Termination Essentials

NZPPA Certificate in Payroll Termination Essentials (Level 4)

• Tax-free payments should only be made if the situation is documented in a settlement agreement. If the settlement is reached within the workplace, to ensure the settlement can be enforced, the record of settlement should be written down and given (referred to as submitted) to the Employment Mediation Services to check and sign (see reference at the end of the section on this). • Payroll could also receive a settlement agreement from other agencies such as: Mediation Service, Employment Relations Authority or even the Employment Court. • A copy of the settlement agreement to justify why it was made tax-free should be kept as part of payroll records just in case at a later date, IR investigates this payment. IR can overturn a compensation payment if they believe it does not meet the requirements for hurt and then put the PAYE bill onto the employer.

• Any other minimum entitlements provided by law owed to the employee must be paid (if a termination situation) and cannot be used offset any compensation paid to the employee.

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

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