Process final pay for a redundancy

When employment ends due to a genuine redundancy, set the employee's termination date and make any tax-free payments in addition to unused leave in their final pay. Terminations due to an early retirement scheme can also be done using this process.

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.

Before you start

Process a redundancy 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 Genuine Redundancy / invalidity / early retirement scheme.
  7. Click Save.
  8. Enter the tax-free payment under Fixed Amount on the Redundancy line in the payslip.

    For amounts greater than the tax-free threshold, create a pay item for an employment termination payment.

  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 automatically applies to the employee and they'll move to the History tab in your list of employees.