Termination Essentials

NZPPA Certificate in Payroll Termination Essentials (Level 4)

Extra Pay

Extra Pay (formally known as: lump sum payments or extra emoluments) are payments made to an employee, such as annual bonuses, redundancy or back pay. Overtime or any regular payments are not lump sum payments. From 1 April 2025, there are now two different variations in how extra pay is calculated (based on the assessment period for the annualisation to determine gross): • Standard approach: All extra pay, paid as part of the employee's regular pay period (ongoing employment), based on the last 4 weeks [ THIS IS NOT USED FOR TERMINATION PAYS ]

• Termination approach: All extra pay, paid as a part of the employee termination pay, based on the last two pay periods.

Common extra pay on termination (not an exhaustive list):

• annual or special bonuses (paid on termination)

• retiring or redundancy payments

• payments for accepting restrictive covenants (on termination)

exit inducement payments

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• gratuities (paid on termination)

• Back paid holiday pay (remediation)

• Annual holiday entitlement paid out on termination

• employee share scheme benefits (paid in a termination pay.

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

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