Big news in May, with the Government passing a bill to double employees’ minimum sick leave entitlements from five to 10 days. The changes are now in play and as always, we’ve covered the ins and outs of these changes for you.  

Four key things you need to know 

1. From 24 July 2021, minimum sick leave entitlements increased from 5 to 10 days. 
2. The changes will roll out gradually, with employees gaining the extra five days when they reach their next entitlement day. This will either be after 6 months of employment or on their sick leave anniversary (12 months after they were last entitled to sick leave). 
3. If your business already gives your employees 10 or more sick days per year, we recommend checking your sick leave policies and employee agreements to see if any changes need to be made. It’s always a good idea to seek some advice if you’re not sure about anything, we would suggest contacting MBIE in the first instance. 
4. The maximum amount of unused sick leave that an employee is entitled to remains at 20 days in any year, under the Act. 

Let’s go through some employee scenarios 

Scenario 1

Scenario 2

If you’re a SmartPayroll customer, we’ll sort everything for you in the background. Regardless of whether you’ve got new employees starting, or existing employees nearing their employment anniversary, the software will automatically update, so your team are receiving their correct entitlements. 

What’s driven the change? 

In October last year as part of their election campaign, the Labour Party announced they would double minimum sick leave entitlements if re-elected. The issue with the current minimum entitlements came to light after the COVID-19 pandemic, where Kiwi’s were urged to stay home if they weren’t feeling well. Increasing employee’s sick leave entitlements will mean more people have the capacity to stay home if they are sick and provide more support and flexibility for working parents.  

More sick leave changes are expected in early 2022. 

The Government has started working to implement the recommendations of the Holidays Act Taskforce. One of the recommendations includes giving employees access to some of their sick leave from day one of employment, instead of waiting till they’ve worked for the business for six months. The Government expects to introduce this legislation in early 2022. 

Not a SmartPayroll customer? Switch today.  

Payroll legislation, the Holidays Act, sick leave entitlements and more, it’s a lot to get your head around. Our automated and simple to use payroll software can sort this all for you. Sign up today and get your first month free with promo code ONEFREE.

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Want to know more about how SmartPayroll works? 

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The post Changes to sick leave entitlements – what you need to know appeared first on SmartPayroll.

The end of financial year is just a few days away and there’s some key changes coming in on 1 April 2021. With the introduction of a new tax rate, minimum wage rate, Payday Filing version 2, new KiwiSaver options, plus the usual annual tax and legislation changes, there’s a lot to be aware of. To help you out, we’ve summarised these changes and what they mean for you.

Rate updates

ACC Earners’ Levy Rate

The Earners’ Levy rate for the 2021/2022 tax year will remain unchanged at $1.39 for every $100 of liable earnings. The maximum liable earnings threshold also remains at $130,911.

Student Loan Threshold

The annual student loan repayment threshold has increased to $20,280 for the 2021/2022 tax year. This is the income level above which student loan deductions will be taken. This is broken down by pay period threshold amounts in the following table:

New tax threshold and rate change

A new top personal income tax rate of 39% applies on annual personal income that exceeds $180,000. The personal income tax rates from 1 April 2021 are:

If you’re using SmartPayroll, we’ll automatically switch to the updated tax rates from 1 April 2021. More information about tax rates is available here.

Secondary tax codes

To support the new top tax rate, the ST secondary tax code will still apply for secondary employment earnings for an employee whose total income subject to PAYE is more than $70,000 but would only apply up to $180,000.

Where an employee’s total income subject to PAYE is greater than $180,000 the new SA tax code will apply from 1 April 2021.

Employer Superannuation Contribution Tax (ESCT)

A new ESCT rate of 39% on superannuation contributions made for an employee whose ESCT rate threshold amount exceeds $216,000 will apply from 1 April 2021.

Extra Pay Tax

Lump sum payments – also called extra pays – earned in the course of employment such as bonuses, backpay, redundancy and retirement payments, are generally taxed at the employee’s marginal rate. The new 39% tax rate will apply on extra pays if a person’s gross taxable annual income exceeds $180,000.

Moving to version 2 of Payday Filing

For files with a payday of 1 April 2021 or later, Inland Revenue (IR) will require all employers to use the new payday filing format (version 2). Version 2 provides more Employment Information (EI) and Employee Detail (ED) information than the current version 1.

The addition of KiwiSaver details in version 2 of the ED file means a separate KiwiSaver Employment Details (KS1) form will no longer need to be filed.

Note: Any amendments to previously filed EI files (EIA) will have to be made using the same version as the original EI file. This means that if you file through version 1, you must amend through version 1.

Reporting KiwiSaver information

IR have introduced new requirements for reporting KiwiSaver information via payday filing. We’ve outlined the available options in SmartPayroll to accommodate this.

KiwiSaver status

IR have updated the KiwiSaver status codes for version 2. To support this, the SmartPayroll KiwiSaver options have been updated and are outlined in the table below along with a description of the circumstances in which they should be used.

Selecting the correct KiwiSaver option is important as this determines whether KiwiSaver is deducted from an employee’s pay packet and what information is sent in the ED file. There’s some more information about KiwiSaver for new employees here.

Late opt-out reasons

If an employee is automatically enrolled in KiwiSaver when they start their new job, they can opt-out between 2 to 8 weeks of starting work (i.e. between day 14 and day 56).

Subject to approval from IR, an employee may be able to opt-out after 8 weeks, but they must provide a reason for the late opt-out.

The following table lists the late opt-out reasons available on SmartPayroll. Remember, this field should only be used if the date of the signed opt-out notice you receive from your employee is 56 days or more after their employment start date.

More information about employees who opt-out late from KiwiSaver can be found here.

If you select “Other reason (please explain)” you will be prompted to provide a reason. This information will be sent to IR.

KiwiSaver Exempt Income

IR require employers to select one of the below options if an employee is likely to receive KiwiSaver exempt income within their first 12 months of employment.

This is required to be selected for new employees only (it is not retrospectively applied to existing employees) and will be reported to IR when the employee is first paid. Note the employee doesn’t have to receive the exempt income payment in their first pay.

In the event the employee will receive more than one type of KiwiSaver exempt income within the 12-month period, then the reason associated to the income type with the greatest estimated overall value should be selected.

More information about KiwiSaver exempt income can be found here.

Other legislative changes

New Minimum Wage Rate

The minimum wage is set to increase on 1 April 2021 from $18.90 per hour to $20.00 per hour (before tax).

The starting out and training minimum wage rates will also increase from $15.12 to $16.00 per hour (before tax).

Note: you will need to update the rate for any employees affected by this change as SmartPayroll does not automatically change wage rates.

For some our top end of financial year tips, head to our EOFY Blog.

Not using SmartPayroll? Switch today.

Payroll can be complex but we’re here to help make it simple. SmartPayroll takes care of most of the faffing, but if there’s something you want to talk through our support team are always there to help. We offer free support and training to our customers.

If you’re interested in signing up to SmartPayroll, please check out what we have to offer here. 

The post What do the upcoming tax changes mean for you? appeared first on SmartPayroll.

To help you prep for the end of the 2020/21 financial year, we’ve covered off the following things:

1. Upcoming changes to legislation
2. Processing your final pay run
3. Cashing up annual leave
4. Reports you might need
5. COVID-19 support payments
6. Updating and reviewing your payroll

1. Upcoming changes to legislation

Minimum wage increase

Starting from 1 April 2021 the minimum wage is increasing from $18.90 to $20 per hour. You’ll need to make sure this is accounted for and ready to go as part of your payroll. If you’re using SmartPayroll, it’s pretty straightforward to update pay rates, and we’ll prompt you along the way if you forget.

What you need to do:

Review your payroll, work out which people are on minimum wage or close to it. Next, make sure you update any pay rates impacted by the change. All details about the minimum wage increase are on the Ministry of Business, Innovation and Employment’s (MBIE) website.

When you’re in SmartPayroll type ‘change pay rate’ into the Need Help section  of your site,  it will provide step by step instructions on how to update pay rates for your team.

New tax rate

A new tax rate of 39% will come into effect from 1 April 2021 for employees earning over $180,000 per annum.

New Zealand’s personal income tax rates will soon look like this:

Using SmartPayroll? We will automatically switch to the updated tax rates. Learn more about tax rates in New Zealand.

Other changes coming soon

Although changes to sick leave aren’t here yet, keep an eye out. The proposed changes include the minimum sick leave entitlement changing from 5 to 10 days. Employees will receive 10 days on their next sick leave entitlement date (rather than all employees receiving the additional sick leave on the same day). There will be no change to the maximum amount of unused sick leave an employee can carry over, which remains at 20 days.

2. Processing your final pay run

It’s simple, make sure you process your final pay run of the 2020/21 financial year on time. This will help you reconcile any payroll related information for the year and ensure pay data is in the correct period for your reporting. When using SmartPayroll this is all sorted in the background and you can pull any reports as and when you need to. Easy right?

3. Cashing up annual leave

End of financial year is a common time for staff to cash up annual leave.

Here’s a couple of things to remember:

• A maximum of one week (of an employee’s four-week entitlement) can be cashed out every 12-months of continuous employment. This can be done all at once, or through multiple requests to cash up until the entire week is cashed up.
• Cashing up annual leave needs to be requested by the employee in writing and agreed by both parties. The employer may say no. Employment NZ has some useful information about cashing up annual leave.

4. Reports you might need

Year to date earning and allowances report

You may want to pull this report to look at your employee total earnings and allowances for the year. It’s likely an accountant will be interested, so ask them about the specifics.

63-day holiday report

This report shows all earned and taken leave, including any adjustments that have been made. The amount shown for annual leave paid in advance is based on the weeks value calculated at the time of the payment. This report is often used as part of the end of financial year reporting. It also allows employers work out which annual leave is deductible for the financial year.

To find this report in SmartPayroll, follow these steps:

1. Log into your SmartPayroll site
2. Go to Reports
3. Click on 63 Day Report in the left-hand menu
4. Enter the date range
5. Click Export
6. Open or Save the file

5. COVID-19 wage subsidies

Throughout 2020 COVID-19 support payments were paid out to many Kiwi businesses. You do not get a tax deduction for COVID-19 wage subsidies paid from the Government. So, you’ll need to separate this out for the financial year and in any reporting you do. In SmartPayroll you can do this by selecting ‘Allowances Report’ and then select the ‘COVID-19 Leave Payment’ option.

It’s also useful to see the total amount every member of your team earned from the wage subsidy. To learn more about all things COVID-19 visit Work and Income.

We’ve also created a page where we provide up-to-date details relating to SmartPayroll and COVID-19.

6. Updating and reviewing your payroll

It’s a great time to check the pay rates of all of your employees and make sure their tax rates are correct. A general tidy up of your payroll is also a good idea. Check employee details, who has access to make changes, and who has the authority to approve your pay runs. Get it sorted for the year.

You’ll also want to check the Employer Superannuation Contribution Tax (ESCT) rate for each employee. Employers need to work out the ESCT rate for each employee. ESCT rates depend on the employee’s income. If an employee’s salary or wage changes throughout the year, you won’t need to change the ESCT rate until the end of the tax year. This is something to be aware of, but for SmartPayroll customers it’s all dealt with behind the scenes.

Not using SmartPayroll? Switch today.

Payroll can be complex, we’re here to help make it simple. SmartPayroll takes care of most of the faffing, but if there’s something you want to talk through our support team are always there to help. We offer free support and training to our customers. End of year payroll is made simple with SmartPayroll.

If you’re interested in signing up to SmartPayroll, please check out what we have to offer here. Everything mentioned in this blog is something our product or awesome support team can help you with. We’ll make it simple for you and your people.

More information

It’s not always a straight forward situation so we suggest contacting Employment NZ on 0800 20 90 20 if you’re unsure about anything to do with your team. IRD are also there to help when it comes to any tax-related queries.

The post EOFY: 6 things you need to know for end of year payroll appeared first on SmartPayroll.

Launched in 2004, the original founders of SmartPayroll found themselves on what was to become a serendipitous plane ride with Datacom’s then head of PaySystems.

On that trip, they discussed how the two companies could work together — how the Datacom ecosystem could help the fledgling company grow to become a major payroll provider in the New Zealand market.

Fast forward 15 years, and what was discussed on that plane trip had become reality — so much so that Datacom saw the company was a fantastic opportunity for it to expand its own offering in the payroll space and drive the business forward. Datacom bought out the last of the SmartPayroll’s independent shareholders in September, 2020.

SmartPayroll CEO Melissa Cheals has led the company for more than two years, leading her team to improve processes, delight customers and unite behind a vision to grow the business. “We’re looking to expand the business, revenue and offering over the next decade,” she says, adding “We want to be the leading payroll provider in the New Zealand market — something we’ll work to achieve by expanding our product platform and broadening our customer base.”

It’s an audacious proposition but one she believes will be possible now that SmartPayroll has joined the Datacom ecosystem.

“The business is a strong entity in its own right but now it has the powerful backing of Datacom and all its resources, expertise, talent and support,” Melissa says.

With a strong customer following, SmartPayroll’s sales have traditionally come from referrals and word-of-mouth.

“Our driving ethos is to support customers. We place them at the heart of everything and that drives satisfaction. We like to amaze our customers — we don’t want to just be average or do things well,” Melissa says.

Amazing customers when it comes to payroll, something that generally feels like a back office, compliance-driven task, is something Melissa has led. She says while it may feel dry, payroll is actually “surrounded by emotion”.

“Payroll may not be exciting but getting paid is. Developing people should be the centre of it. Business owners can better look after their employees, paying them accurately and on time. People come first and success follows in all kinds of ways, shapes and forms,” she says. Payroll is a complex task — especially in sectors like hospitality or for temporary workers. The news has been littered with stories about inaccurate payment and noncompliance but technology is helping businesses stamp out these errors.

“For people whose hours change all the time, it’s difficult to keep track of. We now record leave in weeks rather than hours or days so we can be more accurate. We’re actively trying to think about compliance to ensure businesses are fair and right when completing payroll. Technology really helps businesses keep up with changing legislation,” Melissa says.

One way technology is stamping out incorrect payments is by placing compliance at the centre of product design — making it easy for businesses to do the right thing.

“We’ve set our product up so the way you put the data in and how it moves through the system means you minimise mistakes, minimising human error,” Melissa says.

Looking ahead, the investment from Datacom means SmartPayroll can continue to deliver what its customers want, building out its core offering as it works to become New Zealand’s leading payroll provider.

You can read more about Datacom in their 2020 annual review.

How can SmartPayroll help your business?

If you think SmartPayroll sounds right for your business, check out everything you need to know here. If you’re interested in signing up, use our simple sign-up form here.

The post The beginning of a beautiful friendship appeared first on SmartPayroll.

This blog discusses common payroll pain points and things you should be aware of leading up to the summer break. We’ll touch on Mondayisation all the way through to how to run your Christmas pay and key things to remember.

We’re going to cover off nine key areas:

1. Getting it sorted early
2. Closedown periods – what are the rules
3. Running your Christmas pay — key things to consider
4. Working out how much annual leave a team member will accrue by Christmas
5. Bonuses and paying out leave
6. Working on a public holiday
7. Mondayisation
8. When are banks open to process payments?
9. How can SmartPayroll help?

Now it’s time to get into the detail and make sure you and your payroll team are ready this Christmas.

1. Getting it sorted early

Leading up to Christmas is often a busy period and the last thing you want to worry about on Christmas Eve is paying your people! Communicate with your team early and get your Christmas break roster locked in. This way you can organise pay cycles and annual leave. Remember, keep it simple!

You’ll want to ask yourself some of the following questions to help prepare:

• Are we closing down during Christmas and New Years?
• Who’s taking leave? What type of leave are they taking? (e.g. annual leave or leave without pay)
• If you’re open, who’s working and when?
• When are the public holidays? Will anyone be working on those days?
• Do I need to run multiple pays in advance of Christmas?

Once you’ve covered off all these questions, and worked out a plan, then it’s important to let your team know, especially if there’s any changes to the norm.

2. Closedown periods – what are the rules

Closedown periods are common in a lot of workplaces, and differ between industries and organisations. Some organisations opt to closedown, others decide to stay open. What’s important to remember is that if your business has an annual closedown, you need give your people at least 14 days written notice. This is so the appropriate leave arrangements can be put in place and payroll can be submitted and ticked off.

When you closedown, employees will need to do the following:

• take annual leave while your business is closed down, and
• take leave in advance or leave without pay (agreed) if they don’t have enough annual leave available to cover the closedown period.

This is only applicable for employees who are entitled to annual leave. Under the Holidays Act, employees not entitled to annual leave at the time of the closedown must be paid 8% of their gross earnings as at the start of the closedown date and their anniversary date for annual leave reset.

Closedown periods often include public holidays. Remember to pay your team if the public holiday falls on a day they’d usually work. Employment NZ has more useful information and tips about closedown periods and annual leave.

3. Running your Christmas pay — key things to consider

There’s a few things you’ll want to consider when running your Christmas pay:

1. Make sure you’re running a regular pay cycle and don’t mix things up. Set it up in advance so you can manage different periods of leave appropriately.
2. Ensure the pay period matches the dates your team member is being paid for.
3. It’s common to be considering paying your team leave in advance or leave without pay during the Christmas period. Make sure you and your team are aware of the different types of leave available and how they can use them. Things like Leave Without Pay can add extra steps to your payroll.
4. Remember, 2020 has been a full-on year, with lots of change, so if you can, be flexible with your people and put all options on the table.
5. If it all lines up, then you’re good to go. Hit go!

We’ll also cover off specifics around bonuses, cashing out annual leave, public holidays, and of course mondayisation. It’s all in here, so have a read and make sure you’re prepared this Christmas.

4. Working out how much annual leave a team member will accrue by Christmas

Everyone wants to know how much leave they’ll have by Christmas. Thankfully, we’ve got a friendly formula for you and your team to use if they’re on standard hours each week. This way you can work out their leave.

For team members on the same standard hours each week (e.g. 37.5 hours)

Here’s a formula to help you work out the amount the employee will accrue between now and Christmas.

[standard work hours] x [number of weeks until Christmas] = [sub-total hours]
[sub-total hours] x 4 = [total hours]
([total hours] ÷ 260) x 5 = [hours of annual leave accrued before Christmas]

For example, with a scenario:

Rachel will accrue 14.4 hours of annual leave by the time she reaches Christmas. She’ll have 60 hours (8 days) of leave available to use over the Christmas and New Year’s period.

Note: Your leave balance in hours/days is an approximation only, it’s the leave balance in weeks that will always add to four weeks for every 12 months of consecutive employment. You can read more about leave in weeks here.

5. Bonuses and paying out leave

Christmas is a common time for businesses to pay out a bonus or cash up annual leave, generally as a lump sum (annual or special bonus). These are considered one off payments and you’ll want to make sure the correct tax is deducted. Most payroll systems should do this automatically for you. If not, here’s a basic guide:

• Work out your employees income bracket (e.g. $48,001 to $70,000) and apply the tax rate for that income bracket to the bonus. To do this:

– Work out what your staff member has earned, before PAYE, over the last 4 weeks.

– Multiply this figure by 13 (or 12 if they are paid monthly).

– Add the bonus (lump sum) amount to the outcome above.

– See what tax bracket this figure sits in (Inland Revenue).

– Deduct the appropriate PAYE amount from the bonus.

• Inland Revenue has detailed information about how to get this right, along with information about PAYE tax brackets and secondary taxes.

Tip: In some payroll software (like ours), you can reduce the Kiwisaver contribution rate for a specific pay, it could include a lump sum payment. The employee may request this one-off change and then revert back, as long as you agree. For example, if the employee is contributing at 8%, they could drop their contribution rate to 3% for this pay period.

It’s also the time of year for employees to request to cash up annual leave, also considered a lump sum payment. You can follow the same process as above.

A maximum of one week (of an employee’s four-week entitlement) can be cashed out every 12-months of continuous employment. Cashing up annual leave needs to be requested by the employee in writing, and agreed by both parties. The employer may say no. Employment NZ has some useful information about cashing up annual leave.

6. Working on a public holiday

To determine how your team should be paid when they work on a Public Holiday, you need to check if they usually work on this particular day.

• If the public holiday is their normal working day, the employee should be paid time and a half for the hours worked plus they are also entitled to earn an alternative public holiday (day in lieu).
• If it’s not their normal work day, the employee is only entitled to be paid time and a half for the hours worked.
• An employee doesn’t need to work a public holiday unless they would normally work on this day and it’s stated in their employment agreement. Employment NZ have put together five employment tips for Christmas where they dive into public holidays and other common questions.

7. Mondayisation

This Christmas, multiple public holidays fall on the weekend. This brings about some payroll complexities which are good to understand.

During the Christmas and New Year’s period of 2020/2021 we have the following statutory public holidays which fall on a weekend:

• Boxing Day (Saturday 26 December)
• And the day after New Year’s Day (Saturday 2 January).

If your employee doesn’t usually work on these days, maybe they work Monday – Friday, then it’s Mondayised. To put it simply:

• Boxing day is observed on Monday 28 December
• The day after New Year’s Day is observed on Monday 4 January.

Let’s put this into a couple of scenarios to help explain what you need to know:

There are also additional rules around ‘normal’ working days. Employment NZ have broken down mondayisation in detail with a range of scenarios to help. They’ve also designed a handy flow chart to help you understand what happens when a public holiday fall on a weekend.

8. When are banks open to process payments?

Payments between banks aren’t processed on public holidays, for example Christmas and Boxing Day. The best way to manage this is to set up payments to go through early and avoid any doubt.

Outgoing and incoming payments:

• For example, outgoing payments that normally happen on a Monday (Boxing Day observed 2020) won’t be processed until the next business day, Tuesday.
• For incoming payments, you may see money coming through to your account earlier as organisations often setup payments to go through earlier during the Christmas period.

9. How can SmartPayroll help?

SmartPayroll are open to support our customers on normal working days throughout the Christmas period. We’re here to help with any issues or questions.

If you’re already using SmartPayroll we’ve put together a handy Christmas Payroll Guide so you can get prepared this Christmas. It covers common Christmas additions to your payroll and how to do this using SmartPayroll. If you or your team have any questions, please get in contact with our friendly support team on 0800 10 10 38 or email helpdesk@smartpayroll.co.nz.

There you have it, the ins and outs of Christmas payroll with our top tips. If you’re interested in signing up to SmartPayroll, please check out what we have to offer here. Everything mentioned in this blog is something our product or awesome support team can help you with.

More information

It’s not always a straight forward situation so we suggest contacting MBIE on 0800 20 90 20 if you’re unsure about anything to do with your team or business during Christmas.

Disclaimer: The content of this article is general in nature and is not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose. We expressly disclaim any liability to you or your business in relation to the information contained in this article, and you rely on any information solely at your own risk.

The post Preparing for Christmas payroll — what you need to know appeared first on SmartPayroll.

Now, it’s important to understand the correct terminology but where possible we’ve used simpler language. Following is a list of key words and what they mean in the context of this article:

1. Primary carer/Primary parent/Parent – Gender inclusive terms that mean either the birth mother or person that will take primary responsibility for the child.
2. Leave (on its own) – Parental Leave.
3. Unpaid leave – Primary carer and/or unpaid extended leave.
4. Parental leave payments – Government funded payments.
5. Entitled/Entitlements – The minimum legislative entitlements in accordance with the Parental Leave and Employment Protection Act 1987.

Alright – let’s get into it.

1. Did you know entitlements can differ between your employees?

Many people believe that parental leave is the same for everyone. However, different work situations don’t only affect the amount of leave someone is entitled to, but also the types of leave they can get.

Let’s say you have an expectant mum who works for you full-time – we’ll call her Charlotte. Charlotte may be entitled to a whole year off work, made up of 26 weeks of primary carer leave, and a further 26 weeks of unpaid extended leave. Charlotte’s eligibility however depends on her meeting what’s called the 6- or 12-month time criteria. If she’s worked for you for an average of 10 hours or more per week for any 26 weeks of the 12 months leading up to her due date, then she’s entitled to the full year. However, if she’s only been working for 6 months at the same weekly average, then she’s only entitled to the 26 weeks of primary carer leave.

Charlotte can also take up to 10 days of unpaid special leave while she’s pregnant for pregnancy-related reasons such as antenatal classes or scans. During her first 26 weeks of leave, she will also receive a weekly sum from the Government, administered by Inland Revenue. The amount she’ll get will be equal to her ordinary weekly pay or average weekly income up to a maximum of $606.46 per week, before tax. The criteria to get parental leave payments differs from parental leave entitlements, so it pays to check these closely.

Employment New Zealand has a great Parental Leave Eligibility Tool that can help you easily work out staff leave entitlements.

2. Employees can work while they’re on leave

Many parents miss the workplace while they’re away. Some miss the social side of things and others simply like to keep their “work brains” engaged. Whatever the reason, Keeping in Touch days are a way for your people to remain connected, by allowing them to work limited hours during their leave period.

If someone wants to come back to do the odd job for you, here’s what you need to know:

• You don’t have to agree.
• You must pay them their usual pay rate.
• They can’t work more than 64 hours all up.
• Their child must be at least 28 days old.

If they do more than 64 hours or return earlier than 28 days, they’re considered “back at work” and will no longer receive payments from Inland Revenue.

3. Arrangements must be confirmed in writing

The way you approach leave requests is also important and the key is clear communication. The general rule is that anyone wanting to take parental leave needs to give their employer at least 3 months notice before their baby is due. However, sharing the news over coffee isn’t enough, arrangements need to be confirmed in writing and must include:

• The type of leave they want to take
• The date they want the leave to start
• How long the period of leave will be, and
• Whether they are sharing any part of their leave with their partner and the details of this.

You need to provide a formal response

From the time someone puts in their request, you have 42 days to provide a formal response which is broken down by the following milestones:

• When you receive their leave request, you have seven days to ask for more information
• Your employee has two weeks to get the information to you
• You then have 21 days to provide your formal response.

Letter templates can be downloaded from the Employment New Zealand website.

4. You can’t decline an employee’s request for leave

This shouldn’t come as a surprise, but you can’t deny someone parental leave.

For anyone taking four weeks or less the law requires that their job is kept safe. However, for people taking more than four weeks, there are two situations where you may decide that their role can’t be held, and that’s if:

1. You define the role as a key position or
2. There is a redundancy situation.

If someone loses their job for one of these reasons, you’re obliged to give them a 26 week ‘period of preference’ at the end of their parental leave term. This means that at any time during this preference period, if you want to recruit for a role that is  similar, you must offer it to them before anyone else.

5. Staff continue to “accrue” leave while they’re on leave

Under the Holidays Act 2003, parental leave is counted as continuous employment so an employee on parental leave will continue to “accrue” an annual leave entitlement.

However, if the employee becomes entitled to annual leave during parental leave or in the 12 months after they return to work, the pay for any annual leave taken is calculated at the rate of the employee’s 52-week Average Weekly Earnings only (without the comparison to their Ordinary Weekly Pay .

If the employee has any unused annual leave entitlement prior to going on parental leave, then the normal calculation rules for annual leave will apply to that entitlement. In other words, they will be paid the greater of their Ordinary Weekly Pay or Average Weekly Earnings at the time the leave is taken.

It’s a good idea to discuss parental leave plans with your employee as early as possible to make sure everyone is on the same page. Discuss their current entitled annual leave balance, their anniversary date for annual leave, and the effect of parental leave on the payment of annual leave when they return to work.

Get more info

Well, there you have it – the ins and outs of parental leave. If you’d like to know more there are some great resources available at https://www.ird.govt.nz/paid-parental-leave and https://www.employment.govt.nz/leave-and-holidays/parental-leave/.

Disclaimer: The content of this article is general in nature and is not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose. We expressly disclaim any liability to you or your business in relation to the information contained in this article, and you rely on any information solely at your own risk.

The post 5 things you may not know about parental leave appeared first on SmartPayroll.

In this blog, we explore what termination pay includes, how to calculate final leave, and tips to help your business stay compliant. Let’s get into it!

What is termination pay?

Termination pay is another name for the final payment an employee receives when their employment ends. It differs from regular pay because it includes:

• Any time worked since the last pay period.
• Any leave entitlements owed to the employee.
• Any other contractual benefits such as notice periods or redundancy compensation.
• Any other agreed payments, such as a bonus or commission.

It is paid on their last day of work, or no later than the next pay period from the actual termination date. An employment agreement will usually state when termination pay needs to be processed, so it’s best to check and confirm.

Tips to stay compliant when calculating final pay

Before we get into the calculations, here are three tips to get you started.

1. Review the employee’s employment agreement.

Keep an eye out for anything that’s non-standard to make sure you’re not breaching any contractual obligations. Some of the less common entitlements you might come across are long service leave and redundancy compensation but benefits can vary between companies.

2. Determine whether an employee has worked more or less than 12 months for your organisation.

It’s important to make this distinction as it will impact how termination pay will be calculated.

3. Include a breakdown in the employee’s final payslip.

This demonstrates compliance and shows the employee that their final pay is accurate. They will also feel confident that they’re receiving all their entitlements.

How to calculate leave entitlements

Employees that have worked for less than 12 months:

If an employee has worked for less than 12 months, the calculation is straightforward. They should be paid 8% of their gross earnings since they started employment, minus any annual leave that was taken in advance or paid on a pay-as-you-go basis. You’ll also have to pay out any contractual benefits owing.

Employees that have worked for more than 12 months:

For someone that has worked longer than 12 months, it gets a little more complicated. In this case the employee’s leave entitlements will be made up of three things:

• Any annual leave entitlement owing.
• Any public or alternative holidays owing.
• Any annual leave accrued.

What is accrued annual leave?

Accrued annual leave is the leave someone earns up until they get their full four-week entitlement. The Holidays Act 2003 states that employees only become entitled to their four weeks of annual leave every 12 months, so accrued leave is a useful tool to show you how your employees are progressing towards their full four-week entitlement.

Imagine someone has worked in a role for 18 months. If their employment ended at this point, they would receive their four week entitlement at 12 months, and effectively six months of accrued leave in their final pay. Any annual leave they had taken in advance would be subtracted from their leave balance.

How to calculate annual leave accrual for final pay

Let’s break this calculation down into four steps:

1. Calculate the employee’s gross earnings from when they last received their annual leave entitlement to the date their employment ends.
2. Add the value of any unused annual leave, public holidays and alternative holidays owing to these gross earnings.
3. Work out 8% of this sum.
4. Subtract any annual leave taken in advance or paid on a pay-as-you-go basis.

Something to look out for…

On termination, an employee’s final day of work is notionally extended by any annual leave entitlement not taken. This is to determine if an employee is entitled to public holidays that fall within this extended period. It has nothing to do with notice periods and is different from the date on which the employment agreement is terminated.

This means that if an employee had three weeks of annual leave owing, an employer would need to add three weeks to the employee’s end date. If a public holiday fell within this three-week notional extension, and the employee would normally work on that day, the employer would need to account for the public holiday in the employee’s final pay.

What about redundancy?

When it comes to redundancy, it’s essential that a valid workplace change process is followed. Here is a breakdown of the key steps all employers should complete before making an employee redundant:

• Create a business case for the proposed redundancy. Ensure this is supported by accurate and relevant evidence.
• Document your business case and present it to the employee with all potential options in a workplace change proposal.
• Give the employee an opportunity to consider the proposal, seek advice and have their say.
• Genuinely consider any feedback the employee provides.
• Make a business decision and present it to the employee in writing.

Do you have to pay redundancy compensation?

There is no legal obligation to pay redundancy compensation to an employee. However, compensation may be agreed on in the employment agreement. Your payroll team will need to know exactly what is in the employment agreement to accurately process final pay for redundancy.

Tip: Employees will still be entitled to work, or be paid, their notice period, even if they aren’t entitled to redundancy compensation. If you want to pay out some or all the employee’s notice period, you should first check to see what the notice period is in the employment agreement and whether it allows for the notice period to be paid in lieu of notice.

Want to know more?

Termination pay is a particularly tricky topic as there can often be emotions involved and this can push payroll to the side. However, it’s important to keep payroll top of mind when considering any kind of termination. If you have any questions about final pay or what SmartPayroll can do to make your payroll even easier, get in touch today. We’re committed to faff-free payroll and we would love to chat!

Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose

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In this blog, we explore the benefits of undertaking annual leave reviews, the main leave calculations in the Holidays Act 2003, and how to apply these to your leave review process. Let’s dive in!

What is a leave review?

Before you get started, it’s important to understand exactly what a ‘leave review’ is, which is:

A process of regularly checking your employee’s setup in payroll to ensure their leave is being calculated correctly.

We recommend that you carry these out at least once a year to:

• Demonstrate compliance with the Holidays Act 2003.
• Confirm your employees are receiving their correct pay and leave entitlements.
• Minimise risk for you and your business.
• Reduce your potential workload.

How to complete a leave review

So, now you know what a leave review is, let’s discuss how to carry one out. We’ve broken the process down into four main steps.

1. Review your employee’s employment agreements.

It’s important that whoever is responsible for your payroll knows about all of your employee’s entitlements. They can then make sure these are accurately reflected in the payroll set up. If there are contractual bonuses, incentives, or terms around overtime, they need to know.

Tip: Create an approval process that includes your payroll person when making changes to any employment agreements.

2. Review the standard hours that your employees work.

When an employee’s role changes, and their standard hours are affected, it’s easy to forget to update payroll. However, it’s important to check to make sure any changes in hours and days of work are reflected in the payroll setup and that you are still calculating leave correctly. Standard hours can change when someone works regular unscheduled overtime or moves from part-time to full-time hours and vice versa.

Tip: If you think an employee does not have a standard work pattern, review their employment agreement and/or roster to see if core agreed hours can be defined. You may find that they do have an agreed number of contracted hours and days. Just assuming that an employee has no standard hours of work because they work varying hours and days is something that the Ministry of Business Innovation and Employment (MBIE) is critical of.

3. Check that your employee’s payment rates are still correct for all types of leave.

During a leave review, you should also check the payment rates for Family Violence, Bereavement Leave, Alternative Holidays, Public Holidays and Sick Leave.  

Defining payment rates can get a little bit tricky. The amount of leave you pay an employee will either be based on their ‘Relevant Daily Pay’, otherwise known as their RDP or their ‘Average Daily Pay’ or ADP.  

Relevant Daily Pay (RDP)

If you know what your employee would have earned had they come to work that day, then you’d pay them that amount – known as their RDP.

Most salaried employees are paid RDP because they earn the same amount every day, regardless of their hours worked. Even rostered employees can be paid their RDP if they strictly work their standard rostered hours.

Average Daily Pay (ADP)

If you can’t determine what your employee would have earned had they come to work because their daily hours vary, or they get extra but variable payments for things like commission or unscheduled overtime, you may need to pay their average daily pay instead.

To calculate ADP:

1. Work out your employee’s gross earnings over 52 weeks
2. Divide this by the number of whole or part days they worked, including any paid leave or holidays during that period.

Casual employees

Staff on ‘casual’ employment agreements are also entitled to sick leave, bereavement leave, and family violence leave after six months if during that time they have worked:

• an average of at least 10 hours a week, and
• at least one hour a week or 40 hours a month.

You should regularly assess your employees against these criteria to determine if they qualify for these leave entitlements.

4. Check payment rates are still correct for annual leave calculations.

According to the Holidays Act, employees must receive four weeks of annual leave each year, based on what a working week is for them. However, not every employee has a standard working week. This is where you can run into a little bit of trouble, so calculating annual leave requires some extra care.

How to calculate annual leave

When calculating annual leave, there are two payment rates that can be used. There is Ordinary Weekly Pay (OWP) and Average Weekly Earnings (AWE). You must use the greater of these two rates to calculate annual leave for your employees. It’s also important to note that the applicable payment rate can vary between staff, so you’ll need to check these are correct for each individual.

Ordinary Weekly Pay (OWP)

Ordinary Weekly Pay is the sum an employee receives for an ordinary working week under their employment agreement. If they work standard hours each week, and you know exactly what they would be paid if they were at work, then you would pay them their OWP. You should include any payments that are a regular part of their pay such as:

• Regular overtime.
• Allowances.
• Productivity or incentive-based payments.

Some employees also receive regular but unpredictable payments in addition to their ordinary pay rate. These could be variable overtime payments or incentive payments. This means it isn’t always possible to work out their OWP based on the amount they would normally receive for an ordinary week. If this is the case, you can consider paying their ordinary weekly pay based on the average of their previous four weeks of earnings.

Average Weekly Earnings (AWE)

Average weekly earnings are based on an employee’s average earnings per week over a 52-week period. These include any payments that the employer is required to pay the employee under their employment agreement. This means any contractual bonuses should be included, even though the exact amount of the bonus may depend on performance measures.

Tip: While discretionary payments can be excluded, make sure you check these are truly discretionary and aren’t reflected in some way in the employment agreement.

What about annual leave for casual employees?

Casual employees can be paid annual leave on a “pay as you go” (PAYG) basis. This means you pay them 8% of their gross earnings in lieu of providing four weeks of annual leave. Employees paid like this are usually employed on a fixed-term basis for less than 12-months, or work so randomly that it is impractical to provide them four weeks of annual leave entitlement.

To use PAYG, you must be able to show that you have considered the criteria under section 28 of the Holidays Act 2003 and can justify that your casual employees meet it. Otherwise, you may be required to pay the employee their four weeks of annual leave entitlement, on top of the 8% PAYG already paid.

The easiest way to stay compliant when calculating annual leave

The Holidays Act defines annual leave entitlements in weeks and days, but most payroll systems record annual leave in hours. This makes it difficult to demonstrate and maintain compliance and requires ongoing reviews to ensure leave is being calculated correctly.

SmartPayroll offers the ability to convert and hold annual leave balances in weeks. Using this option will ensure your employees receive their correct entitlements as specified by the Act. You also won’t need to make any manual adjustments to balances because the balance in weeks remains constant, regardless of a change in working patterns. Read more about calculating annual leave in weeks.

Got questions?

As you can see, there are a lot of factors that go into keeping compliant with the Holidays Act 2003 and paying your employees correctly. The Act is complex and involves multiple calculations that apply in different situations. If you feel a little overwhelmed, you’re not alone and we’re here to help. If you have any questions about compliance with the Act or how SmartPayroll can help to support you and your business, get in touch today. We’re committed to making payroll easy and we would love to chat!

Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

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The post A step-by-step guide to completing a leave review appeared first on SmartPayroll.

Here we look at why annual leave calculations are so confusing and how to easily demonstrate compliance by calculating leave in weeks.

The root of the problem

The Holidays Act 2003 is a very complex piece of legislation and one of the significant issues with leave calculations stems from Section 16 which states:

“After the end of each completed 12 months of continuous employment, an employee is entitled to not less than 4 weeks’ paid annual holidays.”

Sounds straightforward right. In other words, “employees get 4-weeks holiday pay”. Unfortunately, it’s not that easy. Most payroll systems record annual leave in hours and what starts out as simple math can quickly morph into something far more complicated. Most affected are employers with staff that work highly variable hours and days or who have changes in work patterns.

The easiest way to demonstrate compliance is to hold leave balances in the time units stated in the legislation – i.e. weeks.

Hours, weeks – what’s the difference?

Although it’s perfectly OK to hold your leave balance in hours, those hours must be clearly equivalent to the employee’s 4-week entitlement. They must also genuinely reflect what constitutes a week for the employee at the time the leave is taken, not when earned – and that’s where things get tricky.

Last year, Chris Mar, the Product and Compliance Manager at Datacom, presented about Leave in Weeks and announced that SmartPayroll was working on a solution that makes it easier to remain compliant with the Act. We now hold leave balances in weeks and we have been transitioning customers over to this calculation method since the beginning of the year. Holding leave in weeks:

• Removes the need to recalculate balances when work patterns change.
• Demonstrates the principle that entitlements can only be determined in relation to the work pattern that exists at the time leave is taken.
• Makes it clear that employees receive their correct entitlements.

Work scenarios

Let’s look at how to calculate leave for three different types of employees in hours vs weeks.

The “9 to 5er”

The “9 to 5er” is a regular full-time employee and converting weeks from hours is simple math. Take Fred for example.

Based on Fred’s work pattern he would get:

40 hours per week x 4 weeks = 160 hours

The same calculation would apply to someone working regular part-time hours. For example:

20 hours per week x 4 weeks = 80 hours

The “transformer”

But, what about someone that starts out as a part-time employee and moves into a full-time role like Mary who is coming up to her 12-month anniversary.

If you hold leave balances in weeks the answer is simple – 4 weeks. Just as it states in the Act.

But what about if you’re calculating leave in hours? What would Mary’s leave entitlement be:

A: 160 hours – based on her full-time hours.

B: 96 hours – based on her part-time hours.

C: 128 hours – halfway between the two.

One of the fundamental principles of calculating leave is that the entitlement is determined by the work pattern at the time the leave is taken, not from the time their employment starts. So, the answer is 160 hours.

The “complicator”

Finally, let’s look at Sue who is the most problematic type of employee when it comes to calculating leave entitlements.

The problem with Sue is you can’t offer a fixed entitlement in hours or days on her anniversary, because what represents a week for her is a constantly moving target.

So, what is Sue’s entitlement after a year of service?

A: 24 days

B: 4 weeks

C: 120 hours

There really is only one logical answer – 4 weeks. It’s not possible to work out what 4 weeks of entitlement is for Sue. Therefore, holding her leave balance in weeks is the best way to ensure that she receives her correct leave entitlements.

As you can see, the Act is complex and requires regular monitoring for compliance if employment arrangements change. If you feel a little overwhelmed, you’re not alone and we’re here to help. If you have any questions about compliance with the Act or how SmartPayroll can help to support you and your business, get in touch. We’re committed to making payroll easy and we would love to chat! 

Make the switch today!

If you’re keen to move over to SmartPayroll, we make the process super easy. Here’s what you’ll need to do:

1. Sign up online
2. Get free training – Our Account Services team will call within one business day to start your set up and discuss training options.
3. Set up your employees – You’ll then receive an email with your login details. You can start setting your employees up yourself, or provide us with reports from your existing payroll provider.
4. Start processing – Once your employees are set up, you can use SmartPayroll for your next pay run.

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The post What’s all this fuss about “leave in weeks?” appeared first on SmartPayroll.

Government support for your business 

If your business has been affected by COVID-19, you may be eligible for Government support schemes. Business.govt.nz is the central resource for all COVID-19 business information. 

Information you’ll find there:  

• Government support schemes for businesses 
• Cash flow loans and support 
• Cash flow forecaster 
• News and updates for businesses 
• Workplace operations at Alert Level 2 

Learn more.  

COVID-19 Wage Subsidy Extension 

On the 14th of May, the Government announced the Wage Subsidy Extension. You can apply for the subsidy extension once your employees 12 week Wage Subsidy has been paid. Specific conditions will apply, applications open from 10 June 2020. 

Learn more.  

COVID-19 Income Relief Payment 

On the 25th of May, the Government announced a new temporary payment to support kiwis who have lost their jobs due to COVID-19 (including self-employment). Applications open from 8 June 2020. 

Learn more.  

Business advice from experts 

If business advice from experts would help you right now, you may want to check out a support group called Manaaki. Manaaki is a free online forum where Kiwi businesses can ask questions and receive advice from business experts and advisors. 

Learn more.  

Workplace well-being during COVID-19 

The Mental Health Foundation have put together a guide for workplace leaders and management. The guide includes information about creating a work environment where your employees feel safe, calm and connected throughout COVID-19 and going forward.  

Learn more.  

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