HR Practice For Payroll Practitioners

HR Practice for Payroll Practitioners

Death of an employee

In this situation, the employer should not pay the employee’s final pay until it has received instructions from the executor of the estate or if the final payment is less than $15,000 to a beneficiary that has met the requirement under the Administration Act.

Final pay for a deceased employee

Final pay for a deceased employee is taxed as per the normal tax rates and rules based on what is being paid under legislative terms (minimum leave entitlements) and what has been agreed upon under their employee employment agreement.

• Common misconception: There is no special tax rate or option to pay no tax on a deceased employee's final pay.

Steps for payroll to check and confirm for a deceased employee:

• Once payroll has been notified that an employee has died (from within the business or externally), someone in the business will need to confirm the employee's death. This would be done through the recorded details of next of kin or emergency contact (one of the reasons this information should be kept up to date). (executor, family member, or someone else) so that we can confirm whether the employee has a will and whether it will be administered. If the employee has under $15,000 and no will or executor, then the procedure under the Administration Act can be followed (see Appendix A). • One aim is to identify the employee's representative • The final pay will follow standard legislative and agreed terms but, depending on the instructions provided by the representative of the deceased employee (executor or other approved person), may be paid into a different bank or trust account. • Payroll needs to ensure that all paperwork on identifying the representative, instructions of payment (to where) and proof of payment are fully checked and confined and are retained as part of the record on the employee file. This includes all IRD PAYE filing requirements.

© New Zealand Payroll Practitioners Association, Sep 2024, Ver 12

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