Redundancy payments
ANSWER ID:11325
Redundancy is when a termination of employment is the employer's decision.
Redundancy payments may be made to:
- an employee whose position is no longer needed, or
- a seasonal worker whose usual seasonal position is no longer needed (the employee works for you each year for a continuous period of less than 12 months at a regular time each year).
Redundancy payments are treated as an lump sum pay amount because:
- they are NOT liable for ACC earner premiums OR KiwiSaver deductions, and
- Student Loan Repayments are still required to be calculated.
The IRD have put together the following factsheet which explains how your redundancy payment or retirement allowance will be taxed and how redundancy or retirement may affect your entitlements:
http://www.ird.govt.nz/forms-guides/title/forms-r/ir1009-guide-redundancy.html?id=righttabs
Is this redundancy part of a final pay?
The redundancy payment will override the tax rate for the whole pay. Therefore, if the redundancy is part of a final pay then you'll need to process the redundancy pay, then put through a separate pay for the final pay. For more information, see Preparing a final pay.