Leaving a job in NZ: your final pay, holiday pay and tax

When you leave a job, your final pay must include your last wages, all holiday pay owed (untaken annual holidays plus 8% of gross earnings since your last anniversary) and anything else owed under your agreement. Holiday pay must be paid on or before the pay day of your final pay period. The holiday pay is taxed as an extra pay, at one flat rate including the ACC levy, so the PAYE often looks high. If you earn less for the rest of the 2026/27 year, IRD refunds the difference after 31 March 2027.

What your final pay must include, and when

Employment New Zealand's final pay page (updated 2 November 2026) says your final pay must include:

• final wages for all hours worked since your last pay;
• all holiday pay owed: annual holidays, plus any public holidays and alternative holidays (days in lieu) owing;
• any other payments owed under your employment agreement or a leaving package, such as redundancy compensation.

On timing, the rule is firm: "The final leave and holiday payment must be paid on or before the pay day of the final pay period." Final wages and other amounts are usually paid at the same time. Your employer cannot hold holiday pay back until it suits them.

If your employer ends your employment, it must give the notice in your agreement or reasonable notice if the agreement says nothing; Employment New Zealand says two to four weeks is usually considered reasonable, depending on the role, length of service and industry norms. Being paid instead of working your notice needs "some form of agreement". Pay in lieu of notice is taxed as an extra pay, with the ACC levy and KiwiSaver.

How the holiday pay owed is worked out

Under the Holidays Act 2003, holiday pay on leaving has two parts.

1. Entitled but untaken annual holidays from completed years of service. These are paid out as if you took them at the end of your employment, at the greater of your ordinary weekly pay or your average weekly earnings.
2. 8% of your gross earnings since your last anniversary date, less anything already paid for annual holidays taken in advance or paid as you go. In Employment New Zealand's words: "Employees will also get payment of 8% of their gross earnings since their last anniversary date".

If you have worked there less than 12 months, you get 8% of your gross earnings since you started, less any holiday pay already paid.

A quick example. Tom earns $1,250 a week, so his ordinary weekly pay and average weekly earnings are both $1,250. He has 1 week of annual holidays left over from his last completed year, and he has earned $40,000 since his last work anniversary, with no leave in advance. His holiday pay owed is:

The 8% is not applied to everything you ever earned. Completed years are paid as weeks of leave; the 8% covers only the part year since your last anniversary.

Public holidays after your last day

This catches people out. Untaken annual holidays are treated as if you took them immediately after your last day of work. If a public holiday falls within that notional leave period, on a day you would otherwise have worked, you must be paid for it. Employment New Zealand: "the employee must be paid for it if it falls on a day that they usually would have worked if they were still employed."

Paying a public holiday can extend the notional leave period by a day, and that longer period can capture a further public holiday. So if you leave shortly before a cluster of public holidays with leave still owing, count forward from your last day using your usual work days, and check each public holiday in that window is in your final pay.

How your final pay is taxed

A final pay has two kinds of income, and they are taxed differently.

• Your normal wages go through the PAYE tables as usual, under your tax code.
• Holiday pay paid on top is an extra pay. IR335 (September 2026): "Holiday pay paid in addition to the regular pay for the pay period is treated as an extra pay. These are payments not normally paid in the pay period, such as when accumulated leave is paid out at the end of employment."

Since 1 April 2025, extra pays at the end of employment use a newer method. IR335 says employers must "use the gross earnings from their last 2 pay periods, not the last 4 weeks' pay." The employer annualises those 2 pay periods (weekly x 26, fortnightly x 13, four-weekly x 6.5, monthly x 6), adds the holiday pay, finds the bracket, and applies that one rate to the whole lump sum.

Unlike redundancy, holiday pay does carry the ACC earners' levy, so the 2026/27 rates include it: 12.25%, 19.25%, 31.75%, 34.75% up to $156,641, then 33% to $180,000 and 39% above. KiwiSaver and student loan deductions also apply to holiday pay paid out on leaving.

IRD's own example (IR335 p.40): last 2 weekly pays of $1,000, lump sum of $400. $2,000 x 26 = $52,000, plus $400 = $52,400, so 19.25% and PAYE of $77.00.

Worked example: Tom's final pay

Tom from the example above is on the M code with KiwiSaver at 3.5%, paid weekly. His final pay in the 2026/27 tax year has his last week's wages and his $4,450 holiday pay. His last 2 weekly pays were $1,250 each, so his annualised income is $2,500 x 26 = $65,000. Adding the holiday pay gives $69,450, in the $53,501 to $78,100 band: 31.75% including the levy.

If Tom had a student loan (M SL), the deduction for the pay would be 12% of the combined $5,700 above the $464 weekly threshold: $628.31.

The holiday pay works out the same with the bonus tax calculator: enter $4,450 as the extra pay and $5,000 as the last 4 weeks' pay, which annualises to the same $65,000 when your pay is steady. If your last 2 pays were unusually high or low, annualise those 2 yourself.

Why the PAYE looks high, and how it is squared up

Tom's holiday pay was taxed at 31.75%, while his weekly wages felt like they were taxed at about 20%. Two things are going on:

• The extra pay rate is the marginal rate on annualised income plus the lump sum, applied flat to the whole lump sum. A normal week's PAYE is an average across all the brackets.
• The annualised figure assumes you would keep earning at the same rate for a full year. If you do not, too much tax has been deducted.

Say Tom left after 33 weeks of the 2026/27 year and earned nothing more before 31 March 2027. His income for the year is $41,250 in wages plus $4,450 holiday pay, $45,700. On the M code with no other income, PAYE deducted across the year was $9,572.45. The tax and levy actually owed on $45,700 is $7,705.25 ($6,905.50 income tax plus $799.75 levy). IRD's year-end assessment would refund the difference of $1,867.20. IRD says: "At the end of the tax year we work out if you've paid the right amount of tax."

If instead Tom went straight into a new job at the same pay for the remaining 19 weeks, his deductions and his liability for the year would land within a dollar of each other. The refund only appears when your income for the year turns out lower than your pay rate suggested. It can go the other way too, for example if a new job is on the wrong secondary code. IR335 warns employers that if they use the wrong threshold or rate, "your employee may end up with a tax bill later." See year-end refunds and bills.

A checklist before and after your last day

1. Get your leave balance in writing: weeks of entitlement from completed years, and gross earnings since your last anniversary.
2. Do the holiday pay sum yourself: untaken weeks at the greater of ordinary weekly pay or average weekly earnings, plus 8% since your anniversary, less any leave in advance.
3. Check public holidays that fall in the notional leave period after your last day.
4. Check your payslip lines: normal wages, holiday pay, notice pay and any redundancy should be separate. Redundancy has no levy or KiwiSaver; the others do. Our redundancy tax guide explains the difference.
5. Check the date: holiday pay is due on or before the pay day of your final pay period.
6. Get your new tax code right at your next job, using the tax codes guide.
7. After 31 March 2027, check your year-end assessment in myIR for a refund.

Questions people ask

When do I get my final pay in NZ?

Holiday pay owed must be paid on or before the pay day of your final pay period, and final wages are usually paid at the same time. Employment New Zealand sets this out on its final pay page.

How much holiday pay do I get when I leave?

Any untaken annual holidays from completed years, paid at the greater of ordinary weekly pay or average weekly earnings, plus 8% of your gross earnings since your last anniversary, less any holiday pay already paid. Under 12 months, it is 8% of gross earnings since you started.

Why is my holiday pay taxed so much?

It is an extra pay, taxed at the marginal rate on your last 2 pay periods annualised plus the holiday pay, including the ACC levy. If your income for the year ends up lower, IRD refunds the over-deduction after 31 March.

Is KiwiSaver deducted from holiday pay when I leave?

Yes. KiwiSaver and student loan deductions apply to holiday pay paid out on leaving. Only redundancy compensation is free of KiwiSaver deductions and the ACC levy.

Do I get paid for public holidays after I leave?

Yes, if a public holiday falls in the period your untaken annual holidays would have covered, on a day you would usually have worked.