13 December 2022

With the holiday season around the corner, holiday pay worries may keep business owners from fully enjoying their well-earned holiday break. To help you better understand how to prepare for holiday pay, we outlined a few questions.

Does your business shutdown during the holiday season?

If so, employees who have been employed for less than 12 months, are required to be paid 8% of their gross earnings (Employment Court, 2021) at the start of the shutdown period. The employee’s annual leave anniversary date will then be updated to the date the shutdown commences.

Employees who have been employed for more than 12 months can take annual leave during the shutdown period provided they have enough leave available.

For employees that do not have enough leave to cover the shutdown period, they need to agree with their employer if they can take annual leave in advance for the balance of the period or take leave without pay.

If your business is open throughout the holiday season, then only the public holidays rules apply and process payroll as usual.

How do you calculate payment for annual leave?

When an employee is on annual leave, you must pay them whichever is higher (Business Government NZ):

• Their ordinary weekly pay at the time of the leave.

• Their average weekly earnings over the 12 months before the holiday is taken.

A suitable payroll software can assist with calculating the correct annual leave rate for your employees.

How could a payroll software benefit your business?

• Increase accuracy and reduce human errors: With a payroll software, it is less likely to make human errors as most of the information is pre-loaded, such as hourly rate, PAYE calculations, Kiwisavers and deductions. Your payroll software will always keep tax rates up-to-date.

• Automate payments and payday filing: Automated payments and filing is another big advantage of using a payroll software. Net payments will be paid to the employees and PAYE to the IRD as well as a confirmed record once payroll is complete, removing the administrative hassle and saving you time.

• Keep up-to-date records for leave balances: Once payroll is processed, leave balances will be recorded and updated every time, and a report can be easily generated to track the details.

• Compliance for leave calculations: Annual leave calculations are no longer a mission as a payroll software will pick up the higher rate of ordinary weekly pay and average weekly pay to ensure a correct annual leave rate.

• Easy bank reconciliation while integrated with an accounting software: With the integration between a payroll software and accounting software, bank reconciliation is easy with one click. It provides you with better records of PAYE, Kiwisaver, ESCT, and deductions.

• Employee mobile app access to check payslips and leave balances: Employees can submit timesheets, check payslips and leave balances on the mobile app, reducing time for payroll administrators to provide the information to the employees.

How do you find a suitable payroll software?

The first step is defining your payroll needs by clarifying:

• How many employees you have?

• How often you process payroll?

• Do you intend to process your payroll or outsource the service?

• How can your staff access their payslips and leave balances?

The Findex Business Advisory team can help you find the suitable software. Our experts will go through your business needs with you, find a suitable payroll software, and assist with the onboarding process. Get in touch today to learn more.

Season’s greetings from our Findex family to you and yours!