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Preparing a final pay


When an employee ceases their employment, you'll need to prepare their final pay.

A final pay is comprised of any ordinary hours worked for the pay period as well as any annual leave, holiday pay and alternative holiday entitlements. It can also include other items such as allowances, deductions, etc.

If you need to remove an employee from Payroll without preparing a final pay, see Finishing or reinstating employees.

Public holidays

Employees may be entitled to be paid public holidays that fall after their employment ends, if they have unused annual holidays owed. Consider any remaining holidays owed as leave taken immediately after their last day of employment. Any public holidays that fall within this period that the employee would have normally worked had they still been employed are paid at their relevant daily pay, or average daily pay (if applicable).

If public holidays are owed, add these to the pay first before calculating the final pay amount.


1. Prepare the final pay

This task will add any outstanding leave to the ordinary pay.

  1. Go to the Prepare Pays command centre and click Enter Pays. The Enter Pays window opens.
  2. Double-click the employee you are preparing final pay for. The Enter Pay Details window opens.
  3. Enter the ORD (Ordinary Time) hours worked in the final pay period. This may differ from the employee's normal hours if the pay is for a longer period, so adjust their hours accordingly.
  4. Click Final Pay. The Final Pay Details window opens.
  5. Enter the employee's Finish Date and Finish Reason, then click OK. The employee's pay details are updated and the pay is marked as a Final Pay.
2. Override the tax

When you process a final pay, the annual leave owing and the holiday pay due are added to the pay. Whenever leave is paid as a lump sum it's taxed as extra pay. The gross sum of annual leave owing and the holiday pay due needs to be entered as an Extra Pay Amount.

For more information on extra pay amounts, check with your accounting advisor or the IRD.

  1. Click the TAX (PAYE) pay code then click the Rate column. The Tax Override button in the right-hand column becomes available.
  2. Click Tax Override.
  3. Enter the Extra Pay Amount, then choose the appropriate tax code. Visit the Inland Revenue website for the latest tax rates.

  4. Click OK.

3. Process the final pay

Process the final pay as you would any other pay. The employee's pay slip will show any outstanding leave as being paid out, or deducted if in arrears.

The employee is entitled to be paid for any Statutory Holidays that fall in the period that their Annual Leave would have covered. For more information on this visit the Department of Labour website .

What if my employee is receiving a redundancy/severance payment?

If your employee is receiving a redundancy or severance payment these must be handled using a special paycode. Please see Redundancy payments for more information.

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