Termination Essentials

NZPPA Certificate in Payroll Termination Essentials (Level 4)

Example 2 – Unpaid Leave - Gap between current pay and previous paid period

For the last three years, Kelvin has worked at “Will’s Café”, a Wellington café owned by his employer.

Unfortunately, after following a redundancy process is made redundant. Kelvin is paid weekly. Kelvin's last PAYE payment includes the amount of $2,000 in redundancy payment and will be paid in the period ending 26 May.

The following recent salary information is: Period End Status

PAYE income payment (excluding extra pays)

26 May

At work (termination period)

$550.00

19 May

Unpaid leave

$0.00

12 May

At work

$500.00

5 May

At work

$600.00

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 periods ending:(expressly excluded by section RD 17 1BA). • 26 May as the period includes the extra pay • 19 May as period unpaid for that pay period. The two most recent pay periods for which Kelvin is paid are 12 May and 5 May. The annualisation calculation is as follows: Step Calculation Result 1 Add together the amounts received for the pay periods ended 12 May and 5 May ($600 +$500). $1,100

2

The sum of the two pay periods represents two weeks’ PAYE income payments. (weekly – total the two weeks and multiply by 26)

Annualised income ($1100 x 26)

$28,600

3

Add extra pay to annualised income. ($28,600 + $2,000)

$30,600

4

Using table below identify the income range

($30,600 is in the $15,601 to $53,500 range)

17.5%

Kelvin’s total extra pay at end of employment pay will be $2,000 less PAYE of $350.00 – that’s $1,650.00 nett, this will be on top of his normal pay.

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

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