Process a redundancy payment
Add a redundancy payment to the employee's final pay.
Before you start
- Add the employee’s end date to their employment tab. Xero includes the end date in the Full Payment Submission that's sent to HMRC.
- Decide on the best way to process an employee’s final payment based on their leave balance.
- Set up an 'Other Earnings' pay item for the redundancy payment. By selecting 'Other Earnings', you can remove tax and other deductions if they don't apply. To do this, deselect the checkboxes next to the deductions when setting up the pay item.
- Check with HMRC for more information about redundancy pay and tax (GOV.UK website).
Add the redundancy payment to the employee's final pay
- In the Payroll menu, select Pay Runs.
- Click the pay run that includes the employee’s final pay.
- Click the employee’s name to open their payslip.
- Under Earnings, click Add.
- Select the redundancy pay item, and enter the amount owed.
- Once you're happy with the payslip, you can post the pay run and download a P45 form for your employee.