Is a redundancy payment taxed differently from salary?

Yes. A redundancy payment is an extra pay for PAYE. Inland Revenue's method annualises your recent pay, adds the lump sum, and applies one rate to the whole payment from the extra pay table: 10.5 percent up to $15,600, 17.5 percent to $53,500, 30 percent to $78,100, 33 percent to $180,000 and 39 percent above that. The ACC earners' levy does not apply to redundancy payments and KiwiSaver is not deducted from them. Student loan deductions of 12 percent do apply if you have a loan.

What is the ten year step in a public sector redundancy formula worth?

Under the Land Information New Zealand and PSA collective agreement, redundancy compensation is three months' pay for less than ten years' service and six months' pay for more than ten years, so the step doubles the payment. On $85,000 that is the difference between $21,250 and $42,500 before tax. Other agreements use other formulas, and there is no statutory redundancy payment in New Zealand.

Can I take the redundancy payment and a comparable public service role?

Usually not. Section 88 of the Public Service Act 2020 says a public service employee who has been given notice of redundancy is not entitled to a redundancy payment if, before their employment ends, they accept another State services position on terms no less favourable, or are offered an alternative position with comparable duties, in substantially the same locality, on terms no less favourable, that treats State services service as continuous. The calculator cannot tell you whether a particular offer meets that test.

Redeployment vs Redundancy Calculator NZ 2026

A restructure often ends with two envelopes: a role in the new structure, usually at a different salary, or a redundancy payment and the door. This calculator puts a number on each. It works out the redundancy package under your agreement's formula, takes PAYE off it the way Inland Revenue taxes an extra pay, and compares what you would have in hand over the next twelve months against staying on in the redeployed role. It also tells you how many weeks of no income the net payout would replace, which is the honest measure of what you are being offered.

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Current gross annual salary

Completed years of service

Redundancy formula

Custom formula: weeks of pay

Notice period (weeks)

Notice is

Redeployed role gross annual salary

Salary protection at the old rate (months)

Weeks without work if made redundant

Salary in the next job outside

Comparison period (months)

Student loan

$8,053.77

redundancy is ahead over 12 months

Redundancy package after tax$18,618.27

PAYE on the package$9,170.19

Weeks of no income it replaces14.8

Redundancy path total$69,068.27

Redeployment path total$61,014.50

The preset formula is clause 10.16 of the Land Information New Zealand and PSA collective agreement; your agreement or letter of appointment may say something different, and there is no statutory redundancy payment in New Zealand. In the public service, section 88 of the Public Service Act 2020 removes the redundancy payment altogether if you accept, or are offered, a comparable State services position on terms no less favourable before your employment ends, and this calculator cannot tell whether an offer meets that test. Take-home pay uses the 2026-27 PAYE brackets and the ACC earners' levy, with KiwiSaver left out of both paths.

How it works

The package is your salary multiplied by the formula: three twelfths under ten years' service or six twelfths at ten or more under the preset, or the custom number of weeks divided by 52. If your notice is paid in lieu rather than worked, those weeks of salary are added, because worked notice is earned on both paths and cancels out. PAYE on the package follows Inland Revenue's extra pay method: the salary stands in for the annualised recent pay, the package is added, and one rate from the extra pay table applies to the whole payment, using the column without the ACC earners' levy because redundancy payments do not carry it. If you have a student loan, 12 percent of the package comes off as well. The redundancy path then adds the net package to take-home pay at the next job's salary for every week of the comparison period after the gap you expect. The redeployment path is take-home pay at the redeployed salary for the whole period, at the old salary first for any months of salary protection. The headline is the difference, and the weeks figure is the net package divided by your current weekly take-home: how long you could be without income before the payout is spent.

Worked example

On $85,000 with nine completed years, the preset gives three months' pay, $21,250.00, and four weeks' notice paid in lieu adds $6,538.46, so the package is $27,788.46. Added to the $85,000 salary that lands in the 33 percent row of the extra pay table, so PAYE is $9,170.19 and the package after tax is $18,618.27. Current take-home is $1,261.25 a week, so the payout replaces 14.8 weeks of no income. With twelve weeks out of work and a next job at $85,000, the redundancy path over twelve months is $18,618.27 plus 40 weeks at $1,261.25, which is $69,068.27. Redeployment at $78,000 with no salary protection is 52 weeks of take-home at that salary, $61,014.50. Redundancy is ahead by $8,053.77 over twelve months. Make the gap 20 weeks and redeployment is ahead instead, which is the point: the answer turns on how long you think the search will take.

Related calculators

Lump Sum and Redundancy Tax Calculator: the full extra pay method with the payment type, KiwiSaver and student loan options.
Work and Income Stand-Down Calculator: how many weeks the gap runs before Jobseeker Support pays, and the cash to bridge it.
Redundancy Entitlement Calculator: final pay, leave and compensation under your own agreement's terms.
Contractor vs Employee Calculator: if the third envelope is a contract for the same desk, the rate that matches the salary.
Redeployment Rights Guide: reconfirmation, redeployment and a comparable role, and what refusing each one costs.
Public Sector Redundancy Guide: the collective agreement clause by clause, and the rule that cancels the payment.

Data sources: the extra pay rate table for 2026-27 and the treatment of redundancy payments from Inland Revenue, calculate PAYE for a lump sum payment; the preset formula from clause 10.16 of the Toitu Te Whenua Land Information New Zealand and PSA Collective Employment Agreement 2023 to 2025, released under the Official Information Act; the comparable position rule from section 88 of the Public Service Act 2020. Read on 3 September 2026. PAYE brackets are maintained against Inland Revenue and checked each 1 April.