Process a redundancy payment

Add a redundancy payment pay item to keep it separate from other employee earnings. Add the payment to the employee's payslip, then process an unscheduled pay run to make the payment.

Before you start

Set up a custom pay item for the redundancy payment.

How it works

  1. Create an unscheduled pay run for the redundancy payment.
  2. Adjust deductions and contributions on the employee’s payslip:
    • Change the employee's tax code to WT. The ACC earners' levy doesn't apply to redundancy payments. By changing the tax code, you ensure the payment appears in the correct column of your employer monthly schedule (IR348).
    • Cancel out KiwiSaver contributions generated by Xero. You don't need to deduct these contributions from the redundancy payment (unless the employee agrees otherwise).
    • Add student loan deductions if the employee is repaying a student loan.
    • Cancel out child support deductions (you make these deductions in other pay runs). Do the same for court fines or Ministry of Social Development repayments.
    • Keep Inland Revenue Arrears if these appear on the employee's payslip.

Create an unscheduled pay run for the redundancy payment

Before creating an unscheduled pay run, delete other draft pay runs with the same pay calendar.
  1. In the Payroll menu, select Pay Runs.
  2. Under New Pay Run, select Unscheduled Pay Run.
  3. Click Process Pay Run.
  4. Select a pay calendar and a pay period.
  5. Click Create.

Adjust the employee's payslip to include the redundancy payment

  1. From the list of pay runs, select the unscheduled pay run you’re using for the redundancy payment.
  2. Select the checkbox next to the employee you want to add to the pay run.
  3. Click the employee's name to open their payslip.
  4. Reset the amounts for default earnings and other line items to zero.
  5. Under Earnings, click Add.
  6. Select the redundancy pay item, and edit the amount owed if necessary.
  7. Change the employee's tax code to WT:
    • Under Employee Taxes, click Edit tax settings.
    • Under Payslip tax code, select WT.
    • Under Payslip tax rate %, enter the appropriate tax rate. See Tax redundancy and retiring payments (Inland Revenue).
    • Click Apply.
  8. Remove employee and employer KiwiSaver contributions:
    • Under Statutory Deductions, click Add.
    • Select KiwiSaver Manual Adjustment. Add a negative amount to cancel out the employee contribution generated by Xero.
    • Under Superannuation, click Add.
    • Select KiwiSaver Manual Adjustment. Add a negative amount to cancel out the employer contribution generated by Xero.
  9. (Optional) Add or remove other statutory deductions:
    • Under Statutory Deductions, click Add.
    • Select the applicable manual adjustment (eg Student Loan Manual Adjustment). Enter a positive amount to add a deduction or a negative amount to remove a deduction.
  10. Under Other Pay Information, change Days Paid to zero.
  11. Click Save & Close.
  12. (Optional) Click the Memo button Image of the Memo button. to add a personal message to the employee’s payslip.
  13. Click Post. When prompted, click Post again to post the pay run.
You can now end an employee's employment by making a final payment.