Termination Essentials

NZPPA Certificate in Payroll Termination Essentials (Level 4)

Example 1 – Worked for the last two pays

Pierre owns “Pierre’s Pastries” an upmarket bakery in Auckland famed for the quality of its pastries and croissants, and has two employees, Connor and Larissa.

Unfortunately, after following a redundancy process is made redundant.

Connor is paid weekly, and income can vary. Connor’s last pay includes a redundancy payment of $1000. This extra pay amount will be paid in the period ending 21 April. Connor’s wages information is below:

Period End

Status

PAYE income payment (excluding extra pays)

21 April

At work (termination period) $500.00

14 April

At work

$650.00

7 April

At work

$550.00

To determine the amount of tax that applies to the extra pay, annualise the two most recent periods for which payment was made. Ignore the period ending 21 April because that is the period including the extra pay and is expressly excluded by section RD 17(1BA).

The two most recent pay periods for which Connor is paid are 14 April and 7 April. The annualisation calculation is as follows:

Step Calculation

Result

1

Add together the amounts received for the pay periods ended 7 April and 14 April ($550 +$650). The sum of the two pay periods represents two weeks’ PAYE income payments. (weekly – total the two weeks and multiply by 26)

$1,200

2

Annualised income ($1200 x 26) Add extra pay to annualised income. ($31,200 + $1,000)

$31,200

3

$32,200

4

Using table below the income range

($32,200 is in the $15,601 to $53,500 range)

17.5%

Connor’s total extra pay at end of employment pay will be $1,000 less PAYE of $175.00 – that’s $825.00 nett, this will be on top of his normal pay.

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

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