Redundancy pay calculator: what your package is worth after tax
New Zealand law sets no redundancy pay: you get what your employment agreement says, and without a redundancy clause none may be owed. Put in your agreement's formula, such as 4 weeks for the first year and 2 for each year after, with notice paid instead of worked and your final holiday pay, to see the total after tax.
Worked out for the example. Change the boxes to make it yours.
| Service | 6 years, 4 months |
|---|---|
| Redundancy weeks (4 + 2 x 5 later years) | 14 weeks |
| Redundancy compensation at $1,500.00 a week | $21,000.00 |
| Notice paid instead of worked, 4 weeks | $6,000.00 |
| Final holiday pay | $4,200.00 |
| Total before tax | $31,200.00 |
| PAYE | -$10,293.00 |
| ACC earners' levy (not on redundancy pay) | -$178.50 |
| KiwiSaver at 3.5% (not on redundancy pay) | -$357.00 |
| Total after tax | $20,371.50 |
| The same in weeks of your usual take-home pay | 18.2 weeks |
- Tax is the extra tax a year at your base pay carries because of these payments. Your employer works out PAYE on them as a lump sum, so the amount withheld can differ a little and is squared up at the end of the tax year.
- Redundancy pay has no ACC earners' levy and no KiwiSaver taken from it; notice pay and holiday pay do. A student loan repayment is taken from all of it.
Free while you are between jobs. Your account adds this package, after tax, to the savings in your money runway on Insights, after asking, and you can change any figure there.
There is no legal redundancy pay in New Zealand
Employment New Zealand is plain about it: you are only entitled to redundancy compensation if your employment agreement says so. That can be your individual agreement, a collective agreement or a workplace policy that forms part of it. If none of them mentions redundancy pay, there may be no compensation, though an employer can still offer some and it is worth asking. What you are always owed is your notice and your final pay, including holiday pay. Our guide to redundancy in New Zealand covers the process your employer must follow.
How the calculator applies your clause
Most redundancy clauses pay a number of weeks for the first year of service and a smaller number for each year after, often with a cap. With 6 years and 4 months of service, 4 weeks for the first year and 2 for each later year, and only complete years counting, the example pays 4 + 2 x 5 = 14 weeks. At $1,500 a week that is $21,000. If your clause pays part years pro rata, choose that and the extra months count. Read your clause for which pay it uses: most use base pay, without overtime or allowances.
Notice, holiday pay and tax
Your employer must give you the notice in your agreement. If you are paid for it instead of working it, that pay is added here; our article on garden leave and pay in lieu of notice explains the difference. Final holiday pay comes from our final pay calculator.
Inland Revenue taxes redundancy pay as a lump sum. It carries no ACC earners' levy and no KiwiSaver deduction, but a student loan repayment is taken from it. Notice pay and holiday pay carry all three. The after-tax figure is the extra tax a year at your base pay carries because of the package; the amount your employer withholds can differ a little and is squared up at the end of the tax year. How much redundancy pay you get also helps decide whether a stand-down for Jobseeker Support is 1 or 2 weeks.
Questions
How much redundancy pay am I entitled to in NZ?
Only what your employment agreement, a collective agreement or a workplace policy says. New Zealand law sets no minimum redundancy pay, so without a redundancy clause none may be owed. Your notice and final holiday pay are owed either way.
How is redundancy pay calculated?
By your clause's formula, commonly a number of weeks for the first year of service plus a smaller number for each later year, sometimes capped, multiplied by your weekly pay. 4 weeks plus 2 for each of 5 later years is 14 weeks.
How is redundancy pay taxed in NZ?
As a lump sum, at a single PAYE rate worked out from your recent pay plus the payment. There is no ACC earners' levy and no KiwiSaver deduction on redundancy pay, but student loan repayments are taken from it.
Is notice pay part of redundancy pay?
No, it is separate. You are owed the notice in your agreement whether you work it or are paid instead, on top of any redundancy compensation and your final holiday pay.
What happens when I save this?
Your account adds the after-tax package to the savings in your money runway on Insights, after asking, so you can see how many weeks it lasts. It is free while you are between jobs.
Sources
- Employment New Zealand: redundancy.
- Employment New Zealand: final pay.
- Inland Revenue: taxing employee redundancy.
- Inland Revenue: calculate PAYE for a lump sum payment at the end of employment.
- Inland Revenue: redundancy and KiwiSaver.
- Inland Revenue: redundancy and student loans.
- Work and Income: stand-down periods.
More free tools: see all the calculators.