Understanding Termination Payments

Because it is common for some payments to be made only upon termination and some standard earnings might not be processed as part of termination pay, you must define exactly which earnings should be paid in response to a termination.

Before termination earnings or deductions can be processed, you must:

  • Define your termination versions.

    Termination versions are the set of reasons for termination, layoff, or completion of contract that are considered sufficient to trigger a set of termination payments and deductions.

  • Define the earnings and deductions to process upon termination (or layoff and completion) by associating each element with one or more termination versions.

  • Use the delivered generation control element LF GC VER FINIQ to trigger the processing of each termination earning and deduction only when the action and reason for a payee's termination match the termination version associated with the earning or deduction.

  • Identify the terminated payees and enter the appropriate action/reason for termination on the Job Data pages in HR.

  • Define whether the Salary Credit will be considered for tax calculation, either at the payee level or calendar ID level, by using the delivered Salary Credit in Terminations variable (LF VR CRED SAL). The Salary Credit in Terminations variable has a default value of Y to include the salary credit in the termination tax calculation. The Salary Credit in Terminations variable should be changed to N if the salary credit is not considered for termination tax calculation.

In Mexico, when you terminate a payee, you might need to make the following payments:

  • Regular earnings and deductions that are due for the termination period.

  • Compensation for unused paid vacation days and the vacation premium.

    The system multiplies the DAILY RT (system element) by the proportional worked days in the year times the number of vacation days, as of the termination day or anniversary date.

    If the payee's seniority anniversary occurs during the termination pay period, the system calculates the corresponding days in an array using the new seniority years.

    To calculate the vacation premium, the system multiplies this result by the premium percentage.

  • Compensation for the Christmas bonus.

    The system prorates worked days in the year to calculate the corresponding Christmas bonus pay.

  • Severance pay or other compensation due to special termination earnings, according to the termination version selected for the payee.

  • Amount owed for all unpaid loans, independent of each other.

    This amount is automatically deducted from the last payslip.

Note: Termination payments can be calculated in either a regular payroll or an off-cycle payroll.

For Global Payroll for Mexico, the payroll process generates termination payments based on the last day that an employee works, which is one day prior to the termination date. The termination date is equal to the effective date of the TER (termination) action on the employee's JOB_DATA record (Job Data component).

When you enter a TER action, the system invokes the JOB retro trigger for processing of the employee's termination pay. To ensure that the payroll process uses the date one day prior to the termination date for termination payment processing, the delivered JOB retro trigger for terminations offsets the termination date by -1 for actions that equal TER. This is set by the Offset Days field value on the Trigger Definitions – Field Values page.