Termination Essentials

NZPPA Certificate in Payroll Termination Essentials (Level 4)

Additional agreed annual leave

As with long service leave, there is no legislative requirement for additional leave provided to an employee. It must be seen as an agreed term, so the terms agreed upon for this additional leave should be followed. What does payroll need to do? • Find out if this has been agreed to be paid out on termination • What is the agreed rate for the leave • It will be taxed as an extra pay. • If does not extend forward from termination like annual holiday entitlement. • It will be part of the gross for the 8% on termination. Please note: • Do watch out for clauses that state that this additional leave will be provided under the rules of the Holidays Act. • If this is stated, then leave should be treated as a minimum entitlement under the Holidays Act.

Taxable allowances

Any taxable allowance payable to an employee is based on an agreed-upon term,

What does payroll need to do? • A taxable agreed allowance will be part of the taxable gross (PAYE & KiwiSaver) on termination. • Also, it will be part of the taxable gross for leave and the gross for the 8%.

Reimbursing allowances

This is outside of payroll but needs to be considered in a final pay.

What does payroll need to do? •

Any reimbursing payment that needs to be paid to an employee on termination is not part of taxable gross earnings or as part of leave, including the 8% on termination.

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

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