable on termination payments under £30,000
   • The employee will pay tax on any termination payment amount over £30,000. For example, if an employee is paid a £45,000 termination payment, the employee will pay tax on £15,000 and no NI contribution; the employer will pay Class 1A NI on £15,000.
8. Add 1 in the Units field.
9. Enter the termination amount in the Rate field.
10. Select Save.

If you wish to cancel the termination, all you'll need to do is unlock the finalised pay run, select the employee name > Actions > Cancel Termination.

To split termination payments

If you need to split a termination payment over different pay runs, first terminate the employee and make the first payment before creating a new pay run you'd like the payment to be made in. Then follow these steps:

1. In the new pay run period, select Pay Run Actions, then Add Employees. QuickBooks will apply payment after leaving regulations, and will change the employee's tax code to 0T wk1/mth1.
2. Make the termination payments following the steps mentioned in 'Make a termination payment'.
3. Finalise the pay run. Note: This will not create a new P45.