My Employee Left Suddenly, What Do I Need to Give Them for Payroll

When an employee leaves suddenly it can catch any employer off guard. You may not have expected the resignation, you may not have had time to complete a proper handover and you might feel unsure about what paperwork you legally need to provide. In my opinion this is one of the most common stress points for small business owners because payroll obligations continue even when the departure is unexpected. HMRC does not give grace periods just because the exit was abrupt.

This guide explains exactly what you must give a departing employee, what payroll steps you must complete, what information you must report to HMRC, how to process their final pay, how to handle outstanding holiday, how to manage deductions and what to do if the employee refuses to cooperate or does not return company property. I will also share practical insights that I have seen from real employers in this situation so you know what is and is not legally required.

By the end you will understand every payroll document and process you need to complete when an employee leaves suddenly.

Understanding Your Legal Responsibilities When an Employee Leaves

When an employee leaves a business you must:

Pay them correctly up to their final working day
Calculate any accrued but untaken holiday
Process their final payroll
Report their leaving date to HMRC
Provide a P45
Keep payroll records for at least three years

These obligations apply even if:

The employee resigns immediately
They walk out during a shift
They do not work their notice
They refuse to return equipment
They leave on bad terms

Payroll law does not change because the departure was difficult. You must still meet PAYE, National Insurance and statutory employment rules.

In my opinion the easiest way to stay compliant is to follow a structured checklist and process everything quickly so your payroll remains accurate.

The Essential Payroll Documents You Must Provide

When an employee leaves suddenly HMRC requires that you issue one specific document. You may give others, but one is legally mandatory.

1. The P45 (Mandatory)

This is the most important document. You must give the employee a P45 when they leave.

A P45 includes:

Total earnings in the tax year so far
Total PAYE tax deducted
The employee’s tax code
Leaving date
Employer PAYE reference

It is split into four parts:

Part 1: Sent to HMRC by you
Part 1A: For the employee
Parts 2 and 3: For their new employer

You must issue the P45 as soon as possible after the final payroll run.

If you delay the P45 you do not break employment law although it can cause tax issues for the employee so it is good practice to issue it promptly.

In my experience this is the single most important payroll step when someone leaves suddenly.

2. Final Payslip (Mandatory Under Employment Law)

You must provide a payslip for their final pay period. The payslip should show:

Final salary
Holiday pay
Deductions
PAYE
National Insurance
Pension deductions
Repayment of any overpayments
Any additional payments owed

Employees are entitled to payslips by law. HMRC does not enforce this directly although employment tribunals do.

3. Written Holiday Pay Breakdown (Good Practice)

Although not legally required it is strongly recommended that you give the employee a clear breakdown showing:

Holiday entitlement for the year
Holiday taken
Holiday remaining
Holiday paid in lieu

This prevents disputes later and shows transparency.

4. Payroll Summary or Statement of Earnings (Optional)

Some employees ask for additional confirmation of earnings. You may provide:

A year to date payroll summary
A letter confirming employment dates
A schedule of deductions

These are optional. The P45 is the only legally required tax document.

5. Pension Information (Dependent on Your Pension Scheme)

You must notify your pension provider when the employee leaves. You should also:

Provide the employee with the standard leaver notice from your pension provider
Confirm the date contributions stopped
Confirm whether they can continue contributions independently

If they were auto enrolled you must ensure final contributions are paid correctly.

Payroll Steps You Must Complete Internally

Aside from giving the employee documents you also have internal duties.

1. Process Their Final Pay Correctly

Your final payroll must include:

Outstanding salary
Holiday pay
Outstanding overtime
Unpaid commissions if applicable
Deductions for salary overpayments
Deductions for loans/advances if applicable
Any statutory payments owed

Holiday pay must always be included because employees cannot lose accrued holiday unless the contract states otherwise.

In my opinion employers often forget to check part month calculations which leads to incorrect final pay.

2. Report Their Leaving Date to HMRC Using an FPS

You must submit a Full Payment Submission (FPS) to HMRC with:

Their final payment
Their leaving date

This must be done on or before the day you pay them.

If you miss this step HMRC will assume the employee still works for you which can cause incorrect tax codes or compliance issues.

3. Stop Future Payments

Once the final FPS is submitted you must:

Deactivate the employee in your payroll software
Remove them from future pay runs

Failing to do this can create accidental duplicate submissions which HMRC may investigate.

4. Inform Your Pension Provider

You must notify the provider of the employee’s final date and final pensionable pay. This ensures:

No further contributions are taken
The employee receives the correct leaver information

5. Update Your HR and Payroll Records

You must retain:

Payslips
P45
Payroll reports
Correspondence
Holiday records

for at least three years.

In my opinion keeping everything for six years is safer because it aligns with HMRC enquiry timelines.

How to Handle Accrued Holiday When Someone Leaves Suddenly

If an employee leaves without taking all their holiday you must pay them for the days they accrued.

The calculation is:

Annual holiday entitlement
Minus holiday taken
Equals holiday owed

Holiday accrues monthly. Even if they walked out suddenly they are still legally entitled to the holiday they have earned.

If they have taken more holiday than accrued you may deduct this from their final pay if your contract allows it.

In my experience employers often forget that bank holidays count toward entitlement unless the contract states otherwise.

What Happens If the Employee Owes You Money

If the employee:

Took more holiday than accrued
Received an advance
Received an overpayment
Owes loan repayments

you may deduct these from their final pay if:

The employment contract allows deductions
The deduction does not take pay below National Minimum Wage except for statutory repayment items

If there is not enough pay to recover the full amount you must not pursue it through payroll. You can instead treat it as a civil debt.

What If the Employee Does Not Return Company Property

Payroll obligations still continue even if:

They keep equipment
They ignore messages
They leave without notice

You must still:

Issue the P45
Issue the payslip
Report the leaving date

You may:

Deduct the cost of missing items if your contract explicitly permits it
Invoice them separately
Treat it as a civil recovery issue

Payroll cannot be withheld as punishment.

What If the Employee Leaves Without Notice

You still process payroll up to their last working day.

The employer may:

Deduct pay in lieu of notice if the contract allows
Not pay for unworked notice periods
Pursue breach of contract separately

In my opinion employers often confuse payroll rights with contractual rights. You must always separate the two.

Common Payroll Mistakes When Employees Leave Suddenly

Using the wrong leaving date
Failing to pay holiday owed
Issuing the P45 before the final payroll
Deducting too much for equipment
Forgetting to submit the FPS
Not informing the pension provider
Using the wrong tax code on the final run
Failing to issue a payslip
Delaying the P45 for no reason

These mistakes can create HMRC penalties or disputes with the employee.

Real World Examples to Help You Understand the Process

Example 1: Employee walks out mid shift

You pay them up to the last day worked
You calculate holiday owed
You run final payroll
You issue P45
You record the leaving date
You notify the pension provider

Example 2: Employee resigns by text and never returns

You still provide the P45
You still issue payslips
You still pay holiday owed
You follow your deductions policy for missing items

Example 3: Employee works their notice but leaves early

You pay part month salary
You calculate holiday
You report leaving date
You issue P45 on time

Example 4: Employee owes money or equipment

You check your contract
You deduct only what is permitted
You invoice the rest
Payroll continues as normal

Example 5: Employee leaves suddenly and starts a new job immediately

Their new employer uses the P45
Their tax code adjusts normally
Your obligation ends once payroll is complete

Checklist: What You Must Give the Employee

You must give:

P45
Final payslip

You should give:

Holiday calculation
Pension leaving information

You may give:

Employment confirmation letter
Full statement of earnings
HR documents on request

Conclusion

When an employee leaves suddenly the process may feel chaotic although your payroll obligations remain the same. You must process their final pay, calculate holiday correctly, submit the FPS, issue a P45 and ensure your records are accurate. In my opinion the key is to follow a clear checklist and treat the departure professionally even if the situation was unexpected or difficult.

With the right documents and proper payroll processing you can stay fully compliant, avoid disputes and close the employment relationship cleanly and confidently.