In Lieu of Notice payments can be paid to an employee if the employer requests the employee to leave immediately once notice has been given. The number of weeks to be paid is specified in the employment contract which should have been signed by both parties.
Conversely, the employer may make deductions from the employees final pay if the employee defaults on the agreed notice period (provided that is permitted by the employment agreement)
In Lieu of Notice payments attract the following on Termination:
– Holiday Pay of 8%
– KiwiSaver Contribution if a member
– ACC Levy of 1.7%
When terminating , the in lieu of notice payment is taxed as an extra pay. The PAYE is calculated by taking the lump sum payment and the grossed up annual value of the employee’s income for the previous four weeks (multiply this by 13 to get the annual gross) then taxed at the appropriate rate as per the IRD.