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How to run This article provides steps on how to process the last pay for a leaving employee and to include accrued annual leave in that pay runan employee.

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Pre-requisites

The following pre-requisites are broken into two sections ‚Äď LawMaster setup and manual calculations.

Parameter Setup

You will need to accrue leave to the last day of their employment (this will be easier to do manually), for example it you need to accrue leave to 24 August 2018:

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3. Once you have Updated the emplyees leave, go back to Parameters > Set Parameters > Payroll > Processing Options.  Tick the the Raise Leave Accruals field.   File > Reset Login Settings.

4. Go to the leaving employees Employee Record > Leave button.  This will then show you the total hours of Leave accrued as a negative amount, which is what you owe the employee.  Take note of the hours. 

Payroll Processing.

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ensure that you have created the following parameters to allow you to process the unused leave proportion for the final pay. 

Payroll Leave Types

Create a new leave type for Unused Annual leave as e.g. LU:

 Parameters > Set Parameters > Payroll > Payroll Leave Types (LT).

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Create the subsequent Payroll Payment and Deduction Codes parameter for Unused Annual Leave e.g. HLU:

 Parameters > Set Parameters > Payroll > Payroll Payment and Deduction Codes (PC).

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Manual Calculations

Additional Annual Leave to Last Day of Employment:

You will need to ensure that you have calculated annual leave to the last day of employment. 

 To work out how many annual leave hours are accrued per week:

Item

Description

Result

A

Hours per day e.g. 7.5, 7.6 or 8

7.6

B

Hours per week e.g. 37.5, 38 or 40 (A * 5 days)

38

C

Leave hours per year (20 days * A)

152

D

Hours accrued per hour (C / 52 / B)

0.0769


i.e. 38-hour week you accrue 2.92 hours (D * B)


Total additional hours to accrue for unused annual leave to finish date where you need to accrue for an additional 45.6 hours for the fortnight (6 days * 7.6 hours per day).

Total hours to accrue will be 45.6 hours x 0.0769 = 3.51 hours.

Once you have calculated the additional leave, you will need to add this to any other unused annual leave for that employee on their timesheet when processing the pays.

You can then audit your pays and print pay slips as per normal.   

Tax on Unused Annual Leave

On the new Unused Annual Leave code, the Normal field is unticked, this means that tax will be calculated at a higher rate in LawMaster.  You will need to speak with your Accountant to calculate the tax correctly on the final pay.

https://www.ato.gov.au/Rates/Schedule-7---Tax-table-for-unused-leave-payments-on-termination-of-employment/

Payroll Processing

If the final pay is part of normal payroll processing, generate the pays as you normally would and make any changes as necessary to

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other employees

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Superannuation Adjustment

For any unused leave that is paid out on termination/resignation it is not considered ordinary times earnings, therefore superannuation is not calculated on this figure.  However in LawMaster the HLA is considered Normal Pay and therefore calculates superannuation.   A Superannuation journal needs to be added to reverse the calculated superannuation on the unused leave component. 

From the gross amount of the unused leave, calculate 9.5% of that amount.  This will give you the SG contribution on that amount.  Let's say the unused leave component gross is $5,000; x 9.5% = $475.

On the leaving employees Employee Record, go to the Super tab.   Right click and Add.  Leave the date as at 24/8/18.  Reference No. can be anything you want e.g. adjust.  Narrative could be e.g. Adjusted Super not OTE on Unused Leave; Amount = negative -$475.00 (SG Contribution); Ordinary Pay = negative -$5,000.00 (Gross Amount of Unused Leave); Select OK.  

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You can then audit your pays and print pay slips as per normal.   Once you have finalised the leaving employees pay, remember to terminate them in payroll and LawMaster Security. otherwise you can manually add a timesheet entry for the leaving employee.

Payroll and Personnel > Payroll Processing > Input and Review Timesheets.  Select Bank > right click > Add Timesheet Entry.

Add any ordinary hours that you are paying, Add Another Pay Item for Unused Annual Leave.  This will include what leave was already unused and the additional accrued leave calculated above.

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Note: You will need to select Modify Header to override the tax amount that was calculated manually.

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Process the balance of pays as per normal.

Once you audit the pays, and prior to printing pay advices, you will need to go back to the Employee’s payroll record > Leave tab and enter a leave transaction (journal) for Annual Leave (LA) and Personal Leave (LS) to zero out the hours.  You will see that the annual leave has accrued to what you have paid out at unused annual leave.

Once all STP reporting has been done, you can then terminate the Employee in payroll and LawMaster Security.

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