An employee resigns, retires or is retrenched. What exactly goes on that final payslip, and what paperwork follows? Getting this wrong is one of the most common CCMA and SARS tripwires for small employers.
The final payslip — four possible pieces
1. Salary up to the last day — pro-rata for a part month. The standard convention is a daily rate of monthly salary ÷ 21.67. 2. Leave payout (compulsory) — BCEA section 40(b): all accrued, untaken annual leave must be paid out on termination. You cannot forfeit it, and you cannot "pay it out" instead of leave while they're still employed — payout only happens at termination. Rate: the employee's current daily rate × the balance. 3. Notice pay — if you end the employment and don't require the employee to work their notice, you pay them for it (BCEA s38). Notice periods: 1 week (employed ≤ 6 months), 2 weeks (6–12 months), 4 weeks (over a year). 4. Severance pay — retrenchment only: minimum 1 week's remuneration per completed year of service (BCEA s41). Not owed on resignation or dismissal for misconduct.
How it's taxed
- Pro-rata salary and leave payout are normal remuneration — PAYE (the leave payout is taxed like a bonus: the once-off, annual-difference method), plus UIF and SDL.
- Severance is different: the first R550,000 (lifetime) is taxed at 0% under the retirement/severance tables, but you must apply to SARS for a tax directive (IRP3) before paying it — don't guess the tax on severance.
- Everything lands on the employee's IRP5 for the year (leave payout typically under code 3605).
The paperwork
- UI-19 — you must submit this UIF declaration when any employee leaves; without it they can't claim UIF. Also give them a certificate of service (BCEA s42).
- IRP5 at year-end (or earlier on request) reflecting the final figures.
- Keep the payroll records — 3 years under the BCEA, 5 for SARS.
Common mistakes
- Forgetting the leave payout — it's owed even on dismissal for misconduct.
- Taxing severance without a directive — over- or under-withholding, both painful.
- Netting off money the employee "owes" — deductions from final pay need written consent or a legal basis (BCEA s34); you can't just help yourself.
- No UI-19 — the ex-employee gets stuck at the Department of Labour and it comes back to you.
How 360books handles it
Open the employee's leave record and click Pay out balance (termination) — 360books computes the payout at the current daily rate, adds a taxed Leave payout line to the final payslip (PAYE by the bonus method, UIF and SDL applied), zeroes the leave balance with an audit-trail transaction, and posts everything to your books when you finalize. Then mark the employee inactive — the automatic pay run skips them from the next month. The payout flows into the IRP5 automatically.