Ceasing employment is one of the common activities when running payroll, but first, what is an Employment?
Revenue keeps track of employment using the:
- Employers Registration Number (to identify the company)
- Personal Public Service (PPS) number (to identify the person)
- Employment Identifier (to identify the employment)
An employee can have one or multiple periods of employment with an employer. For instance, they may have two separate concurrent jobs with the same employer. Or, more commonly, they may start with the employer in Jan, and leave in Feb, only to be rehired again in August.
The Employment ID number is how Revenue keeps track of which employment period the work is related to.
To cease an employment you must notify Revenue of the employee’s last day with the organisation.
This is done by creating a Payroll Submission Request (PSR) containing a ‘Leaving date’. You can create this payroll submission request by:
- Ceasing the employee in your payroll software and then submitting that information to Revenue
- Ceasing the employee directly in ROS by creating a cessation payslip there
Once a PSR containing a leaving date has been sent to Revenue, then that cessation date is updated on the employee Revenue Payroll Notification (RPN). Note that this process cannot be reversed. Even if you delete the PSR containing the leaving date, the employee will still have been ceased.
Ceasing Employments on Parolla
There is a wizard for ceasing employments, which can be found in your navigation bar.
The wizard will amend the employee contract role details and employment details. It will add the leaving date and it will mark the employee as ‘Leaving’ in the employee status and the upcoming pay runs.
Parolla will highlight the next payslip as being a cessation payslip and will prompt you to enter any final amounts owing, such as Leave Paid Out.
Final payslips may require adjustments to:
- The number of insurable weeks (if leaving part-way through a pay period)
- The final salary amount, as agreed between the employer and employee.
- Payment using Leave Paid Out for annual leave owed.
There are three methods of calculating a final salary amount. Parolla cannot calculate those amounts for you so the final salary payment must be entered manually.
It is also important to use the Leave Paid Out option when paying out annual leave. There are two reasons:
- Annual leave can only be paid (instead of taken) when an employee is leaving employment. In all other cases, the Organisation of Working Time Act requires employees to take the leave as holidays, preferably in the year that they are earned.
- Employees earn annual leave while on annual leave. By using the Leave Paid Out option the employee will not be earning more annual leave.
When that payslip is processed and sent to the Revenue it will contain a leaving date. If that payslip is then accepted by Revenue, we will mark the employee as ‘Left’.
You can process a payslip individually in advance of the rest of the pay run.
Post Cessation Payments
It is common for an employer to have to make a payment to an employee who has already been ceased. This is called a Post Cessation Payment. Typically it occurs when an employee becomes entitled to some form of commission-based income which couldn’t be calculated at the time of the employee leaving.
You can still add a ceased employee to a pay run. However, you may run into issues with respect to high taxes on income.
Normally, when an employee changes employers, they move their tax credits and the standard rate cut-off values from the old employment to the new employment.
So you may find that the employee now has to pay more tax than their income allows.
To get around this you will need to apply an earlier Revenue Payroll Notification for the employee. To put them back onto the original tax rates.
Common Issues When Ceasing Employments
Why is my ceased employee still marked as ‘Leaving’
Leaving employees must be submitted to Revenue using a PSR (by submitting the cessation payslip). Until the payslip is submitted and accepted by Revenue then the employee will still be status ‘Leaving’.
Why is my employee Ceased on their RPN, when I never ceased them in payroll?
Employees are able to cease their own employment using MyAccount. This information is not passed onto the employer until you download a revised RPN.
If an employee has ceased themselves then you need to establish if this was intentional, and if so, just update the employee Role and Employment in Parolla.
You don’t automatically get notified when employees cease themselves. You need to look at the Revenue Payroll Notifications, where you will notice that the employee now has a ‘Cessation Date’ on their latest RPN.
Can I reverse a Ceased employee?
Cessations are final, at least from software and ROS. You may be able to contact the Employers Helpline at Revenue. They do have the ability to remove the leaving date from an employee’s RPN.
If that is not possible then you will need to request a new Revenue Payroll Notification for the employee, using a new Employment ID.
Create a new Employment for that employee in Parolla.