Terminating Employees in QuickBooks
When an employee leaves the company, you need to enter the employee's release date in QuickBooks so that the employee's name is not displayed when you go to pay employees. A release date is the last day that the employee worked or will work and the last day for any deduction of taxes from the employee's paycheck.
To release an employee:
- In QuickBooks 2007 and 2006, click Employee Center. In the Employees tab, double-click the employee you want to release.
In QuickBooks 2005, from the Employees menu, choose Employee List and then double-click the employee you want to release.
- Click the Change tabs drop-down list and choose Employment Info.
- Enter a date in the Release Date field. QuickBooks displays the Deceased checkbox.
- (Optional) If the employee is deceased, select the Deceased checkbox so that this status is shown on the employee's W-2 form at the end of the year.
- Click OK to record your changes.
The employee's name will stop appearing in the Select Employees to Pay window after you designate an employee as released—and after the Pay Period Ends date you select on the Select Employees to Pay window is later than the release date you specified on the employee record.
The employee's name appears when you create W-2 forms, as long as the employee was paid that year.
In QuickBooks 2007, when you terminate or release an employee, you can keep the employee active or you can make the employee inactive.
Note: Regardless of the status, any employee who received a paycheck during the year will receive a W-2 form for that year.
Active status. When you keep a terminated or released employee as active, that employee's name:
- Still appears in the "Enter Hours for terminated employees" window for six months after the employee's release date.
- Doesn't appear for Scheduled Payroll or Unscheduled Payroll in the Enter Hours window.
- Appears in the Released Employees list in the Employee Center for six months.
- Still appears in the Active Employees list in the Employee Center for six months.
Inactive status. When you change a terminated or released employee to inactive status, that employee's name:
- No longer appears in any of the Enter Hours windows (for terminated employees, for Unscheduled Payroll, or for Scheduled Payroll).
- No longer appears in the Active Employees list.
- Moves to the All Employees list (with an X next to the employee's name).
- Moves to the Released Employees list (with an X next to the employee's name).
Hiding an Employee's Name from the Employees List
You cannot delete a released employee if you have transactions associated with that employee. You can, however, hide the employee's name from the Employees list.
To hide the employee's name from the Employees list:
- Display the Employees list.
- Double-click the employee's name you want to hide.
- In the Edit window, select the Employee is inactive checkbox.
- Click OK.
Termination checks are governed by a separate set of state rules governing when employees must be paid when they separate from employment, either through discharge, layoff, or resignation. These requirements guarantee that employees receive all wages they have earned at, or soon after, their last day of employment. For additional information, contact your state regarding wage payment requirements for involuntary termination and/or voluntary resignation.
Processing a termination check will prompt you for a release date.
For instructions on how to create a termination check, see the topic "Write a termination check" in QuickBooks Help or visit these support pages for Standard and Enhanced Payroll and Assisted Payroll.
You must pay released employees for any vacation time they have accrued. QuickBooks allows you to pay accrued vacation time in the termination check or in a separate paycheck. When you create the paycheck, use the vacation payroll item and put the accrued vacation hours in the hours field to clear out the balance.