Christmas Payroll Reminders
Business Shutdown – Leave Management Plan
Have you worked out your team’s Leave Management Plan? If your business traditionally shuts down over the festive season you need to plan closing and opening days, check if anyone needs to work during the closedown, get your team sending in their leave requests, and start organising! Check out People in Mind’s excellent article on ‘Planning Leave for the festive season’: https://www.peopleinmind.co.nz/planning-for-the-festive-season/
Wages & Salary payments to employees when they fall on a Public Holiday
If you usually pay your employees on a Monday or Tuesday you will need to consider processing your payroll and paying your employees on the Friday prior. This may be easy for employers with a pay period ending on a Friday. If your pay period ends on a Sunday and employees work the weekend, then you may need to discuss with your employees if they will be happy to be paid on Wednesday 27 December and Wednesday 3 January instead. Remember all discussions with employees should be made in ‘good faith’ as you don’t want to unduly disadvantage them financially.
Tax on Lump Sum Payments – Extra Pays
Lump sum payments include annual or special bonuses, cashed-in annual leave, retiring or redundancy payments, back pay, lump sum holiday pay, plus more. See more at: http://www.ird.govt.nz/payroll-employers/make-deductions/staff-benefits/bonuses/emp-ded-bonus-lump-sum.html
Tax implications with bulk payment of Holiday Pay
Effective 1 April 2016 if you pay out several weeks Holiday Pay in bulk to an employee before they go on leave you are required to tax it on a lump sum basis (as per above). The implication to employees is more tax deducted, and less net pay. We recommend that you pay employees their Holiday Pay in their usual pay run to avoid over taxing them. Check out: http://www.ird.govt.nz/payroll-employers/make-deductions/staff-benefits/holiday-pay/emp-deductions-benefits-holiday-pay.html
Paying Bonuses – Are they discretionary?
There is lots of misunderstanding around paying bonuses and implications on an employee’s leave rate. The Act isn’t helpful in clarifying this, however if the payment is not in an employee’s employment agreement the payment is a discretionary payment and can be excluded from gross earnings. This may apply to a Christmas bonus, but check your employment agreement. ‘Discretionary payments’ are defined by MBIE on this page: https://www.employment.govt.nz/leave-and-holidays/calculating-payments-for-leave-and-holidays/gross-earnings/
Public Holidays – What is an ‘otherwise working day’?
It’s important to be able to work out whether a day is an ‘otherwise working day’ for an employee to work out their entitlements. Where it is unclear, an employer and employee must reach an agreement based on several factors.Check out these links: https://www.employment.govt.nz/leave-and-holidays/otherwise-working-day/
An employee gets an Alternative Day for working on a public holiday that is an ‘otherwise working day’ (formerly known as a lieu day or day off in lieu). We recommend employees use the Alternative Day, where possible, soon after the Public Holiday worked. Want to know more, check out: https://www.employment.govt.nz/leave-and-holidays/alternative-holidays