Q:When paying Redundancy, Retirement or Medical Incapacity – are these considered Gross Earnings under Section 25 (2) of the Holidays Act?
My understanding has always been that a payment triggered by the Termination of Employment is not considered Gross Earnings, rather a Compensation payment.
A: Redundancy is excluded from gross earnings, retirement and medical incapacity are not
What gross earnings don’t generally include
- reimbursements
- any weekly compensation payable under the Accident Compensation Act 2001 that the employer doesn’t have to make
- payment for leave from work when an employee is on volunteers leave for military service
- payment for annual holidays that have been paid out instead of taken (ie up to one week per entitlement year)
- any payments that the employer is not bound, by the terms of the employee’s employment agreement, to pay the employee. These payments will be truly discretionary, and will be relatively rare.
- redundancy payments
Note that:
- If an employment agreement states that a payment is included in gross earnings, then it must be included even if that type of payment would not usually be included.
- If it is unclear whether a payment should be included in gross earnings, it is recommended that employers err on the side of caution and include the payment or obtain legal advice before making a decision to exclude the payment. For example, whether employee share benefits are included in gross earnings will depend on their specific nature.
Reference: https://www.employment.govt.nz/leave-and-holidays/calculating-payments
Here is the MBIE gross earnings tool have a look at this: http://apps.employment.govt.nz/gross-earnings-tool