November 2016 Update
Changes to Employment Law
In April this year, major changes were introduced to NZ employment law:
- Parental leave
- Hours of work
- Wage deductions
- Record keeping
- Health & Safety
Most of you will be aware of the changes to Health and Safety, the calculation of holiday pay and hours of work, as they were in the news a lot but there were a few other changes that might have been overlooked. Here’s a summary to job your memory (courtesy of *MyHR):
PARENTAL LEAVE
- Increase to 18 weeks paid for biological & adoptive parents (under 6 years old).
- Parents qualify after 26 weeks work for any employer in the past 52 weeks.
- “Keeping in touch hours” allow parents to partially return.
- Payments increased to $527.72 (or max earnings if less). Paid by IRD.
- Protection of employment unchanged.
HOURS OF WORK
- Permanent part-time & full-time agreements must specify hours. Zero hours prohibited.
- Extra hours by mutual agreement or paid compensation.
- Reasonable notice and reasonable compensation for cancelling a shift.
- Genuinely casual still OK.
DEDUCTIONS FROM WAGES
- Employees MUST CONSENT to wage deductions, the employment agreement is not enough.
- Deductions must not be unreasonable.
- No more penalties for unworked notice.
RECORD KEEPING
- Increased power to Labour Inspectors, including issuing fines on the spot up to $20,000.
- More Labour Inspectors.
- Must have a signed agreement (no change).
- Must have accurate wage and time records.
HEALTH AND SAFETY
- Health and Safety at Work Act 2015
- Proactive two-way communication
- New responsibilities
- PCBU, Officer, Worker & Others
- Increased penalties
(*MyHR is an online software company. I have no affiliation with MyHR but I did enjoy the seminar they put on and I have tried their sofware with one employee. So far, it is shaping up to be as promised.)
What is Leave in Advance?
Not everyone understands how annual leave entitlements work.
A common misconception held is that because holidays are accruing, that they are an entitlement. That is not correct. An employee only becomes entitled to holidays on the annual (12 month) anniversary of their start date. Any leave that is taken before that is not yet an entitlement and is classified as leave in advance.
While it is good to get rid of some of the accrued leave liability, your employees need to understand that if they terminate before they become entitled to leave, the leave taken in advance may not be valued at the termination value. This means there may be an adjustment, usually a deduction, made on termination.
Leave entitlements are paid at the HIGHER OF rate, while holiday pay on leave accrued on termination is just 8% of gross earnings. Depending on the industry, 8% could be much less that the average rate over the past 12 months.
To avoid any misunderstanding, you should have your employee agree that they understand they are taking leave in advance and that their final holiday pay may be adjusted. The easiest way to do that is to have a tick box and a note on the leave application form. The employee signs their leave application in full knowledge that they are taking leave in advance and of any possible consequences.
Lump Sum Tax on Holiday Pay
Last year the IRD clarified their position on the taxing of termination holiday pay and holiday pay paid in advance.
In situations where the holiday pay is paid as a lump sum IN ADDITION TO the employee’s regular pay in a pay period, the holiday is to be taxed as an extra pay:
- where the holiday pay is paid as a lump sum before the holiday is taken (holiday pay paid in advance)
- where the remaining balance of the employee’s leave entitlement is paid as a lump sum at the end of their employment.
The higher tax on holidays paid in advance is a bit of an anomaly, seeing as the staff are in continuous employment with you, but that is the rule. There are submissions to change this but for now you are required to abide by the legislation.
It will affect you at Christmas if you shut down and your staff take all their holiday pay at once; you will need to use the lump sum rate. The simplest way to avoid this is to run a separate pay for each pay period and to pay each pay separately as it falls due.
How to work out the PAYE for lump sums
- Work out what your employee has earned (before PAYE) over the past four weeks.
- Multiply this figure by 13.
- Add the lump sum payment to the figure in step two.
- Use the table below to work out what income bracket your employee is in.
- Deduct PAYE from the lump sum payment at the rate shown in the right-hand column for that income bracket.
Choose the right PAYE rate
| Total of lump sum payment and grossed-up annual value of employee’s income for previous four weeks | PAYE rate (including 1.39% ACC levy) | PAYE rate for redundancy or retiring payments |
| $14,000 or less | 11.89% | 10.50% |
| from $14,001 to $48,000 | 18.89% | 17.50% |
| from $48,001 to $70,000 | 31.39% | 30.00% |
| from $70,001 to $122,063 | 34.39% | 33.00% |
NOTE: $122,063 is the ACC levy maximum for the 2017 tax year.
If you need help with Christmas pays, keep your eye out for training courses from your payroll providers, or give me a call and I can come in and check your payroll with you to make sure you comply with legislation, that you are paying based on employment agreements and that you have company policies in place for those tricky situations.
Accounting Software Hackers
It has been brought to my notice that hackers are gaining access to businesses’ on line accounting software and changing the bank account details for suppliers. If you have a two-stage on line log in process, make sure you follow it and use two separate passwords, one to log on line, the other to get into your software. Make sure you TURN OFF “Keep me Logged In”. Once a hacker is in, it doesn’t take much to change details in your accounting software to pay themselves without you noticing.
It is also possible to intercept and amend PDF invoices, this has been happening in Christchurch. If you have an option in your software for the customer to download the invoice themselves from a secure site, choose that option instead of emailing.
Accounting Software Discounts
There seems to be an aggressive fight for space in the cloud right now. All the providers are offering discounts for you to move to the cloud. Make sure you call me if you are thinking moving to the cloud, or putting more files in the cloud.
AccountRight Tip – Use the Find Ribbon to search in All Registers and Lists
You have probably used the Find Ribbon in the AccountRight Bank Register but did you know you can access it on all registers and lists?
I have found it especially useful when searching for job numbers and purchase orders.
First you need to know how to access the find ribbon.
When you are in a register or list, click into the data lines and press the key combination: Ctrl Shift F.
Open a list or register, click on any line, in this example, Supercheap:
Use Ctrl Shift F to bring up the Find Ribbon and type in the some information to search on, I’ve used a supplier name:
I could have searched for an invoice number:
Freeway: A Mobility App that allows you to work away from the office on your mobile device without the need for cell coverage.
Key Functions of Freeway:
| Checklists: mandatory or optional checklists & data capture | Sales & Jobs: creation of quotes, orders and invoices | ||
| Photos: take photos or link to existing images on device | Maps: map and directions from your current position | ||
| Signatures: capture multiple signatures with mandatory setting | Notes: internal or external notes | ||
| Timesheets: record job times or throughput quantities | Products & Charges: standard lists or supplier catalogues | ||
| Tracking: GPS coordinates and timestamps for On & Off site | Inquires: ad hoc user defined inquiries | ||
| Purchases: creation of receipts for supplier pickups | Service Maintenance: assets & equipment | ||
| Sketches: freeform drawings | SMS: Two-way text messaging | ||
| Barcodes: barcode scanning support | Audio Recording: unlimited voice recording |
All about business 