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How to pay severance

Severance can be added in Zenefits Payroll to a terminated worker's  paystub in both regular and off-cycle runs. If a Severance pay item doesn't already exist, create one first by following these instructions. Then, add it to the final paystub by clicking +Add New Earnings in the Earnings section, and choosing Severance from the list.

Severance pay is considered supplemental income.

  • If paying severance by itself in an off-cycle run after termination, you can choose to have Zenefits Payroll use a time-based tax withholding rate (22% for Federal; varies for state) when creating the off-cycle run.
  • If paying it alongside regular earnings in the same (regular or off-cycle) run, Zenefits Payroll will automatically withhold Federal and State income taxes from their combined amount using their W-4 information (the aggregate method).

Note on severance pay:

  • When you terminate an employee in Zenefits, they will remain active in payroll if their last day worked overlaps with an open pay period. 
  • If the employee's last day worked does overlap with an open pay period, they will populate on the next pay run.
  • If the employee's last day worked does not overlap with an open pay period, they will no longer populate in payroll.
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