Payment After Leaving: An Explanation for Employers

Even after an employee has left the business, they may be due additional payments. In the world of payroll, this is known as payment after leaving, and can be related to a number of things such as holiday pay, bonuses, commissions, or any other type of pay. 

This should happen once their P45 is issued, and as per HMRC's guidance should be applied after they’ve left.

Payment after leaving: how does it work?

In the month that an employee’s contract is terminated, they’ll receive a P45. You should make the payment within one month of the employee leaving, after their termination date.

How are payments after leaving taxed?

The tax code for a payment after leaving is the ‘0T’ on an M1 basis. A payslip is produced for the employee, and the payment after leaving should be reported to HMRC on the FPS. There’s no need to reissue the P45.

What is a P45 in the UK?

A P45 is an end of employment form which sums up how much an employee has earned and what tax they’ve paid up to that point in the year. As explained before, it’s given to a staff member at the end of their employment. 

It’s one of the essential PAYE forms you’ll issue as an employer if you have staff in the UK (though P11Ds are now being phased out in 2026).

What is the difference between P60 and P45?

A P60, on the other hand, summarises what an employee has paid for the whole of a tax year. You’re obligated to ensure your employees get this form at the end of each tax year.

Payment after leaving FAQs

An employee is on maternity leave but leaving the company. How do I ensure they’re paid their statutory pay after they’ve left?

If you’re using a payroll software, then you should set the employee to 'payment after leaving' during the termination process with an end date at the end of their SMP pay period. This should keep the employee on payroll until the last month of their SMP, and the SMP payments due will automatically apply to their payslip.

When is the P45 issued to employees if I apply a payment after leaving?

The P45 is issued in the month that the employee leaves. Using HMRC's guidance, any payments processed after this, are taxed without freepay (0T M1) and no further P45 can be issued.

What does a payslip look like for payment after leaving? 

Employees with a payment after leaving status won't be paid a salary, so any subsequent payslips issued will show only a £0 value until you add any additional payments, like so:

Leave payments after leaving to PayFit

Processing payments after leaving is just one more of those tedious payroll or HR tasks you’d probably rather not have to contend with. The great news is that PayFit makes processing payments after leaving extra easy. Simply enable the ‘payment after leaving’ setting one month after your employee’s termination date in their employee record. Then, watch PayFit take care of the rest, including taxing this payment correctly. You can even enter a payment after leaving for a date further away in the future. Now that’s smart payroll. 

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