Leaving employment — whether by choice or redundancy — has financial implications that most people only discover after they’ve resigned. Running through this checklist before handing in your notice protects you from nasty surprises.
Before you quit your job, confirm: how long your emergency fund will last at your current spending rate, what happens to your employer KiwiSaver contributions, how income tax changes, and whether you need to update your tax code. Health insurance, income protection insurance, and home loan conditions can also be affected. Have at least 3–6 months of living costs saved before resigning.
1. Confirm Your Financial Runway
How long can you survive without income?
| Monthly living costs | 3-month buffer | 6-month buffer |
|---|---|---|
| $3,000/month | $9,000 | $18,000 |
| $4,500/month | $13,500 | $27,000 |
| $6,000/month | $18,000 | $36,000 |
Minimum recommended buffer before resigning:
- Moving to a new job quickly: 1–2 months (overlap may be minimal)
- Taking time off / career change: 6 months
- Starting a business: 12 months minimum
- Quitting for health reasons: depends on income protection insurance coverage
2. Understand Your Final Pay
When you leave employment, your final pay must include:
| Component | Notes |
|---|---|
| Wages/salary to your final day | Standard |
| Accrued annual leave | You receive a payout for any unused leave |
| Holiday pay (8%) | If not already embedded in wages |
| Lieu days / TOIL | Any accumulated time-in-lieu must be paid out |
Redundancy pay: NZ law does not require redundancy pay unless it’s written into your employment agreement or a collective agreement. Many people assume it’s automatic — it often isn’t. Check your employment agreement now.
3. Employer KiwiSaver Contributions Stop
When you stop employment, your employer stops contributing to KiwiSaver. Your choices:
- Continue contributing from your own savings (voluntary contributions)
- Take a savings suspension (can stop contributions for 1–5 years after 1 year of membership)
- Make no contributions — contributions simply stop if you have no employment income
If you’re self-employed, you can still contribute voluntarily and still get the government contribution ($521/year if you contribute $1,042/year or more).
4. Update Your Tax Code with IRD
When you change employment or have no employer, your tax code changes:
| Situation | Correct tax code |
|---|---|
| Starting a new job (main and only income) | M |
| Leaving employment and starting own business | S (secondary) for any retained income streams |
| No income for an extended period | No tax code required |
| Receiving taxable government benefit | Benefits are taxed at source by Work and Income |
If you have a secondary income (investment income, rental income, freelance work), make sure this is correctly declared. Underpaying tax at PAYE stage leads to an unexpected tax bill the following April.
5. Check Your Employment Agreement
Before you resign, review your employment agreement for:
- Notice period: How much notice are you required to give? (Typically 2–4 weeks; some senior roles require 3 months)
- Restraint of trade / non-compete clauses: These are enforceable in NZ if they’re reasonable in scope and duration
- Confidentiality obligations: Continue after employment ends
- Intellectual property: Work created during employment typically belongs to the employer
- Garden leave: Some employers may put you on paid garden leave during your notice period — you’re paid but not permitted to work
6. Income Protection Insurance — Check Your Coverage
Income protection insurance (often called redundancy or income protection cover) may:
- Lapse automatically when you leave employment if it was employer-provided
- Continue if it was a personal policy you hold independently
Check with your insurer. A personal income protection policy taken out before you resign is much easier to get than one taken out while unemployed.
7. Health Insurance
Many NZ employers offer subsidised health insurance as a benefit. When you leave:
- Employer-subsidised health insurance usually ends on your last day
- You may be able to convert to a personal policy (sometimes without underwriting if done quickly)
- Without employer cover, individual health insurance costs $80–$250/month depending on age and cover level
8. Home Loan Implications
If you have a mortgage, tell your bank:
- Some loan conditions require you to maintain employment
- Changing from PAYE to self-employment income can trigger a review of your loan terms
- Interest rate top-ups or structure changes may require income re-verification
This doesn’t mean your mortgage will be called in — banks rarely do this — but it’s better to be upfront than to miss a payment and trigger a default event.
9. If Going to Self-Employment / Freelancing
Moving to self-employment has significant tax differences. Before you start:
- Register as self-employed with IRD (simple online process)
- Set aside 25–33% of gross income for tax from day one (income tax + ACC levy)
- Register for GST once your taxable turnover reaches or is expected to reach $60,000/year
- File provisional tax if your tax bill will be over $5,000 in the year
- ACC levy applies to self-employment income — rate varies by industry (typically 1.5–2.5% of taxable income)
See Starting a Side Hustle NZ — Tax Guide for a full breakdown.
10. Government Support — What You May Be Entitled To
If you’re unemployed and looking for work, Work and Income may pay:
| Benefit | Amount | Conditions |
|---|---|---|
| Jobseeker Support | $355 – $465/week (depends on household) | Actively seeking work |
| Accommodation Supplement | Up to $305/week (varies by location) | Renting or mortgage; income and asset tested |
Jobseeker Support is available immediately after leaving employment in most cases (there’s no stand-down if you’re made redundant, but there can be a stand-down if you resigned voluntarily with access to assets).
Final Checklist Summary
- Emergency fund of 3–6 months of expenses confirmed
- Final pay components understood (leave payout, etc.)
- Redundancy pay entitlement checked in employment agreement
- Notice period and any non-compete clauses reviewed
- KiwiSaver plan decided (continue voluntary / suspend / pause)
- Tax code updated with IRD for new situation
- Income protection insurance status checked
- Health insurance transition plan in place
- Bank notified if mortgage holder
- Tax implications of self-employment understood (if applicable)