You'll learn how to:
- Properly process an employee's termination in Xero to ensure payroll accuracy.
- Handle final payments and entitlements correctly to comply with legal and tax obligations.
- Update payroll records and remove access to maintain security and compliance.
Terminating an employee in Xero must be done carefully to ensure compliance with payroll and legal requirements. Whether an employee is leaving due to resignation, redundancy, or dismissal, it is essential to process their termination correctly in Xero to maintain accurate payroll records.
In this guide, we’ll walk you through the step-by-step process of terminating an employee in Xero while ensuring compliance and accuracy in your records.
How to Remove an Employee in Xero
Step 1: Navigate to the Employee's Payroll Record
- Log in to your Xero account.
- Go to Payroll and select Employees.
- Choose the employee who is leaving.
- Click on the Employment tab.
Step 2: Enter the Employee’s Termination Date
- In the employee’s profile, locate the End Date field.
- Enter the final working date of the employee.
- Save the changes.
This step ensures the employee is not included in future payroll runs beyond their termination date.
Payroll and Termination Documentation
Step 3: Process the Final Pay Run
- Navigate to Payroll > Pay Runs.
- Start a new pay run or open the existing pay run that includes the employee’s last working period.
- Calculate the final pay, including:
- Any outstanding salary or wages
- Accrued but unused annual leave or holiday pay
- Severance or redundancy payments (if applicable)
- Finalise and approve the pay run.
- Issue the final payslip to the employee.
Step 4: Ensure Tax and Compliance Requirements Are Met
- Generate any required termination documents, such as a P45 (UK) or Employment Separation Certificate (AU).
- Report the termination via Single Touch Payroll (STP) if required.
- Submit tax and social security contributions in line with local payroll regulations.
Removing Employees from Xero
Step 5: Remove Employee Access
- Go to Settings > Users.
- Locate the employee’s Xero account access.
- Remove or limit access to prevent further login to the system.
Step 6: Archive the Employee’s Record
- Return to Payroll > Employees.
- Select the terminated employee.
- Click Archive Employee to retain their records without keeping them in active payroll.
Troubleshooting Common Issues
- Employee not appearing in the pay run? Ensure their termination date is set correctly.
- Final pay calculation discrepancies? Check for any outstanding bonuses, deductions, or reimbursements.
- STP submission errors? Verify that all required data is entered correctly before submitting.
Equals Money integrates with Xero
Our platform syncs your Equals Money transaction data directly into Xero daily, providing a seamless, real-time overview of your finances.
- Save time with automatic bank feeds, removing manual, time-consuming imports and allowing focus on more strategic tasks.
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- Get real-time control of cash flow with a single view of spending, removing the need for manual statement reports.
Conclusion
Terminating an employee in Xero requires careful attention to payroll accuracy, compliance, and security.
By following this step-by-step process, you can ensure that the employee’s final payment is handled correctly, tax obligations are met, and payroll records are up to date. Properly archiving and managing access for terminated employees helps maintain data integrity and security within your Xero account.
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