Lump sum payments made to employees on termination will need to be added using a custom once-off income item. In addition to this custom item, you will need to add the system termination lump sums item; adding this item to a payslip will affect every other item on the payslip. We suggest that you issue the employee with a normal payslip for his / her last month, then create a once-off payslip, with this item and all the items that make up part of the lump sum.
Please note: We strongly recommend that the date of the once-off payslip be the same as that of the final normal payslip – in order for the tax calculation on the final normal payslip to be correct.
The above concepts are discussed in more detail in the following articles:
Once you have created the once-off payslip, you can add the termination lump sum item by clicking on Add (next to Payslip Inputs) > Termination Lump Sums.
All items on the payslip will be UIF exempt. You should, therefore, not include items on the payslip where those items are not legally UIF exempt.
Under certain circumstances, SARS allows part of the final payment to an employee on termination to be tax exempt, or taxed at a lower rate. This includes pay for retrenchment. Note that application must be made for this via the IRP 3(a) form. This can also be done via eFiling.
More information about tax directives, including the various application forms, is available on this SARS page.
If you have a tax directive, select the Apply Tax Directive option and enter the Amount of tax to deduct as well as the Directive Number. If you click Save without entering a directive number, you will get an error message. The system forces you to enter a directive number to prevent errors during bi-annual filing, when you might want to import your tax certificates into [email protected]
IRP5 / IT3 (a) codes
All remuneration on the payslip will reflect under code 3907 on the IRP5, except leave paid out, which will be under code 3605. You should use the built-in leave paid out item for this; otherwise, it will also be included under code 3907. Paying out leave on termination is discussed in the following article:
If a tax directive is used, all remuneration will be under code 3901 and the tax due to the directive will be under code 4115. You should, therefore, only include items on the payslip that were included on the application form for the tax directive.