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Your last pay when you’re made redundant

When you’re made redundant from your job, you’re responsible for checking your final pay is taxed correctly. If it is not, you could get a bill from Inland Revenue at the end of the tax year.

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What’s in your final pay

Hours worked

Your final pay includes all the hours you’ve worked since your last pay until you leave your job. If you get your final pay before your last day at work, you need to check you’re paid up until your finishing time on your final day.

Unused annual leave or days in lieu

You’ll be paid for any annual leave or days in lieu (alternative holidays) you’ve built up but have not used.

How much you’ll be paid out depends on how long you’ve been in the job. If you’ve been there for:

  • less than 12 months, you’ll be paid out at 8% of your normal pay rate
  • at least 12 months, you’ll be paid out at your normal pay rate.

If you've been in your job for 12 months or more, your leave days are treated as if you took a holiday immediately after you stopped work. If any public holidays fall during that time, you’ll be paid for those too.

Example

If your last day is 18 December 2015 and you’re paid out for 6 days of unused leave, your last day is actually 30 December — so you’ll also be paid for Christmas Day and Boxing Day as long as you’ve been in the job for at least 12 months.

Lump sum payments

Any other payments are:

  • written in your employment agreement, or
  • negotiated as part of your redundancy package.

What’s taken out of your final pay

Your employer takes tax and other payments off the total amount you’re paid out. It’s your responsibility to make sure they’ve taken the right amounts.

Income tax

You’ll pay tax on the entire amount of your final pay.

Your tax rate might change if you’re being paid a lump sum. Make sure that you pay the correct tax by using the IR calculator.

IR tax on annual income calculator

ACC levy

You pay the ACC levy on:

  • wages
  • annual leave payments.

There’s no ACC levy on redundancy payments.

KiwiSaver

Your KiwiSaver contributions are taken out of your:

  • wages
  • annual leave payments.

KiwiSaver contributions do not come out of redundancy payments.

Example

You contribute 3% of your income to KiwiSaver and you receive a final pay of:

  • $1,000 wages
  • $200 of unused annual leave
  • $2500 redundancy payment.

You pay $36 of KiwiSaver contributions from your wages and unused leave — that is, 3% of $1200 ($1000 + $200).

Student loan repayments

If you’re repaying a student loan, the usual 12% repayment is taken from the total of your final pay, before any other deductions or taxes are taken out.

Example

You receive a final pay of:

  • $1,000 wages
  • $200 of unused annual leave
  • $2500 redundancy payment.

You pay $444 towards your student loan — that is, 12% of $3700 ($1000 + $200 + $2500).

Child support

If you pay child support, the usual amount you pay will be taken out of your:

  • wages
  • annual leave payments.

You do not pay child support from redundancy payments — but they might change what you have to pay in the future.

Contact IR if your circumstances change.

Changes IR need to know about and how to tell them

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