Introduction

As we come closer to the 2024 tax year, new updates are set to roll out on April 1st, bringing significant changes in New Zealand’s employment legislation.  For businesses, understanding these changes and their implications on their payroll processes can be challenging. But no worries, we’re here to make these updates clear, offering clarity and ease in managing your payroll.

2024 Employment Legislation Changes

Minimum Wage Increase

Background: In New Zealand, the minimum wage is a legally mandated lowest hourly rate that employers must pay their workers, and it’s reviewed annually.The minimum wage in New Zealand has been on an upward trajectory, a trend consistent with the government’s efforts to ensure fair compensation for workers.

The Change: The minimum wage has risen from $22.70 to $23.15 per hour. For a full-time employee working a 40-hour week, this translates to an annual pre-tax income increase from $47,216 to $48,152, amounting to an extra $936 annually, or about $18 per week. This boost in earnings marks a positive step for the financial wellbeing of employees.

Along with this, the training wage, which is 80% of the minimum wage, has also been adjusted accordingly  to $18.52 from the current minimum rate of $18.16 per hour.

What You Need To Do To Stay Compliant: Employers must update their payroll systems to reflect this change for all employees on minimum wage. This includes ensuring all employees are paid at least the new rate from April 1, 2024. Additionally, ensure that employees on the training wage are also paid at least 80% of the new minimum wage rate.

Impact: This increase means higher earnings for workers on minimum wage, which is particularly beneficial in light of rising living costs. However, for employers, this means increased payroll expenses, requiring budget adjustments and potentially influencing hiring decisions.

ACC Earners’ Levy Increment

Background: The ACC earners’ levy funds New Zealand’s accident compensation scheme, which provides comprehensive, no-fault personal injury coverage. This levy is paid by employees and self-employed individuals based on their earnings. It’s deducted much like income tax, usually handled through the payroll process by employers or through income tax returns for the self-employed.

The Change: Employees will see a slight increase in their levy deductions. The ACC earners’ levy rate has been increased to 1.60% from the previous rate of 1.53%, an increase of 0.07%. For those earning up to the maximum liable earnings limit, the increase will be proportional to their income. The maximum liable earnings limit for this levy will be $142,283. For individuals earning more than NZ$142,283 annually, their levy contribution will be capped at a maximum amount of NZ$2,276.52.

What You Need To Do To Stay Compliant: Adjust payroll systems for the new ACC earners’ levy rate, ensuring accurate deductions from employee wages.

Impact: For employees, especially those with higher incomes, this results in slightly higher deductions from their pay. For employers, particularly those with higher-earning employees, this could mean an increase in the overall cost of payroll. However this is essential for maintaining a robust ACC fund, crucial for workplace safety and employee well-being.

Student Loan Repayment Threshold Increase

Background: The student loan repayment threshold determines when borrowers must start repaying their student loans, based on their annual income. The specific income level set as the threshold can vary from year to year, based on policy decisions and economic factors.

Current Change: The threshold has seen an increase from NZ$20,280 in 2022 to NZ$24,128 in 2024.

The annual repayment threshold increase means that all frequency rates have changed too. The repayment threshold is now broken down into the following pay period thresholds:

• $464 if you’re paid weekly.
• $928 if you’re paid fortnightly.
• $1,856 if you’re paid every 4 weeks.
• $2,010 if you’re paid monthly.

If you are wondering how long it will take to repay your student loan, you can check out IRD’s resource here.

What You Need To Do To Stay Compliant: Update payroll systems to reflect the new student loan repayment thresholds for different pay periods.

Impact: This adjustment provides relief for loan borrowers, especially recent graduates and part-time workers, as they can now earn more before loan repayments kick in. It also affects government revenue collection from student loan repayments in the short term.

What Do These Changes Mean?

These changes in New Zealand’s employment legislation in 2024 reflect a balanced approach towards economic growth, employee welfare, and education financing. While they pose certain challenges, particularly for businesses in terms of potentially increased payroll costs, they also represent a commitment to a more equitable and supportive work environment. For employees, these adjustments offer greater financial security and support. 

For employers, staying compliant and competitive requires a clear understanding of these legislative changes. It’s important for businesses to utilize efficient payroll systems and seek advice or support when needed to ensure these changes don’t put them at risk of non-compliance and penalties from the IRD.

Over the past five years, we have seen annual changes in New Zealand’s minimum wage, ACC earners’ levy, and student loan thresholds. One primary driver behind these adjustments is the country’s evolving economic landscape, heavily influenced by inflation and the cost of living.

According to the ‘United Nations 2024 World Economic Situation’ report, New Zealand’s inflation is expected to remain high in 2024, largely driven by an uptick in rental prices amidst housing supply shortages. The report projects New Zealand’s consumer price index to decrease to 3.4 percent in 2024, and further to 2.6 percent in 2025.

This trend of inflation, particularly post-Covid-19, has had a pronounced impact on the cost of living, necessitating adjustments in wages and levies to ensure economic stability and social equity. The increase in minimum wage, for example, aims to offset these rising living costs for workers.

Given these trends, it’s reasonable to anticipate continued adjustments in these payroll-related aspects. While these changes may pose challenges for businesses in terms of compliance and payroll management, they are crucial in maintaining the balance between economic growth and individual financial wellbeing.

It’s also encouraging to note the projected decrease in inflation rates, indicating a potential easing of economic pressures in the coming years. However, it’s important for businesses and individuals alike to stay informed and adaptable to these changes as New Zealand undergoes its economic recovery.

Other Changes in Employment Law in New Zealand

Beyond the primary legislative updates we’ve discussed, there are additional recent developments in New Zealand’s employment law that are worth noting. These shifts may have important implications for your payroll processes. This section will discuss these adjustments and outline what they mean for you as an employer.

90-Day Trial Periods

Background and Change: As part of the National Act, NZ First Coalition Government’s 100-day plan, effective December 23 2023, the scope of 90-day trial and probation periods has been expanded to include all New Zealand employers, regardless of their size. Previously, this was limited to businesses with 19 full-time employees or less.

What This Means for Employers:

• Employers with 20 or more full-time employees (FTE) can now implement a 90-day trial period for new hires.
• During this period, employers can terminate an employee’s contract without needing to provide a reason, provided the trial period is included in the employment agreement before the employee starts work, and appropriate notice is given.

Impact:

• Flexibility for Employers: This change offers more leeway in hiring decisions, allowing employers to better assess fit and performance.
• Payroll Adjustments: Payroll systems may need to adapt to accommodate potential employee turnover during trial periods.

Worker Protection Act (Migrant and other Employees) Act 2023

Background and Change: This Act, which came into effect on January 6, 2024, clarifies obligations related to record-keeping and cooperation with labor inspectors. If records are not immediately available during an inspection, employers now have up to 10 working days to provide the requested information. Failing to do so may result in infringement penalties of up to $1,000 per offense.

What This Means for Employers:

• Record-Keeping: It’s vital for employers to maintain accurate and readily accessible employee records.
• Awareness of Compliance: Understanding the specifics of what records need to be available is crucial to avoid penalties.

Impact:

• Administrative Overhaul: Businesses may need to review and update their documentation and record-keeping systems.
• Payroll System Requirements: Payroll systems should be capable of generating detailed reports to meet labor inspector requests efficiently.

Crystal Payroll – Keeping you ahead of the curve.

With legislative changes often occurring and signs of future changes to the Holidays Act, businesses can find themselves perpetually in the struggle to stay compliant. This is where Crystal Payroll shines. Our system is engineered to seamlessly integrate these changes into your payroll processes. From the automatic application of the ACC earners’ levy and student loan deductions to the effortless adjustment of minimum wage rates, we ensure that your payroll is compliant, accurate, and hassle-free.

For businesses yet to experience the clarity Crystal Payroll offers, these legislative changes present the perfect opportunity to reconsider your payroll solutions. As we move into the 2024 tax year, Get in touch with us to find out how Crystal Payroll can be your guide through the legislative changes. 

As we approach the 2024 tax year, significant changes will come into effect. These include three legislative alterations to employment laws coming April 1st and an important IRD update impacting payroll for those using the self-service option. At Crystal Payroll, we’re always updated and prepared for these changes. We’ve also got some great system updates to share to keep you informed on how we’re constantly improving. 

Minimum Wage Increase

A key change coming April 1st is the minimum wage increase from $22.70 to $23.15 per hour. Consequently, the training and starting-out wage will rise to $18.52 from the current minimum rate of $18.16 per hour, remaining at 80% of the adult minimum wage. 

To put the increase into perspective, an employee working 40 hours per week at the old rate earned $47,216 before tax annually, whereas at the new rate, they will earn $48,152. This translates to an extra $936 annually or about $18 more per week for an employee working 40 hours at minimum wage.

Due to this upcoming minimum wage increase, employers will need to adjust the wages for employees currently earning below the new minimum wage of $23.15 per hour. To facilitate this transition, Crystal Payroll will automatically update the wage rates for all employees currently on or between the current and new minimum wages. This means anyone earning from $22.70 to $23.14 per hour will be adjusted to the new rate of $23.15 per hour. However, if you prefer to manage this wage adjustment manually, please let us know by emailing our support team at support@crystalpayroll.co.nz.

It’s important to note that the training wage will not be adjusted to reflect this increase in the minimum wage.

ACC Earners’ Levy

Secondly, Employees will see a slight increase in their levy deductions. The ACC earners’ levy rate has been increased to 1.60% from the previous rate of 1.53%, an increase of 0.07%. For those earning up to the maximum liable earnings limit, the increase will be proportional to their income. The maximum liable earnings limit for this levy will be $142,283. For individuals earning more than NZ$142,283 annually, their levy contribution will be capped at a maximum amount of NZ$2,276.52.

Student Loan Repayment Threshold

Thirdly, the threshold for student loan repayments will be raised to NZ$24,128 for the financial year 2024, up from NZ$22,828. This change means that individuals earning below this new threshold will not be required to make student loan repayments. 

The IRD states that for the 2024 tax year that “The amount you have to pay to your student loan each year is 12% of every dollar you earn over the repayment threshold.” The annual repayment threshold increase means that all frequency rates have changed too. 

The repayment threshold is now broken down into the following pay period thresholds:

• $464 if you’re paid weekly.
• $928 if you’re paid fortnightly.
• $1,856 if you’re paid every 4 weeks.
• $2,010 if you’re paid monthly.

Individuals with student loans who earn below the new threshold will benefit as they won’t have to make repayments until their earnings exceed this limit. This can provide some financial relief, particularly to those starting their careers or working part-time.

Want to know how long it will take to pay back your student loan? Have a look here.

Crystal Payroll is set to seamlessly integrate all the recent and forthcoming changes to New Zealand’s payroll system as soon as they take effect. There’s no need for you to take any action, as Crystal will automatically update the ACC earners’ levy within the PAYE calculations, apply the student loan deductions to employees’ pay as required, and implement the new minimum wage rate starting from April 1st, 2024. Rest assured, these updates will be handled efficiently, ensuring compliance with the latest payroll regulations without any additional effort on your part.

As part of our commitment to keeping you informed and ahead of the curve, we need to share an important update from the Inland Revenue Department (IRD) that will affect the way we manage payroll filings together.

Our development team has been in close discussions with the IRD, advocating for a smooth transition into the new tax year. Despite our efforts to delay some changes that could introduce challenges, the IRD has decided to proceed with these updates. 

Starting this tax year, all our Self Service clients will need to take an important step: authenticating your MyIR accounts with Crystal Payroll. This change arises because PAYE intermediaries, like us, will no longer be able to file on your behalf without direct linkage or authentication. This might sound a bit technical, but don’t worry – we’re here to guide you through every step.

To make this process as seamless as possible, we’re introducing a new reminder feature. Whenever it’s time to set up authentication, you’ll see a prompt to ensure you’re all set. It’s a simple step, but one that’s essential. Without this authentication, we won’t be able to file returns for you, which could lead to late filing notifications or penalties from the IRD.

As always, our team is on hand to assist with any questions or concerns you might have about setting up your MyIR authentication with Crystal Payroll.

Exciting news! We’ve added a feature a lot of you have been asking for. It’s a small change with a big impact on personalization. Say hello to Personalized Payslips! Now you can upload your company logo in General Settings, giving your payslips that custom, professional look.

Our development team is always hard at work to enhance Crystal Payroll, ensuring it remains the best choice for your payroll needs. Here’s a snapshot of even more of the new features we’ve rolled out already this year:

General Enhancements

• Department-Specific Leave Allocation: Now, you can assign any leave type to particular departments or branches.

• Enhanced Reporting: Leave accruals are now visible in the Payroll Variance report.

• Improved Timesheet Note Size: We’ve increased the note size for employee timesheet input, making it easier to record and read your notes.

• Updated Help Index: Find new updates in our guides on managing public holidays and annual leave.

• Streamlined General Ledger Analysis: Access this report directly from the “Take Home Pay” section, and seamlessly integrate with “Send to Xero.”

• Cash-Up Overtime in Lieu: Utilize the “Cash-Up Entitlement” function for this purpose.

• Multi-Employee Regular Allowances/Deductions: Apply these to several employees simultaneously.

• Expanded Leave Tracking: Leave without pay is now included in the “Leave Taken History” report.

• Automated Timesheet Notifications: Crystal Timesheets now automatically alert managers via email.

• Selective Leave Approval: Assign leave approval permissions to designated managers.

API/Integration Updates

• Empower Time & Attendance: We have created a seamless API integration so you can easily pull your timesheet hours in Crystal Payroll.

• KIM Time & Attendance: now features a seamless API integration.

• JP Morgan GDFF Banking Integration: Enjoy streamlined banking processes for JP Morgan with this new integration.

Remember, our Crystal Payroll support team is always here to assist you with any questions or guidance you might need regarding the new changes. Your peace of mind is our priority.

Your Guide to Payroll System Transition

With the recent surge in payroll system prices and unexpected shifts in the market, you might find yourself thinking about switching to a more cost-effective and reliable payroll system. The prospect of changing systems can be daunting, especially when you think about the wealth of historical payroll data stored in your current system. Make sure you’re prepared and know what to expect when moving your data from one payroll provider to another before making the jump.

The Value of Your Historical Payroll Records

When transitioning to a new payroll system, importing at least 52 weeks of historical payroll data is not just best practice—it’s a necessity to ensure your payroll operations run smoothly and comply with New Zealand’s employment and tax laws. 

A one-year record plays a role in several key areas. First, it ensures legal compliance by maintaining accurate records of employee payments, leave, and other entitlements as required by law. Some important payroll aspects are even impossible to calculate without such a comprehensive history including the calculation of leave pay rates to determine a potential higher rate of pay for annual leave; and the average daily pay, which is required for employers to accurately determine what to pay an employee for sick leave, alternative leave, public holidays, and other scenarios where the relevant daily pay does not apply. 

Moreover, this data supports the seamless integration of your payroll operations into a new system. It allows for continuity, ensuring that every aspect of your payroll— from employee details to their entitlement histories —is accurately reflected in the new setup. This continuity gives your employees the reassurance that their pay and entitlements will be correctly managed during and after the system transition. So safeguard your business against potential fines or legal challenges by ensuring your new payroll provider is importing at least 52 weeks of your payroll data.

It’s not just 52 weeks you’ll need to think about when making a switch. Make sure you’ve also retained records of all financial transactions and PAYE records for at least seven years for auditing purposes. These records are not only a legal requirement but they’re valuable assets. They provide insights into your business’s financial health, inform decision-making, and track growth patterns. In the event of an audit by the Inland Revenue Department (IRD), these records will become the evidence that demonstrates your adherence to payroll compliance. If these are stored in your current payroll system, double check with them that your data will be safely stored or back up your data into a secure place to meet IRD’s requirements. Here’s a nifty checklist by the IRD that will help to remind you which records need to be stored.

Key Considerations for Migrating your Data

The fear of changing payroll systems and data transfers often stem from the fear of data loss or corruption. However, if you know how to reliably move your data then this doesn’t need to deter you from upgrading to a better system. When selecting a new payroll provider, it’s essential to choose one that can handle seamless data transfers. Additionally, most businesses using an offline payroll system will eventually face the need to switch to an online provider. Moving to an online payroll system is essential for modern businesses to ensure compliance through automatic updates, provide flexibility with remote access, and enhance data security with cloud storage.  

Here are 8 key considerations when migrating payroll data to guarantee a smooth transition:

1. Data Accuracy and Integrity

Ensure that the data being transferred is accurate and complete. This includes employee details, pay history, tax information, and entitlements data.

2. Compatibility and Integration 

Choose a payroll system that can integrate with your current HR and accounting software. This ensures that data can be seamlessly transferred between systems without the need for extensive manual data entry or customization. If the new system can easily integrate with your existing workflows, you’ll be minimizing disruption to your operations.

3. Scalability 

Your business isn’t standing still, and neither should your payroll system. Opt for a solution that grows with you, handling more data and more team members without breaking a sweat. A scalable system ensures that you won’t need to migrate to another system as your business grows.

4. Compliance with Legal Standards 

Your new payroll provider must comply with all relevant legal and tax obligations. This is crucial to avoid any legal complications post-migration.

5. Security of Data 

You’ll need to make sure your data is secure during the migration process. Confirm the security protocols of the new provider to protect any sensitive information.

6. User-Friendly Interface 

The new system should be intuitive and easy to use. This eases the transition for your payroll team, reducing the learning curve and risk of potential errors. Look for a system that comes with clear, accessible support resources.

7. Data Migration Support 

You don’t want to be left in the dark during this important process. A good payroll provider should offer plenty of support for your data migration. This includes clear guidelines on the data migration process, what information needs to be prepared, and in what format. They should also provide tools or services to assist with the migration, ensuring that your data is accurately and efficiently transferred to the new system. Attentive and helpful local support will go a long way in making sure your data migration questions are answered in a timely manner. 

8. Proven Track Record

Finally, consider the provider’s reputation and track record. Look for reviews or case studies from businesses that have successfully migrated to the new system. A provider with a history of successful migrations and satisfied customers is much more likely to offer the quality service and support you need.

Trust Crystal for Your Payroll Transition

At Crystal Payroll, we’re here to make your move to a new payroll system as worry-free as possible. Our approach is designed with your peace of mind at the forefront. We understand the value of your historical payroll data, and our expertise across a wide array of systems ensures your migration is handled with the utmost care.

Can Crystal Payroll migrate from my current payroll provider?

We’ve got the tools for seamlessly integrating payroll data from a wide array of systems. Whether you’re currently using MYOB, Xero, Employment Hero, iPayroll, PayHero, PaySauce, Smartly, or ThankYou Payroll, we’ve got you covered. And for those on MYOB Business, MYOB Essentials, Ace Payroll, MYOB EXO (Comacc), IMS, or MYOB Payroll, we’re especially prepared to ensure an easy move from these offline platforms into our cloud-based solution.

How difficult is migrating my data to Crystal Payroll?

Our approach is straightforward: simply return to us with a completed import template which we provide and, depending on your current system, a backup file or login details. We’ll take it from there, reconfiguring and importing your data into your new Crystal Payroll online account. A full year’s worth of pay history and all those critical employee details are moved over for both a seamless integration and keeping everything in line with New Zealand’s legal standards.

How long will the migration process take?

Worried about the how and when? Don’t be. Our average turnaround time is just 2 working days, with more complex cases wrapped up in 3 to 5 days. That means you could be enjoying payroll clarity with Crystal in less than a week.

How can I trust that Crystal Payroll will provide a seamless and accurate data migration?

Our clients, like Matchmaster NZ, really appreciate how straightforward we make the data migration process. They’ve shared glowing remarks about their switch to Crystal Payroll. Sam Bruzzese from Matchmaster notes,

We could not have had a better experience compared to other larger companies. Crystal captured our existing files & migrated this into their package very quickly without fuss within days. Crystal Payroll guided us through the training stage with recommended options to help us improve our payroll process & reporting.

Thank you Sam for your positive words!

Switching payroll providers doesn’t have to be a leap into the unknown. With Crystal Payroll, it’s more like a step into clarity. Ready to make the switch? Let’s get your payroll running the way it should be.

Better Payroll with a PAYE Intermediary

In today’s market, there’s no shortage of ways to manage your payroll – be it through your accountant, handling it yourself with software, or fully outsourcing the task. But there’s one choice that stands out from the rest for its distinct advantages: PAYE intermediaries. These specialists not only possess deep expertise in tax matters but also ensure that your payroll information is relayed accurately and reliably to the Inland Revenue Department (IRD). Read on as we explore the unique benefits of using a PAYE intermediary and why it could be the ideal payroll solution for your business.

What is a PAYE Intermediary?

In New Zealand, a PAYE (Pay As You Earn) Intermediary is a specialized service that simplifies payroll tax management for employers. Their role includes accurately calculating and deducting taxes from employees’ wages and handling payments and reporting to Inland Revenue.

• What They Do: They calculate how much tax to take out of your employees’ pay and send this information to the New Zealand tax office (IRD). They make sure all the tax details are correct and submitted on time.
• Who They Can Be: A PAYE intermediary can be a specialized payroll company, an accounting firm, or even a software service that’s set up to handle payroll taxes.
• Why Use One: They take the hassle of tax calculations and paperwork off your plate. This is especially helpful if you’re not an expert in tax laws or if you’d rather focus on other parts of your business.

With New Zealand having one of the most complex tax and payroll legislation globally, a PAYE Intermediary brings you that much needed clarity and precision. They are experts at understanding the complexities of the legislation, ensuring compliance with regulations including minimum wage, sick leave, holiday pay, KiwiSaver, and ESCT (Employer Superannuation Contribution Tax).

With and Without a PAYE Intermediary

Managing payroll is a critical aspect of running a business, yet it can be complex and time-consuming, especially in terms of tax compliance. A PAYE (Pay As You Earn) intermediary can significantly streamline this process, but what difference does it really make? To illustrate the impact of using a PAYE intermediary versus handling payroll independently, let’s explore two contrasting scenarios involving New Zealand businesses – one that manages payroll without an intermediary and another that benefits from the services of a PAYE intermediary.

Scenario 1: Business Without a PAYE Intermediary ❌

Business A is a small cafe in New Zealand. The owner, Sarah, handles the payroll herself.

Here’s what she needs to do:

• Calculating Payroll: Every fortnight, Sarah spends hours calculating wages for her 10 employees. She manually figures out each employee’s income tax, KiwiSaver contributions, student loan deductions, and other statutory deductions.

• Staying Updated with Tax Laws: Sarah tries to keep up with the latest tax regulations, but it’s challenging and time-consuming. She’s always worried about missing a new update or rule.

• Submitting Reports: She manually enters payroll details into the IRD’s online system for payday filing. This is done every fortnight and often feels repetitive and burdensome.

• Handling Errors and Queries: Occasionally, Sarah makes mistakes in calculations or reporting. Correcting these with the IRD takes up more of her time and causes stress.

• Time and Effort: Overall, Sarah spends a significant portion of her time on payroll tasks, which distracts her from focusing on her cafe and growing her business.

Scenario 2: Business Using a PAYE Intermediary ✅

Business B is a boutique shop owned by Jack. He uses a PAYE intermediary in the form of a payroll software for his payroll. 

Here’s how Jack’s payroll is handled:

• Automated Payroll Calculations: The PAYE intermediary payroll software  automatically calculates wages, taxes, and deductions for his 8 employees. Jack just inputs the hours worked, and the rest is taken care of.

• Expert Knowledge of Tax Laws: The intermediary stays current with all tax laws and ensures Jack’s payroll is compliant, relieving Jack of the need to track these changes himself.

• Seamless Payday Filing: The intermediary electronically submits all necessary payroll information directly to the IRD after each payroll run. Jack doesn’t need to manually enter any data for payday filing.

• Handling of Errors and IRD Communications: If there are any issues or discrepancies, the PAYE intermediary deals with the IRD directly to resolve them, often without needing Jack’s involvement.

• Focused on His Business: With the payroll in expert hands, Jack spends his time managing his boutique, serving customers, and planning business growth strategies.

So why should you use a PAYE intermediary? Sarah operates Business A without a PAYE intermediary and faces time-consuming payroll tasks, the stress of staying compliant with tax laws, and the potential for errors. On the other hand, Jack gets a lot of help with Business B from his PAYE intermediary and enjoys efficient, accurate payroll processing, compliance assurance, and more time to focus on his core business activities.

Who Should Consider Using a PAYE Intermediary?

Small to medium-sized enterprises (SMEs) often find the most value in using a PAYE Intermediary, especially those without a dedicated payroll department. However, larger organizations can also benefit from the specialized expertise and efficiency gains.

A PAYE Intermediary can be a valuable asset for New Zealand businesses of all sizes looking to simplify their payroll processes and ensure compliance with tax laws. It’s a bit like having a specialised co-pilot for your payroll journey, making sure everything runs smoothly while you focus on steering your business to success.

Effortless Payday Filing with a PAYE Intermediary

Payday filing is a way businesses in New Zealand report their employees’ pay details to the tax office (Inland Revenue). You do it every time you pay your employees – whether that’s weekly, fortnightly, or monthly.

Why Do I Need to Do It?

It’s required by law in New Zealand. Payday filing helps keep tax records up-to-date and accurate. This way, the tax office always has the latest information about what your employees are earning and the taxes being deducted.

What Happens If I Don’t Do It?

If you don’t do payday filing or you do it late, the Inland Revenue might penalize you. This could mean fines for your business. Also, not keeping up with payday filing can lead to errors in tax records, which can create more headaches and extra work later to fix things.

A PAYE intermediary can help simplify the payday filing process for businesses. As payday filing requires employers to report employee earnings and tax details to the Inland Revenue every time they run payroll, it can quickly become a tedious task. A PAYE intermediary, with their expertise in payroll and tax regulations, can take on this responsibility, ensuring accuracy and compliance with legal requirements. Payroll software can be used to automate and streamline these submissions, significantly reducing the administrative burden. This not only helps in avoiding potential penalties for non-compliance or errors but also gives business owners peace of mind, knowing their payroll obligations are managed efficiently and accurately.

Your Crystal Clear PAYE Intermediary

Steering Towards Sustainability

The NZ government says ‘yes’ to salary sacrifice that helps people save for retirement or covers childcare but ‘no’ to anything that just cuts tax without real benefits. They’re keeping a close eye on it, to make sure it’s all about helping Kiwis, not just cutting corners on tax. That’s why salary sacrifice in New Zealand just got more interesting with Workride’s innovative scheme. It’s an environmentally friendly transportation scheme for Kiwi employees and employers alike, looking to make daily travel more eco-friendly and affordable.

Salary Sacrifice in New Zealand

What is Salary Sacrifice?

In New Zealand, salary sacrifice involves an employee agreeing to receive a portion of their pay in a form other than cash, such as higher employer contributions to KiwiSaver, a private superannuation scheme, or daycare/childcare benefits. It is a pre-tax agreement that can result in the employee paying less tax on their income. However, there are limitations and rules around its use to prevent excessive salary sacrifice as a means to avoid tax.

Not to be Confused!

Salary Sacrifice in the context of this blog is unrelated to another payroll concept of KiwiSaver Salary Sacrifice, which is also called KiwiSaver Total Remuneration. This option can also be set up in Crystal Payroll but is separate to this article, and tends to benefit the employer more than the employee.

NZ’s Salary Sacrifice Strategy

The history of salary sacrifice in New Zealand has been closely tied to tax legislation and the desire to ensure fair taxation across different income levels. Concerns about the misuse of salary sacrifice for tax purposes have been addressed by the government. In 2006, Finance Minister Michael Cullen and Revenue Minister Peter Dunne highlighted the growing misuse of salary sacrifice arrangements, particularly concerning superannuation funds, which could result in significant tax disparities. 

The ministers addressed this with the following statements:

“In many cases, high-income employees ‘sacrifice’ their salary merely to reduce their income tax. They do this by arranging a dramatic reduction in their salary in return for a proportionate increase in employer superannuation contributions, which are taxed at a rate lower than their salary,” 

That is a misuse of the tax rules on employer superannuation contributions that results in great unfairness to other taxpayers on similar incomes. In the extreme, those who take advantage of salary sacrifice may well pay thousands of dollars less in tax than others on the same income. “

To address these issues, the government considered changes to the tax rules to counter extreme salary sacrifice practices, seeking to strike a balance between encouraging retirement savings and maintaining equitable taxation.

New Zealand’s salary sacrifice strategy is cautious but deliberate. By allowing salary sacrifices that align with social welfare and economic stability, the government aims to support its citizens without compromising the tax base. This selective approach ensures that salary sacrifice doesn’t become a vehicle for tax evasion but remains a tool for financial well-being. An effective salary sacrifice scheme in New Zealand is one that’s beneficial, compliant, and does not exploit loopholes – a reflection of the government’s commitment to equitable tax practices, prevention of tax base erosion and positive societal benefits.

Payroll for Workride’s New Scheme

Using WorkRide’s new Ride-to-Work benefit scheme means there might be some tweaking required to your payroll to handle salary deductions before taxes. It’s essential for employers to have a payroll system that’s up to the task—accurately handling these deductions and keeping everything compliant with tax laws.

Simple Salary Sacrifice with Crystal Payroll

Crystal Payroll offers a solution that integrates these new payroll needs smoothly. With features  to manage pre-tax benefit deductions, Crystal Payroll takes the complexity out of the equation, ensuring employers can offer WorkRide’s benefits hassle-free. It’s the smart way to keep your payroll compliant and your employees happy with their new wheels.

Here’s how we’ve tailored our system to facilitate the Ride-to-Work scheme:

New Pre-Tax Deduction Code: We’ve created a specific pre-tax deduction code in our system for the Workride scheme. This allows employers to set up the salary sacrifice efficiently, ensuring the deduction is made before tax and in compliance with New Zealand tax laws.

Automated Deductions: Once set up, our system automatically calculates the pre-tax deductions each pay cycle. This hassle-free automation ensures that the correct amounts are deducted, PAYE is accurately adjusted, and employees’ take-home pay reflects the tax benefits of the scheme.

Reporting and Compliance: Our system generates detailed reports that track the salary sacrifice deductions for employers and employees, giving employers transparency and tax compliance. Employers can readily access these reports for their records and tax filing needs.

Ease of Setup: Employers can quickly establish the Workride scheme for their employees through our intuitive interface. The setup process is designed to be straightforward, to ensure that the salary sacrifice is implemented correctly from the start.

Support and Guidance: Crystal Payroll provides exceptional support to ensure that employers understand the setup and management of the Workride scheme within our system. Our team is equipped to handle inquiries and provide detailed guidance. You can call us at (09) 480 0123 or contact us here.

Payroll Setup for Workride Benefits: A Step-by-Step Guide

Public Holiday Pay: Think You’re Doing It Right? Think Again.

Public holidays aren’t always just days of relaxing; for some, it means a headache of having to change up how they process their usual payroll. Employees working on these days have rights to certain benefits, and for businesses, ensuring accurate public holiday pay is both a legal and ethical obligation.

While many assume that public holiday pay is a straight-forward process, the reality is that there’s a lot more to it than meets the eye. The multitude of regulations and subtle details can mean it’s all too easy for businesses to overlook key details when processing their payroll. If you’re confident that your payroll is 100% compliant, the Wendco case might make you reconsider. 

Wendco, the franchisee of the American fast-food chain Wendy’s in New Zealand, offers a lesson in the complexities and potential pitfalls of public holiday pay. This case underscores the importance of understanding and correctly implementing public holiday pay regulations. It’s a call to action for all businesses to review their practices, ensuring they’re not just ticking boxes, but genuinely upholding the rights of their employees. Keep reading to discover why getting public holiday pay right is more crucial than you might have thought.

The Wendco Case: Why you should be cautious with your public holiday pay

In 2015, Wendco (NZ) Limited, a franchisee behind the popular American burger chain Wendy’s Hamburgers with 23 outlets in New Zealand, faced scrutiny following an “Improvement Notice” issued by Labour Inspector Kim Baldwin. The investigation was triggered by employee complaints, suggesting they weren’t receiving their due alternative holidays for working on public holidays. Baldwin looked into Wendco’s employment practices, particularly at their Hornby restaurant, and combined her findings with an audit from another Labour Inspector at Wendco’s Paraparaumu location. The central issue revolved around whether Wendco’s method of determining “usual working days” during public holidays was in line with the Holidays Act 2003.

Wendco’s Missteps: Where They Went Wrong

The company failed to pay some of its employees for working on public holidays and did not provide others with their entitled alternative holiday or “day in lieu.” Their method, dubbed the “three-week rule”, was a straightforward approach: if an employee worked on the same day of the week for three consecutive weeks, then that day was deemed a regular working day for public holiday purposes. While this might sound like a practical solution, it was far from compliant. Such an approach, while convenient, might not always align with the legal requirements of the Holidays Act 2003. Tania Donaldson, the Labour Inspectorate’s Payroll Lead, emphasized that determining if a day is an “otherwise working day” requires a practical, case-by-case approach. Factors like employment agreements, usual work patterns, rosters, and other relevant considerations play a pivotal role.

Upon further investigation, the Employment Relations Authority (ERA) recently found that Wendco failed to pay some of its staff for working on public holidays. This breach was particularly evident around the “Mondayisation” of public holidays in late December 2020 and early January 2021. 

This case underscores the importance of understanding and correctly implementing the provisions of the Holidays Act 2003. As Tania Donaldson, Payroll Lead, aptly pointed out, “Employers who configure their payroll system in a way that is convenient to themselves without proper regard to their obligations run a high risk of being non-compliant.”

Wendco’s Consequences: Paying the Price for Non-Compliance

Upon realization and subsequent investigation into the breaches, Wendco had to undertake several corrective measures:

• Review of Public Holidays Worked: Wendco was instructed to conduct a thorough review of all public holidays worked by past and current employees since July 2012. This was to determine if the public holiday was an “otherwise working day” for the employee.
• Compensation for Affected Employees: For employees who had worked on a public holiday that was determined to be an “otherwise working day”, Wendco had to credit them with an alternative holiday. For former employees who had not taken their alternative holiday before their employment ended, Wendco was required to make a monetary payment for the alternative day.

Estimates suggest that Wendco could be looking at a cost of around 16,500 days or $1.6 million worth of leave – a high price Wendco might pay for its misunderstandings of the Holidays Act. It reiterates the importance of having thorough understanding of the Act and the necessity of having accurate payroll processes in place to avoid such costly financial setbacks.

The Proper Process: What Wendco Should Have Done

To ensure compliance with the Holidays Act 2003, businesses, including Wendco, should take the following steps:

• Determine “Otherwise Working Days” Individually:
  It’s not enough to apply blanket rules when it comes to public holiday entitlements. Each employee’s situation is unique, and businesses should assess this on an individual basis. For instance:

• • Sarah, who works a regular Monday to Friday job, would consider a public holiday falling on a Monday as an “otherwise working day” since she typically works on Mondays.

• • John works in a restaurant with a rotating roster. He doesn’t have fixed days, but he’s been scheduled to work every Saturday for the last two months. A public holiday falls on a Saturday. Given his recent work pattern, that Saturday would likely be considered an “otherwise working day” for John.

• • Determining an “otherwise working day” requires a practical approach, considering factors like employment agreements, usual work patterns, rosters, and other relevant circumstances. It isn’t always enough to only check if they’ve worked three out of four most recent week days.

• Understand and Implement Mondayisation:
  The Holidays Act 2003 introduced the concept of “Mondayisation”. If a public holiday falls on a weekend, and that day would not otherwise be a working day for the employee, the holiday is transferred to the following Monday (or in some cases, Tuesday). For businesses, this means ensuring that employees receive their rightful entitlements even if the public holiday is “Mondayised”.

• Configure the Payroll System with Precision:
  A compliant payroll system is one that’s set up to align seamlessly with the legal obligations of the Holidays Act 2003. This goes beyond just the basic calculations. It means avoiding shortcuts or configurations that, while convenient, might lead to non-compliance. The system should be robust enough to handle the intricacies of public holiday pay, especially for employees with irregular work patterns.

• Regularly Review and Update Processes:
  Compliance isn’t a one-time task. As legislation evolves and company operations change, businesses should be proactive in reviewing and updating their processes. This ensures that they remain compliant and that employees receive their rightful entitlements.

Simplifying Public Holiday Payroll: Our New Feature 

One of the hardest aspects of payroll is keeping integrity and compliance with legislation. Specifically, if you employ individuals with non-standard working patterns, determining their eligibility for statutory pay can become a challenge. As Labour Day has just passed, we’re excited to introduce a new tool – the Statutory Pay Calculator –  a new tool to help determine both the eligibility of an employee with irregular working hours for public holiday pay and calculate the exact amount they’re due. Let this new tool make your Labour day payroll even more compliant and simple.

It’s straightforward to figure out the holiday pay for employees with consistent weekly schedules.

Regular Working Pattern:

Suppose you have a 40-hour-per-week employee who always works 8 hours every Monday. If they take Labour Day off, they should still receive pay for their usual 8 hours while getting to enjoy their holiday.

However, when employees don’t have the luxury of a regular working pattern. Determining the entitlement and what is to be paid to the employee becomes much more complicated due to the unpredictable working pattern. 

Irregular Working Pattern:

Consider an employee who occasionally works on Mondays, with varying hours each time. Deciding if they qualify for holiday pay—and if so, how much—becomes a complex task.

How we designed it to be fully compliant

Our latest tool incorporates both case law and provisions from the Holidays Act 2003. By default, it evaluates an employee’s work pattern over the past 4 weeks and cross-references it with a broader range spanning from a minimum of 3 months to a maximum of 6 months. This ensures an accurate determination of holiday pay entitlements.

Set up is simple

For a detailed walk-through, watch our in-depth video on the feature and its setup.