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With the latest assessment by MBIE of several larger NZ business’s payroll processes, showing that few businesses are compliant with the Holidays Act 2003, how does your payroll process stack up?

Many organisations rely blindly on their payroll system to accurately calculate their staff pay and assume that it is compliant with NZ legislation. There is a presumption that the system gets it right. One of the key parts of any process within a business, is to audit that process to make sure that it is still compliant and operating as it was intended to. In relation to payroll, all companies should be doing regular checks to make sure that they are in fact paying their staff correctly.

When employing staff, compliance starts with having the correct type of documentation in place that represents their hours and days of work through to paying staff for the work they are doing for you. Secondly, it is important to have documentation that is up to date with legislation. This documentation must meet the minimum standards provided for within the Holidays Act 2003 along with other Acts such as the Employment Relations Act 2000, Minimum Wage Act 1983, Human Rights Act 1993, and the Health and Safety at Work Act 2015. As an Employer, you can provide further terms and conditions over and above these minimum standards, but not less than.

A common issue is the ‘casual’ staff member and the incorrect application of this type of agreement to an Employee’s employment pattern. Many organisations continue to employ casual staff when in fact they are permanent Employees, resulting in them being paid incorrectly, with many such Employees missing out on their minimum entitlement under the NZ legislation. The risk and liability of getting this wrong could mean going back up to 6 years to correct arrears if an error has been found. This requirement may actually apply to all staff and can therefore be a very expensive exercise.

Once you have the correct employment documentation, deciding how you are going to pay your staff will be dependent on a number of considerations, including how many staff you employ and the capabilities within your business to administer payroll.  Regardless of whether you decide to pay staff manually or use a payroll system, checking the following will be important to make sure you are fully compliant.

For the salaried staff member, it is reasonably easy to get their pay correct; it is the Employee who works variable hours where many of the issues arise. With this type of Employee, it is important to have excellent record keeping, clear process and correct calculations as per the Holidays Act. Where these are not accurate it is easy to get an Employee’s hours, gross earnings and the allocation of leave incorrect. There are also times where timesheets need to be kept for salaried staff.

If you are using a payroll system, it is important that you or your payroll staff understand how to calculate the pay correctly so they can pick up mistakes or issues as they happen. Your payroll system must also be configured correctly with NZ legislation.

Another area to consider is; have you applied the alternative provisions of entitlement agreed in an Employee’s Individual Employment Agreement or those part of a Collective Agreement? Other questions to ask are ‘What is a week? What should be included in gross earnings? And what is regular?’

You may think you have it right – are you confident you do?

If you have concerns or would like to discuss anything within this article, please contact Russell Drake Consulting for assistance on 07 838 0018.

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