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Processing payrolls – are you sure that you are getting it right?

Is payroll just one more thing on your list of things to do? 

Well then, I might be throwing a spanner in the works for you, by letting you know of the potential that you may have been doing it wrong all this time…  Yes, your employee might be getting his money paid into his bank account every week, fortnight or month dependent on his contract.  But how sure are you, and the employee, that what he is being paid is in fact what is legally owed to him? 

With payroll being one of New Zealand’s most common ‘grey areas’, it leaves room for many employers and employees to misinterpret the payroll legislation and subsequently not process a pay correctly. 

Here at Varntige, we have found it extremely helpful to join groups on social media (no idea how employers ran payrolls back in the good, old days when the internet was not at their fingertips ).  

Having a platform where payroll guru’s can share scenario’s, can discuss and compare situations, is a helpful tool in today’s payroll society.  We also often find ourselves having debates here in the office, as there are quite a few of us with payroll experience. We make quite good use of our NZPPA Payroll Practice Guide too. This big book reminds me of a book full of spells that a wizard would have sitting up on his shelf – if only we could also just ‘hocus pocus’ a payroll situation to get the payroll right with ease️.

Many employers have the mindset, that they only have a handful of employees, so they will run their payrolls themselves.  Not realizing that by doing it incorrectly for just those handful of employees can become a very costly experience down the road if you are ever audited and found to be doing it incorrectly. 

What to Consider? 

There is a lot to consider when running pays, one of those things being the rate at which Annual leave should be paid compared to the rate that should be used for BAPS leave (bereavement, alternative holiday, public holiday and sick leave).  There are different calculations that need to be used to ensure the employee is being paid what they are legally entitled to.

I recently had a client (who likes to set up the payroll in the software, and then I go in and check and make the necessary adjustments) want to pay her employee for annual leave at her hourly rate of $30. However, when using the correct calculations, her annual leave rate was meant to be paid at $51 per hour. Only once I made her aware and explained to her why, she realised that this is something she was never aware of and that she had been doing wrong for so long!  Luckily, we could adjust and rectify this before paying the employee.  But this got me thinking, how many employers are unaware of all the different calculations to use? 

Another scenario I have come across is when employees apply for leave before they have reached their anniversary date, and the employer thinks, ‘oh no big deal I will give him leave in advance as he has been accumulating holiday pay anyway’.  That is all good and well, but what I have seen is that employers give leave in advance without ensuring that they are not giving the employee more than what they have accumulated in holiday pay thus far.  And then the employee decides not to return to work.  The employer is then left with having overpaid the employee and cannot get that money back. 

With today’s rising cost of everything, we have had employees chose to have some of their annual leave paid out to them instead of them taking the time off. However, many employers are also not aware that it is only 1 week that is allowed to be cashed out AND it is only leave that the employee has already been entitled to.  An employee cannot cash out his holiday pay that will turn to annual leave when he reaches his anniversary date.  It needs to be days owing to them already.  

There have been so many different scenario’s that have popped up in my time as a payroll administrator, that if I were to note everything down, I am sure I would have my own ‘hocus pocus’ payroll mistake manual sitting up on my shelf. 

If you are an employer, running your own payrolls, breezing through them without giving to much thought to the details, but have had an ‘oh no’ moment while reading this blog – now is the time to get in touch, and let us help you get it right from this point onwards!


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