You may pay an employee a lump sum payment if they retire or have left work. The employee is only liable to pay tax on the amount of the payment that is more than either:
- basic exemption and increased exemption (if due)
- Standard Capital Superannuation Benefit (SCSB).
Read more about calculating the taxable amount on Revenue’s website.
To add a termination lump sum to a payslip:
- Go to the Employee’s profile.
- Click on Add (next to Payslip Inputs).
- Select Termination Lump Sum under Income.
- Enter the amounts for the taxable and non-taxable portion of the lump sum.
The PAYE and USC figures will be updated to include the taxable portion of the lump sum. Termination lump sums are exempt from PRSI, as they are not considered reckonable earnings.
When paying out accumulated leave on termination, you should use the built-in leave paid out item for this. Paying out leave on termination is discussed in the following article: