Re-hiring employees

Effects of termination

If a terminated employee is re-hired, the re-hiring must be processed with care to ensure that the employee’s entitlements are treated correctly and that Single Touch Payroll reporting (STP) is compliant.

There are two methods of re-hiring an employee:

Use the employee’s existing employee record from before they were terminated.
Create a new employee record for the re-hired employee.

MYOB recommends that you re-use the employee’s existing employee record when re-hiring them, rather than creating a new record, but both cases are discussed below.

Re-hiring an employee

To understand how re-hiring should be processed, it is important to note what effects termination has on an employee’s records. When an employee’s termination is processed in a pay run using the Termination window from the Employee’s Current Pay form (MP.PP.31.30), the following operations occur automatically:

Unused leave that is eligible for pay-out is calculated and paid out using pay items that are inserted into the employee’s pay automatically. The inserted unused leave pay items are transacted in the entitlement history with a “termination” reason

Unused leave that is not eligible for pay-out is not transacted e.g. LSL prior to payout duration.
The employee’s status, as displayed on the headers of the Employees (EP.20.30.00) and Pay Details (MP.PP.23.10) forms is set to “Inactive”.
The Employee End Date is inserted on the Employment tab of the Pay Details form (MP.PP.23.10).
If there are any rows on the Employment History tab of the Employees form (EP.20.30.00), the active row will be updated with the end date and the termination reason.
The employee’s end date is entered as the Expiry Date on the Employee Pay Groups form (MP.PP.22.50).
A finalisation event for the employee is included in the STP batch for the pay run that the employee is terminated in.

Keeping the existing employee record

When an employee is re-hired, and the same employee record is to be used, the following needs to be done:

Set the employee’s status to “Active” on the Employees (EP.20.30.00) or Pay Details (MP.PP.23.10) form.
Delete the employee’s end date on the Employment tab of the Pay Details (MP.PP.23.10).
Add a new row on the Employment History tab of the Employees form (EP.20.30.00), selecting “Rehire” in the Start Reason column.
On the Employee Pay Groups form (MP.PP.22.50), if you want to use a pay group that the employee previously belonged to, then remove the Expiry Date for that group; otherwise add new pay groups as you would for a new employee.
If the employee’s previous entitlement balances were zeroed out, use the Entitlement Adjustments form (MP.PP.30.00) to make an entitlement adjustment to add back any balances that the employee is entitled to, e.g. if the re-hire meets the legislative requirement for deemed continuous service. Remember to allow for for the period they were not employed.
If the re-hire doesn’t need to be treated as continuation of service, then on the Employment tab of the Pay Details form (MP.PP.23.10), change the Employee start date to the new start date.

The employee’s next pay run will un-finalise the employee in the STP reporting, and they will see a continuation of their YTD balance in their myGov account.

Creating a new employee record

When an employee is re-hired, and a new employee record is to be used, the following needs to be done:

Remove the TFN from the original employee record on the Taxation tab of the Pay Details form (MP.PP.23.10).
Add the employee to the appropriate pay group(s) and set up their standard pay(s).
If the re-hire meets the legislative requirement for deemed continuous service:
- On the Employment tab of the Pay Details form (MP.PP.23.10) set the Employee start date to the employee’s original start date.
- Make an entitlement adjustment to add back any balances that the employee is entitled to, making allowance as required for the period they were not employed.
If the re-hire doesn’t need to be treated as continuation of service, then on the Employment tab of the Pay Details form (MP.PP.23.10) set the Employee start date to the re-hire start date and don’t make any entitlement adjustments.
Recommended: Add a new row on the Employment History tab of the Employees form (EP.20.30.00), selecting “New Hire” in the Start Reason column.

As there is a new employee ID, there is no requirement to undo the employee’s finalisation in STP reporting. The employee will see a separate YTD balance in their myGov account.

Troubleshooting

Managing long service leave

There are different circumstances for LSL to be paid out, for example in NSW when someone has worked for over 5 years and is made redundant they do get their LSL. Will the LSL be available to pay out?

The eligibility for paying out LSL is based on how the entitlement is set up, i.e. the rules and triggers. The system doesn’t currently cater for the ability to accrue but restrict what can be taken and when; that relies on the manager and payroll admin to approve or not. We would expect that LSL will be configured to accrue from the employee’s start date, and that the manager/payroll admin will not allow leave taken until the relevant length of service. On termination, the system will calculate the LSL payout based on accrual/earned balances.

If necessary, override options are available to manually specify the amounts to be paid out.

Hiring and rehiring in the same financial year

In the case where

an employee leaves and is then re-hired within the same financial year, and
a new employee record and the TFN has been deleted for the first period,

will there be any record of the first employment in the STP data?

Yes—the original employee ID would have been finalised in STP reports when the employee was terminated, and that balance will remain in your records and in the employee’s myGov account and will be pre-filled into their tax return. If the re-hire is using a different employee ID, there will be no further reporting on the original employee record, the ATO will treat the new employee record as a new employee, and there will be a new (additional) YTD balance in the employee’s myGov.

The ATO does not validate the TFN/Employee ID combination for uniqueness, as it is valid to have more than one of that combination, i.e. the ATO expects that it is possible to have more than one YTD balance for an employee.