When an employee leaves through ill health

Final payments

Once the decision has been taken to dismiss the employee, or they have resigned because of long-term illness, you will need to calculate the final payment.

The employee may also be entitled to a pension refund depending on the rules of the pension scheme. In special circumstances, such as sickness or disability, a pension may be paid early if the employee is permanently incapacitated.

Consider making an extra payment to the employee as compensation for the loss of their job.

You will need to deduct income tax (PAYE) and relevant National Insurance contributions from the final payment. See our guides on how to sort out tax matters when an employee leaves and on pay - an overview of obligations.

The tax position on these payments can be complex. It is advisable to consult an accountant or see the employers' information on the HM Revenue & Customs website.

Subjects covered in this guide

• Introduction
• Ill health dismissals: the legal position
• Alternatives to dismissal on grounds of ill health
• Final payments

 

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