One of the most common inquiries through the NZPPA PayTech Adviceline concerns Extra Pay and its implications. This webinar will cover everything you need to know about handling Extra Pay correctly.

For

Payroll practitioners who process extra pay in various situations, as well as anyone needing to understand extra pay payments, their application in payroll, and their flow-on effects on the business.

Overview

Extra pay, commonly known as lump sum payments (also referred to as extra emoluments), is a payment that is not regularly included in salary or wages for a pay period. Extra pay uses an annualised calculation to determine the tax rate. As of 1 April 2025, a new approach will apply to extra pay as part of termination pay.

In this online seminar, both the current and new approaches (for termination and extra pay) will be fully covered, with explanations for each type of extra pay, the reasons for it, and fully worked examples demonstrating the different approaches.

All NZPPA webinars are recorded, and attendees will receive a link to the recorded session. Comprehensive PDF course notes will be provided during and after the webinar, along with access to the NZPPA support email. You are encouraged to ask questions.

Contents

1. Understanding what extra pay is

• Defining what payments are extra pay.
• What needs to be written in the employment agreement or policy to support payroll in paying extra pay.
• Flow on effects if extra pay is made to an employee, which the business and payroll need to know.

2. Types of Extra Pay Calculations:

• Standard extra pay
• Standard extra pay (when an employee is on secondary tax)
• Extra pay on termination (New as of 1 April 2025)
• Extra pay on termination (when an employee has different pay periods)

3. How other deductions impact extra pay

• KiwiSaver (employee, employer and ESCT)
• Student loan
• Employees on non-notified rate and non-resident seasonal workers
• Other types of deductions

4. Types of standard extra pay (ongoing employment)

• Annual or special bonuses
• Gratuities (tips)
• Back pay
• Employee share scheme benefits – if you choose to deduct tax.
• Any agreed taxable payment

5. Holidays Act (Extra Pay)

• How extra pay impacts gross earnings
• Cashed in annual leave and Alternative Holidays
• Holiday pay paid in advance

6. Types of termination extra pay

• Redundancy payments or retiring payments
• Exit inducement payments
• Payments for accepting restrictive covenants
• ACC employee resigns
• Medical Retirement
• Personal grievance payment
• Ex gratia payments
• Discretionary payments (Holidays Act) made on termination
• Notice paid in lieu
• Termination based on disciplinary process and decision
• When is a commission payment treated as extra pay on termination
• Agreed leave (extra annual, long service) that is payable on termination
• Any agreed taxable payment to be paid on termination
• Extra pay paid after termination

7. Holidays Act (Extra Pay)

• Annual holiday entitlement paid out on termination
• 8% holiday pay on termination
• The effect of a discretionary payment on an extra pay calculation on termination.
• Holidays Act remediation payments paid holiday pay

8. Reporting and recording extra pay

• How extra pay is reported to IRD
• What should be recorded in the records
• What should be included on the payslip (if provided)?

Webinar Date

• 10 April 2025 (9 am to 11.30 am)