Termination Essentials

NZPPA Certificate in Payroll Termination Essentials (Level 4)

Exit inducement payments

An exit inducement payment made by an employer to an employee when the employee’s job has been changed in some way, including the termination of the employee’s employment. This is sometimes called a settlement payment and most likely will be a written and signed agreement between the employee and the employer.

Note: Ensure you check each item that is to be paid.

▪ Does it form part of gross earnings for leave?

▪ Does it for part of gross earnings for KiwiSaver?

▪ Is there anything else you should be aware of?

Section CE 10 Exit inducements An amount is income of a person if they derive it for —

(a) the loss of a vocation; or (b) the loss of a position; or (c) leaving a position; or (d) loss of status.

How should it be taxed?

The Income Tax Act 2007 clearly defines an extra pay and includes Exit Inducements.

Section RD7. Extra pay includes an amount of income that a person derives under section CE 9 (Restrictive covenants) or CE 10 (Exit inducements) if the income is derived in connection with an employment relationship between the person and the person who paid the amount;

© New Zealand Payroll Practitioners Association, Mar 2026, Ver 9

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