Employment Cessation and Payroll

Most employers are fully prepared for employee onboarding and the duties that come with, but how many are ready to deal with the requirements when an employee leaves? Especially concerning payroll.  To tie up loose ends and make sure you and your employee both have what you need to complete a smooth transition, we have an outlined the payroll requirements for when employment ceases.

An employment ends in one of four ways:

  • Resignation – when an employee decides to leave the company.
  • Dismissal – when an employer chooses to terminate the employment.
  • Retirement-  when an employee reaches an age where their job automatically ends, or they decide to stop working.
  • Dies while in employment

Ceasing an employment

When employment ends, the company must follow the process outlined in the commencing and terminating employment guide from Revenue. The method for commencing and ceasing employees is part of your regular payroll process. Forms P45 and P46 are no longer needed since PAYE Modernisation.

To do this, employers must include the date of leaving on the final payroll submission. This guarantees that a new employer will receive the correct details, from 1 January on the Revenue Payroll Notification (RPN)issued to them.  If there is a delay in submitting the date of leaving, the proper tax credits and standard rate cut-off points will not be available. This means that the individual may overpay tax and Universal Social Charge (USC), as a Nil Revenue Payroll Notification (RPN) will be issued to the new employer.

Calculating tax when your employee leaves

You must calculate your employee’s tax and Universal Social Charge (USC) at the date of leaving. You need to do this even if the last payment relates to a shorter than usual pay period. For example, an employee who is paid monthly should be given their full month’s tax credits, and tax and USC cut-off points. This is even if the payment is for only part of a month. This also applies if the employee is on emergency tax at the date of leaving.  Any balance of pay an employee is to be paid after leaving should be included in the final payroll submission.

Payments made after your employee leaves

If you make a payment to an employee after they leave, you must, request the most up to date Revenue Payroll Notification (RPN) and deduct tax using the details returned on the Revenue Payroll Notification (RPN). You must also report the details of the payment on or before you pay them and use the same Employment Identifier and cessation date from the period to which the payment refers. This applies regardless of whether the payment is made in the year the employee leaves or a subsequent year.

All information on is sourced directly from Revenues website and published by Intelligo for informative purposes only. For more details or with any queries on this, please contact them directly.