Process final pay for a normal termination

When an employee leaves your organisation, you need to set their termination date and pay them their final pay including any unused leave. Only gross wages can be included in the final pay.

Before you start

You can process an employment termination payment (ETP) – Type R or O through Xero Payroll. For other ETP types, you'll need to pay and complete a payment summary manually.

Process a normal termination in the final pay

  1. In the Payroll menu, select Pay Runs.
  2. Select the relevant draft pay run.
  3. Click the employee's name.
  4. Click Set as Final Pay at the bottom of the payslip.
  5. Select the last day of their employment as the termination date.

    The termination date must be before the end of the current pay period.

  6. Select Normal Termination.
  7. Either:
    • Manually enter the average earnings amount if the employee works irregular hours.
    • Select the last full pay period with the employee's normal gross earnings.
  8. Click Save.
  9. Review the employee's payslip, including:
    • Outstanding wages for hours worked.
    • Accumulated leave for the final pay adjustment.
    • Tax on unused leave included in the final pay.
    • Tax on an ETP (if applicable).
  10. Post the pay run.

When the pay run is posted, the termination date is applied to the employee's record in Xero. They’ll move to the History tab of your employees' list.