How to withhold amounts from unused leave payments on termination of employment

Definitions

Genuine redundancy

Genuine redundancy has the following characteristics:

• the employee must have been dismissed from a job, not left voluntarily
• the employee must have been made redundant (where the employee's particular work has ceased or tapered off, or the workplace has relocated or closed), and
• the dismissal must have occurred before the employee had to retire (for example, before the age of 65, or before a set period of service).

Invalidity

Invalidity is where physical or mental capacity stops a payee from continuing in their present line of work, forcing them to leave employment early (and in any event, before the age of 65).

Since 1 July 1994 invalidity has required certification from two qualified medical practitioners.

Early retirement schemes

A payer-devised early retirement scheme offers incentive payments encouraging staff to retire early or resign. The payer must submit the scheme's details to us and, if it meets certain criteria, we will approve it as an 'early retirement scheme'. Under the scheme, certain payments become employment termination payments with a concessional component. You can find detailed information about early retirement schemes in Employment termination payments - when an employee leaves (NAT 71043).

Payments for unused annual leave paid as part of an early retirement scheme are not employment termination payments.

Normal gross earnings

Normal gross earnings include all payments, except those relating to termination payments, received in the last full period of employment (this includes taxable allowances, overtime, bonuses etc). Therefore, a payee's normal gross earnings are those earnings relating to the last full pay period worked.

Where a payee's pay fluctuates significantly over a number of pay periods, we will accept an average of gross taxable earnings for the financial year to date over the number of pays received.