Showing results for 
Search instead for 
Did you mean: 
Get your Payroll questions answered by a QuickBooks Product Manager here -

Terminating an employee in QuickBooks Online Advanced Payroll

Learn how to terminate and re-activate employees, as well as cancel a termination and make termination payments in QuickBooks Online Advanced Payroll.

To terminate an employee

There are two ways to terminate an employee in QuickBooks. The first and most simple is through the Employee details.

  1. In the Payroll homepage select Employees.
  2. Select the employee name you wish to terminate from payroll.
  3. Click Terminate Employee.
  4. Enter their Termination Date. This marks the employee as inactive, and they will no longer be eligible for pay runs. Please note that terminating an employee will not process a termination payment.
  5. Click Terminate.

The second way is via the pay run.

  1. Select the employee within the pay run.
  2. Under Actions, select Terminate Employee.
  3. Enter the Termination Date and then Save.

The employee record will then turn red, and will display earnings and accrued leave. When you Save, any relevant termination payments will be calculated for the employee. The breakdown of payments (and associated hours) will be detailed and include:

  • Annual Leave payout - the 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.
  • Once you have finalised the pay run, this employee will no longer be active or eligible to be included in pay runs and the employee line will be highlighted red.

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

  1. Go to Payroll.
  2. In the dropdown menu next to the search bar, select All Employees.
  3. Select the employee that you wish to re-activate.
  4. Click Re-Activate Employee.
  5. Select Activate to confirm.

If you need to make a termination payment:

  1. Go to Payroll, and click the Pay Runs tab.
  2. Select the pay run you wish to terminate, click on the employee’s name to expand the details window.
  3. Click Actions, and select Terminate employee.
  4. Select the Termination date. 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.
  5. To make the termination payment, click Actions and select Add earnings. The OTHER EARNINGS field will appear.
  6. Expand the dropdown menu and select Termination Payment from the options. Once selected, an information box will appear.
    1. 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.
    2. 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.
  7. Add 1 in the Units field, and add the termination payment amount in the Rate field.
  8. Press Save.

To split termination payments

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

  1. In Pay Run Actions, select Add Employee. Note: QuickBooks will apply payment after leaving regulations, and will amend the employee's tax code to 0T wk1/mth1.
  2. Make any termination payment as processed previously.
  3. Finalise the pay run. Note: An additional P45 will not be created.

If you want to cancel the termination, you simply have to unlock the finalised pay run, click on the employee and select Actions then Cancel Termination

Was this helpful?

You must sign in to vote, reply, or post

Need to get in touch?

Contact us