UK employee offboarding: what a compliant leaver process involves

A UK offboarding process predominantly centres as much on payroll and employee records as on IT.

Employee offboarding isn’t finished when the user’s accounts are disabled and their laptop has been returned.

Offboarding is finalised when the last payment has been correctly made and reported, and the leaver’s records are securely put away somewhere you can still retrieve them years later, if required.

This blog covers what comes next in the offboarding process, including the final payment, pay after the P45 has gone out, holiday pay you still owe and which records to keep and for how long.

It’s the detailed companion to our guide to managing the employee lifecycle.

Why employee offboarding often gets treated as an IT task

Much of the offboarding advice online is little more than an access and asset checklist.

They cover elements of the offboarding process, such as revoking the logins, collecting equipment, running exit interviews and writing the handover notes.

That’s understandable, as all these tasks play a key role in a good employee offboarding process.

However, this advice leaves out important elements that carry financial and legal risk:

• Final pay and its tax treatment
• The P45 and the submission that reports the leaving date
• Anything paid after that P45 has been issued
• Notifying the pension provider
• The records you are obliged to keep

These items all share an inconvenient feature: they happen after the last day, often after the employee has left and dropped off the HR team’s list.

 While offboarding may ‘conclude’ from an employee perspective, your obligations run for years.

The payroll side of a leaver

When an employee leaves your business, four things happen in sequence:

• Enter the leaving date in your records
• Calculate final pay, tax and other deductions using their normal tax code, typically paid on their last working day
• Report the details in your next Full Payment Submission (FPS)
• Provide a P45 with their final payslip

However, if the employee is leaving in the next tax year, don’t put the leaving date in the same FPS as their final payment.

Include them in the first FPS of the new tax year with their leaving date, ‘0’ in ‘pay and tax in this period’, ‘0’ in ‘year to date’ and the FPS payment date.

GOV.UK sets all of this out in more detail: what to do when an employee leaves.

The part of employee offboarding that almost nobody covers is what happens when you pay a leaver after their P45 has been issued.

Scenarios where you’d pay a leaver after their P45 include:

• Late expense claims
• Commission payments
• Payment corrections
• Accrued holiday settled after the pay run closed

The payment-after-leaving route only applies once the P45 has been issued.

Where possible, look to settle everything owed in the final payroll run before the P45 goes out.

You must also never issue a second P45 or amend the original.

The correct processes, as set out on GOV.UK in the HMRC Internal Manual (PAYE Manual) PAYE63025 and their guidance on what to do when an employee leaves, are:

• Apply the 0T tax code: deduct income tax using code 0T on a week 1 or month 1 basis, so no personal allowance is applied to this specific payment (or S0T for Scottish tax, C0T for Welsh tax).
• Calculate National Insurance: deduct National Insurance contributions (NICs) as normal, unless the payment is a redundancy payment, and deduct any student loan repayments as normal. Treat irregular payments, such as accrued holiday pay or late bonuses, using a weekly earnings period.
• Maintain the original leaving date: use the employee’s original date of leaving and original payroll ID on the upcoming Full Payment Submission (FPS). Do not update or change their departure date.
• Set the payment indicator: set the ‘Payment after leaving’ indicator on the FPS when you report the payment.
• Provide written confirmation: issue the former employee a written breakdown showing the gross payment and the deductions made, rather than generating or issuing a new P45 document.
• Report the right year-to-date figure: if the payment falls in the same tax year, add it to the year-to-date figure. If it falls in the next tax year, it should be the only figure in year-to-date.

You must continue paying Statutory Maternity, Paternity or Adoption Pay until the end of an employee’s statutory leave, even after they stop working for you.

GOV.UK sets out two accepted routes, and you should agree one of them with the employee:

1. Provide the P45 when they stop working for you, then deduct tax on the remaining statutory payments using code 0T on a week 1 or month 1 basis.
2. Continue using their usual tax code for the ongoing statutory payments, and issue the P45 only after the final payment has been processed, recording that final payment date as their leaving date.

Note that a correction discovered three weeks after someone has left is not a standard payroll adjustment.

It’s a post-leaving payment governed by its own strict tax treatments and Real-Time Information (RTI) reporting rules.

Holiday pay on termination

Accrued but untaken statutory holiday is paid on termination.

For workers on irregular hours or part-year contracts, leave accrues on the last day of each pay period at 12.07% of the hours worked in that period, under regulation 15B of the Working Time Regulations 1998, capped at 28 days in a leave year.

Therefore, calculating termination payment for irregular hours or part-year workers means using the accrual record for each pay period rather than an annual allowance divided by twelve.

The opposite case arises where an employee has taken more leave than they had accrued by their leaving date.

There’s no automatic right to recover it.

A deduction from their final pay needs a clear contractual right, agreed in writing in advance.

Without one, the recovery is an unlawful deduction from wages.

Since 6 April 2026, under regulation 16B, holiday and holiday pay records now have to be kept for six years from the date each record was made.

The six-year period applies to records created from 6 April 2026 onward, and failure to keep adequate records is a criminal offence punishable by fine, with enforcement sitting with the Fair Work Agency.

This includes the payment in lieu made on termination.

Keep in mind how this interacts with the section above.

If accrued holiday is paid after the P45 has been issued, it’s an irregular post-leaving payment which attracts the treatment set out there.

Leaver records: what to keep and for how long

The gut reaction many businesses have when an employee leaves is to wipe their records, but retention obligations are often much longer than many employers assume.

Considerations worth making are:

• If you’re running multiple systems, marking someone as a leaver in HR does not necessarily delete them from your learning or performance tools, often resulting in employers keeping data longer than they intended. Our guide to HR data security and GDPR covers how long each type of employee record should be kept, and what to do with the rest.
• Deleting all employee records is not the answer, because you still have to produce records if a claim arrives.
• From 1 January 2027, the unfair dismissal qualifying period falls from two years to six months, so leaver documentation starts to matter far earlier in someone’s employment. Our article on the 2027 unfair dismissal changes covers what that means in practice.

The steps that often get missed

In relation to employee offboarding, a few areas sit across departments, which is why they often get missed:

• Notifying the pension provider of the leaving date, and recording that you did it
• Recovering an overpayment, which needs agreement with the individual before anything is deducted
• Removing the leaver from benefits, salary sacrifice arrangements and any group schemes
• Cancelling recurring expenses, subscriptions and company card access
• Retaining the exit interview record itself, rather than discarding it once a summary has been created
• Closing off objectives and any open capability or performance process

What your HR and payroll system should do

When it comes to employee offboarding, your HR and payroll systems should give you five things:

• A leaving date entered once that reaches payroll without re-entry
• Holiday accrual and balances calculated from actual pay periods
• An offboarding workflow, with named owners across HR, payroll, IT and facilities
• Employee records retained and retrievable
• The ability to run a post-leaving payment correctly

Both IRIS HR products, IRIS Cascade and Staffology HR, are built on shared employee data between HR and payroll, removing the manual re-keying associated with offboarding.

IRIS Cascade includes a built-in payroll module, recognised by HMRC as software you can use to report PAYE information online.

Staffology HR integrates with Staffology Payroll to do the same job across two connected systems.

In both, absence and holiday records sit alongside pay data, and an audit trail captures every change to a record and who made it.

For the wider view of workplace compliance, see our guide to UK payroll and workforce compliance.

This blog is general guidance and not legal or tax advice. Every effort has been made to ensure the content is accurate at the time of writing, but details are subject to change. If you require legal advice, please consult a qualified professional.

UK employee offboarding

Frequently asked questions (FAQs)

What does a UK offboarding process need to include?

A compliant UK offboarding process covers the leaving day and everything that follows it, spanning HR, payroll, IT and pensions:

• Notice and leaving date confirmation
• Knowledge handover
• Access and asset recovery
• The final pay calculation
• A P45 issued with the final payslip
• The leaving date reported on your next FPS
• Accrued holiday paid
• The pension provider notified
• Leaver records retained for their statutory periods

What do you pay an employee when they leave?

You pay everything owed up to the leaving date, plus anything their contract entitles them to on departure:

• Any week in hand
• Contractual notice pay where relevant
• Accrued but untaken statutory holiday
• Contractual entitlements such as commission or bonus

Statutory redundancy pay applies where the dismissal is by reason of redundancy and the service condition (two years’ continuous service) is met.

How do you tax a payment made after an employee has left?

Use tax code 0T on a week 1 or month 1 basis, or S0T for Scotland and C0T for Wales. Deduct National Insurance and student loan as normal, and report it on your next FPS using the original leaving date and payroll ID with the ‘Payment after leaving’ indicator set.

How long do you keep records for an employee who has left?

Retention periods run from two years to six and are set by different rules, so there’s no single date on which a leaver’s file can be deleted:

• Right to work evidence is kept for two years after employment ends
• PAYE records for three years after the end of the relevant tax year
• Holiday and auto-enrolment records for six years, with opt-out notices kept for four
• Performance records have no statutory period