Q: We have a ‘retention incentive’ after 4 years where employees receive a one-off payment of the average of their previous 52 weeks’ earnings. If this happens to fall within the period of paid parental leave, is it something we can pay without it affecting the employees’ entitlement to those payments? We have had people report problems with IRD in the past. Given that it’s not related to any work done, I can’t see why IRD should have a problem with it, but we don’t want to cause an issue for our employees. Can you direct me to where to ask for clarification?
A: This is an additional benefit (agreed). You, the employer, have done everything you need to do. If the employee is receiving a tax bill, etc., it is because they are not actively managing their tax affairs (not a payroll role). If the payment will result in a bill for the employee, they can request to be taxed at a higher rate when the payment is made. It is their responsibility, not the employer’s (we are not their MUM!). We are also not financial advisers.
What you could do is add a few references to the policy to make them aware that they should assess whether they could face a higher tax bill. If they want the payment taxed at a higher rate when paid, the request must be in writing. Also, encourage them to seek financial advice from their financial advisor.