Termination Payroll

Termination Payroll allows you to process the final pay for employees leaving your organization. This includes handling their last pay check, unused vacation hours, severance pay, and any other final earnings. Zoho Payroll ensures that the termination process is smooth, compliant, and accurate.

Run a Termination Payroll

Running a termination payroll in Zoho Payroll involves four main steps:

1. Terminating an employee
2. Adding termination payroll details
3. Submitting and approving the termination payroll
4. Recording payment for the termination payroll

Step 1: Terminate an Employee

To terminate an employee:

1. Go to the Employees module.
2. Select the employee who is being terminated.
3. Click More on the top right and select Terminate Employee. You’ll be redirected to the Terminate Employee page.
4. Enter the employee’s Last Working Day.
5. Enable Encash all unused vacation hours if you want to pay the employee for their unused vacation hours. Otherwise, disable it.
6. Configure the pay date for the termination payroll:

7. Enter the employee’s Personal Email Address for future communications, as their work email may be inactive after termination.
8. Optionally, add any comments or notes in the Notes field for future reference.

9. Click Proceed.
10. In the popup that appears, click Yes.

The employee will be terminated, and a termination payroll will be created for them. You can then proceed to add termination payroll details.

Step 2: Add Termination Payroll Details

To add termination payroll details:

1. Enter the employee’s Earning Hours for the primary job role on the Termination Payroll page.
2. If the employee had worked on any other additional job roles:
   • Click + Add Additional Job Hours.
   • Choose the additional job role.
   • Enter the number of Regular, Overtime, and/or Double Time hours worked for that role.

3. Enter the Paid Time Off information for the employee for the pay period.

4. Add the Additional Earnings information.

5. Click Save and Continue.

The payroll will be created in Draft status. Review the payroll details, make any necessary changes, and proceed to approval.

Step 3: Submit and Approve the Termination Payroll

To submit or approve a payroll:

1. Go to the Pay Runs module. Your upcoming payrolls will be listed under the Run Payroll tab.
2. Click Process Pay Run next to the termination payroll.
3. Depending on your role and permissions, follow one of these paths:
   • If you have approval permissions (such as an admin or finance head), click Submit and Approve on the top right.
   • If you don’t have approval permissions, click Submit for Approval on the top right. An authorized user will then review and approve the payroll.

Once your termination payroll is approved, Zoho Payroll will automatically deposit salaries into the terminated employee’s bank account on the scheduled pay date if you’ve set up Direct Deposit for your organization and the employee. The applicable taxes will also be debited from your bank account and paid to the respective agencies.

Step 4: Record Payment for the Termination Payroll

If you’re paying your employee manually via check, cash, or other methods, you can mark the payment as recorded on the payday.

To record payment for a termination payroll:

1. Go to the Pay Runs module and open a payroll in the Payment Due status.
2. Click Mark as Paid on the top right.
3. In the pop-up that appears, select the Paid Through Account and Payment Mode.
4. Enable Send pay stub notification email to all employees if you want to email the pay stub to your employees. Otherwise, leave it disabled.
5. Click Save.

The payroll will now be marked as Paid, and the applicable federal, state, and local taxes will be generated under the Taxes module.