In the event an employee leaves or is terminated, you will pay their accrued Leave, also known as Separation Pay, as a separate Payroll Run. Separation Pay is handled differently than normal pay due to rules around paying out leave types or comp time.
You can also use the Special Payroll Run to pay out Leave Types in the event that your Agency regularly pays employees for unused Leave.
Leave Payouts are considered supplemental income. As such, they are taxed at 22% for Federal income tax and subject to FICA and State taxes. State Taxes are calculated using the supplemental tax rates for each state. Leave Payout is exempt from other deductions, with the exception of Pension.
To pay Leave, open the Payroll Runs page and select New Special Payroll Run to start a new Payroll Run.
Payroll Type: Select Leave Pay as the Payroll Type.
Pay Date: Enter the Pay Date that the Leave will be paid.
Employees: Select the employee that will be paid out their Leave by typing their name in the Employee(s) field and selecting the matching employee from the dropdown menu. You may select multiple employees to be included in the single Payroll Run. Only Active Employees that have Paid Leave will populate this list.
Click Create to start the Leave Payroll Run. You will then proceed through all the Payroll Run steps as normal.
Setup. All employees selected in the Leave Pay setup will populate in the Payroll run along with their Leave Types, associated rate, and Accrued Balance. All Leave Types marked as paid will populate here.Each Leave Type will populate with the default rate and accrued amount for each employee. You can update the rate or the number of hours to be paid out. For example, you may only pay up to a certain number of hours for each Leave Type. To update the Hours, Pay, or Pension applied to each Leave, click the Edit icon in the far-right column.
Edit the Pay or Hours for each Leave Type. For example, if the Leave Type should not be paid out, enter 0 for the Hours.
You have the option to choose whether Pension should be applied to the Leave Payout. If this box is checked, the Deduction marked as Pension associated with that employee will apply. If the employee is associated with more than one Pension Deduction, you'll have the opportunity to select which should apply.
If you have applied the Pension, you can determine the maximum number of Leave hours that should have Pension applied. There are two options available – ‘All Hours’ and ‘Up To’. To apply the Pension to the total number of hours, select All Hours. To apply the Pension only to a subset of hours, choose Up To and then input the maximum number of hours. This option is available only if the Pension associated with the employee has the Deduction defined as a percentage. If the Pension is a fixed amount, then this field will not be displayed and the Pension amount that is defined will be deducted from the leave payout.
Review. Review each employee and their Net Pay. Under the Pay column, each leave type along with pay calculated for that leave type will be displayed. Once you have confirmed the pay is correct, select the box next to each employee and click Approve All. This will move the pay to the Approved state.
Approved. Employees set up with Direct Deposit will be included in the ACH file that is created for this Payroll Run when you click Generate NACHA File in the Final Payroll Stage. For employees set up to be paid via check, you will have the opportunity to enter the check number and print the checks using your check template.
Final. The final stage will include all employees that have been paid or excluded from the Payroll Run.
When you have completed your Payroll Run, click Complete Payroll. This will trigger the data that will get exported in Finance Hub for General Ledger, Accounts Payable, and Bank Reconciliation. This will also change the status of the Payroll Run to "Completed."
All employees must be in the Final Stage before the Payroll Run can be marked as Complete.
The employee's Pay Stub will display "the Leave Type under Pay Type, along with the rate and hours you specified in the setup phase.
Updated
by
Janelle Heuton
