Redundancy pay in New Zealand: what you are owed, how it is taxed and how to check
Financial advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a trading name.
New Zealand has no statutory redundancy payment: whether you get anything, and how much, depends entirely on what your employment agreement says (Employment New Zealand, retrieved 9 September 2026). If it is silent, there is no legal entitlement to a payment at all, only your notice period and final pay. Any redundancy payment is taxed as a lump sum, at 10.5% to 39%.
Is there a legal minimum redundancy payment in NZ?
No. Employment New Zealand states plainly that "whether an employee receives a redundancy payment depends on their applicable employment agreement and any negotiations they've had with their employer" and that "if the employment agreement does not mention redundancy pay, then there would be no compensation" (Employment New Zealand, Redundancy, retrieved 9 September 2026). This surprises a lot of people, because many other countries do set a legal minimum. In New Zealand, redundancy compensation exists only where an employer has agreed to pay it, either in the employment agreement itself or through separate negotiation at the time.
What an employer must always do, regardless of whether redundancy pay is owed, is follow a fair and proper process: have a genuine reason, explore redeployment first, and give proper notice (Employment New Zealand, Redundancy, retrieved 9 September 2026). Redundancy is meant to be a last resort, not a way to remove someone and quietly refill the same role, which would likely be an unjustified dismissal.
Two things are always guaranteed by law regardless of your specific agreement, and one is not:
| What you are owed | Always guaranteed by law, or only if your agreement says so |
|---|---|
| Notice, worked or paid in lieu | Always guaranteed, see notice periods in NZ |
| Final pay: unused annual holidays and other owed entitlements | Always guaranteed |
| A fair, genuine redundancy process with redeployment considered first | Always guaranteed |
| A redundancy payment on top of the above | Only if your employment agreement provides for one |
Source: Employment New Zealand, Redundancy, retrieved 9 September 2026.
How is redundancy calculated in NZ?
There is no statutory formula. If your employment agreement includes a redundancy clause, that clause sets the calculation, commonly a number of weeks' pay per year of service, and you follow exactly what it says (Employment New Zealand, Redundancy, retrieved 9 September 2026). If the agreement is silent, there is nothing to calculate: you are entitled only to your notice period and your normal final pay.
How do I calculate redundancy pay?
Check your employment agreement first. If it sets out a formula (for example, a fixed number of weeks per year of service, sometimes with a cap), apply that formula exactly as written. If your agreement does not mention redundancy pay, there is no legal calculation to make, since no payment is owed unless your employer agrees to one anyway (Employment New Zealand, Redundancy, retrieved 9 September 2026).
Do you get more redundancy if you are over 45?
No. New Zealand law does not set an age-based redundancy formula, so any age-related increase would have to come from your specific employment agreement, and most agreements that do include redundancy pay use length of service, not age, as the driver (Employment New Zealand, Redundancy, retrieved 9 September 2026). If your agreement mentions age as a factor, that clause governs; there is no general legal rule that gives older employees more.
What are you entitled to when you are made redundant in NZ?
You are always entitled to: proper notice (worked, or paid in lieu), your final pay covering unused annual holidays and any other owed entitlements, and a fair and genuine redundancy process (Employment New Zealand, Redundancy, retrieved 9 September 2026). A redundancy payment on top of that is owed only if your employment agreement provides for one. See our guide to notice periods in NZ for how the notice component itself works.
Is it better to resign or take redundancy?
This depends on what your agreement says and your own financial position, and there is no single right answer. Resigning voluntarily can trigger a longer, 13-week non-entitlement period before Jobseeker Support starts, while accepting a genuine redundancy generally means only the standard 1 to 2 week stand-down applies once you claim a benefit (Work and Income, Stand-down periods, retrieved 9 September 2026). See our Jobseeker Support guide for exactly how that difference plays out, and get independent advice before resigning ahead of an expected redundancy, since doing so can forfeit any redundancy payment you would otherwise have been owed.
The difference in how quickly Jobseeker Support can start is one of the clearest financial reasons not to resign ahead of an expected redundancy:
| How your job ended | Typical wait before Jobseeker Support starts |
|---|---|
| Genuine redundancy | 1 to 2 week stand-down |
| Resigned voluntarily, no good reason | Up to 13 weeks (non-entitlement period) |
| Dismissed for misconduct | Up to 13 weeks (non-entitlement period) |
Source: Work and Income, Stand-down periods, retrieved 9 September 2026. See our Jobseeker Support guide for the full stand-down rules.
Can my employer make me redundant without paying anything extra?
Yes, legally, if your employment agreement does not include a redundancy pay clause: you are still owed proper notice and your normal final pay, but no additional redundancy payment is required by law (Employment New Zealand, Redundancy, retrieved 9 September 2026). This is the single most misunderstood fact about redundancy in New Zealand, since many people assume a payout is automatic.
What is the difference between redundancy pay and notice pay?
Notice pay (or payment in lieu of notice) covers the period between being told your job is ending and your actual last day, and it is always owed under either your agreement or "reasonable notice" rules. A redundancy payment is a separate, additional sum that is only owed if your employment agreement specifically provides for one (Employment New Zealand, Redundancy and Notice periods, retrieved 9 September 2026). See our notice periods in NZ guide for how notice itself works.
Does a redundancy payment affect my KiwiSaver contributions?
No. Redundancy payments are one of the specific lump sum payments exempted from KiwiSaver employee and employer deductions, unlike most other lump sums such as bonuses or cashed-in annual leave (Inland Revenue, Lump sum payments, retrieved 9 September 2026). Your and your employer's normal KiwiSaver contributions still stop once your employment itself ends, since those relate to ongoing salary rather than a one-off payment.
What are the 5 stages of redundancy?
New Zealand law does not define a fixed "five stages" of redundancy; instead, Employment New Zealand sets out the workplace change process an employer must follow: identifying the need for change, consulting genuinely with affected staff, considering redeployment, giving proper notice, and calculating final pay (Employment New Zealand, Redundancy, retrieved 9 September 2026). Our step-by-step guide to the first 30 days after redundancy covers what an employee should do once notice has actually been given.
How redundancy pay is taxed
A redundancy payment is taxed as a "lump sum payment", also called extra pay, at a flat rate applied to the whole payment rather than at your marginal income tax rate on top of your salary, and it is exempt from the ACC earners' levy and from KiwiSaver deductions, unlike most other lump sums (Inland Revenue, Lump sum payments, retrieved 9 September 2026). The rate depends on your total annualised income once the redundancy payment is added on top.
Redundancy pay is taxed at whichever of these rates your total annualised income (regular income plus the redundancy payment) falls into, using the rates that exclude the ACC earners' levy since redundancy payments are exempt from that levy:
| Annualised income including the redundancy payment | Tax rate on the redundancy payment |
|---|---|
| $15,600 or less | 10.5% |
| $15,601 to $53,500 | 17.5% |
| $53,501 to $78,100 | 30% |
| $78,101 to $156,641 | 33% |
| $156,641 to $180,000 | 33% |
| More than $180,000 | 39% |
Source: Inland Revenue, Calculate PAYE for a lump sum payment, retrieved 9 September 2026. The whole redundancy payment is taxed at the single rate for the row your combined income falls into, not split across the brackets the way ordinary salary is.
How much tax will I pay on $50,000 redundancy?
It depends on your other income for the year, because the rate is set by your total annualised income including the payment, not by the redundancy figure alone. If your combined annualised income (regular pay plus the $50,000) lands between $15,601 and $53,500, the payment is taxed at 17.5%; if it pushes your total into the $53,501 to $78,100 band, the whole $50,000 is taxed at 30% instead (Inland Revenue, Calculate PAYE for a lump sum payment, retrieved 9 September 2026). Work out your own annualised income first, then read the rate off the table above.
How much tax will I pay on $100,000 redundancy?
Again, it depends on your total annualised income for the year including the $100,000. Most people receiving a payment this size will find their combined income sits in the 33% band ($78,101 to $180,000), so $100,000 of redundancy pay in that band would be taxed at 33%, unless your other income already pushes the combined total above $180,000, in which case the whole payment is taxed at 39% (Inland Revenue, Calculate PAYE for a lump sum payment, retrieved 9 September 2026).
What is the redundancy cap in 2026?
There is no government-set cap on how much redundancy pay an employer can offer; any cap comes only from what your own employment agreement specifies, if it specifies one at all (Employment New Zealand, Redundancy, retrieved 9 September 2026). The tax rate table above does have income bands, which some people describe informally as a "cap", but that is a tax-rate threshold, not a limit on the payment itself.
Do I need to pay tax on redundancy payments in New Zealand?
Yes. A redundancy payment is taxable income, and your employer should deduct PAYE at the lump sum rate and pay it to Inland Revenue on your behalf; if they don't, you become responsible for paying that tax yourself (Inland Revenue, Redundancy and income tax, retrieved 9 September 2026). At the end of the tax year, Inland Revenue automatically assesses most people, or you may need to file an IR3, and depending on your total year's income you could end up owing more tax or being due a refund.
Redundancy pay, notice, and Jobseeker Support work together
A redundancy payment (if your agreement provides one), your notice pay, and Jobseeker Support are three separate things with three separate rules, and it is easy to assume one covers what the others actually do. QuoteHub's read is that the safest way to plan a redundancy is to check your employment agreement for a redundancy clause first, work out your notice entitlement second, and only then look at what Jobseeker Support or existing income protection cover fills in behind that, rather than assuming any one of the three will stretch to cover the gap on its own.
This page is part of our losing your job in NZ cluster. See notice periods in NZ for how much notice you're owed, Jobseeker Support for the weekly rates and stand-down rules that follow a redundancy, a mortgage holiday in NZ if your home loan is now under pressure, and our step-by-step first 30 days after redundancy for the order to work through all of this in. If you had redundancy cover attached to another policy, our guide to redundancy insurance in NZ explains which insurers still sell it, and our income protection insurance guide and income protection calculator cover the broader cover that can replace income lost to illness or injury as well as job loss. Our income protection cost guide, our comparison of income protection insurance, our income protection tax guide, our page on loss of income insurance and our page on whether you need income protection insurance go further into that option, and our insurance when changing jobs guide covers what happens to any existing cover once you leave. For the insurance side of a mortgage specifically, see mortgage repayment insurance, life insurance for mortgage holders and our mortgage protection calculator. Our how to compare insurance quotes in NZ page and our methodology explain how we build the comparisons this cluster links to, and how it works covers QuoteHub itself.
Financial advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a trading name.
Adviser's view
QuoteHub's read is that the most misunderstood fact in this whole cluster sits here: New Zealand has no statutory redundancy payment, so an employer who follows a fair process and whose agreement is silent on redundancy pay owes nothing beyond notice and normal final pay, which surprises people who assume a payout is automatic everywhere.
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Cite this page QuoteHub NZ (2026). Redundancy Pay NZ: What You Are Owed and How It Is Taxed. www.quotehub.co.nz/guides/losing-your-job/redundancy-pay-nz. Updated 2026-09-09.
References
- Employment New Zealand: Redundancy
- Inland Revenue: Taxing employee redundancy
- Inland Revenue: Calculate PAYE for a lump sum payment
- Inland Revenue: Lump sum payments
- Inland Revenue: Redundancy and income tax
- Work and Income: Stand-down periods
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