How do I make a termination award payment to an employee in Platinum Payroll?
From Catalyst
Contents
Summary
This article explains how to make a termination award payment to an employee in Payroll.
More Information
A termination award is a payment made to an employee in connection with the termination of the employee's employment.
The value of the termination award over the threshold (£30,000 for the 2020 tax year) is subject to tax. From April 2020, employer Class 1A NICs are also due on the amount above the threshold.
 | Employee NICs are not due on the amount above the threshold. |
 | For example, an employee receives a termination award of £39,000. Income tax and employer Class 1A NICs are due on £9,000. |
Standard Adjustment for Terminations
A standard adjustment type for termination award payments needs to be set up. Follow the instructions here to add a new entry to the standard period adjustments.
On an unused line:
- In the "Description" column, enter 'Termination'.
- In the "Sign" column, enter '+'.
- In the "Tax" column, enter 'Y'.
- In the "NI" column, enter 'N'.
- In the "Pen" column, enter 'N'.
- In the "Hol" column, enter 'N'.
Entering A Termination Payment
- Go to " Payroll->Run Payroll Period".
- Find the line of the employee who is to receive the termination award.
Awards at or below the Threshold
- Enter the full amount of the award into the "Post-Tax Add." column.
Awards above the Threshold
- Enter the threshold amount (£30,000) into the "Post-Tax Add." column.
- Enter the remainder of the award (the award amount minus £30,000) into the "Termination" column.
- Press <F8> to enter the adjustments; press [Add] to create a new adjustment:
- At "Payment date:", enter the date that the employee's employment is terminated.
- At "Comment:", enter 'Termination Class 1A'.
- At "Class 1A NIC:", calculate the amount of employer Class 1A NICs due. This will be the award amount above the threshold multiplied by the employer NI contribution rate (currently 13.8%).
- Press [Done] and [Accept] the changes.
| For example, the termination amount above the threshold is £9,000. The Class 1A NICs due are £9,000 x 13.8% which equals £1,242. |
See also
