Termination Essentials

NZPPA Certificate in Payroll Termination Essentials (Level 4)

Extra Pay being made on termination - Steps to take

1. Identify what your employee has earned (before PAYE) over their last two paid pay periods before the pay period with the extra pay being paid. Note: Do not include any other amounts of extra pay that may have been made in these two pay periods Note: last two paid pay periods - the definition of ‘pay periods’ in the ITA 2007 refers to the period on which an employee received regular payments, therefore payments made out of cycle are not to be included.

2. Multiply by the employees pay frequency:

Pay frequency

Multiply by

Weekly

26

Fortnightly

13

Monthly

6

4-weekly

6.5

This becomes the annualised income.

3. Add the amount of the extra pay to the annualised income to get the grossed-up amount.

4. Select the tax rate based on the type of extra pay (redundancy and retirement payments – flat tax rate) and other extra pay flat tax rate + earner levy.

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

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