Give yourself a break this holiday season: get your payroll sorted early in NZ

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Silly season is officially upon us – the crazy queues in malls, frantic Christmas shoppers and carols playing everywhere.

As well as playing your part in the festive frivolity, it’s important, before you finish up, to you make sure annual leave has been entered and employees are being paid correctly.

We get asked lots of payroll questions around Christmas time so here are the answers to the most common ones:

Does Inland Revenue have a close-down period for payday filing over the holidays?

IR will have a grace period close-down from 24th December to 15th January. Any paydays within this time-frame are due from employers on or before 17th January. Head to the IR website for more details on filing employment information with payday filing.

How do I pay my employees all their holiday pay?

It’s not possible to pay out holiday pay as such. The holiday pay figure in Xero shows 8% of an employee’s total gross earnings for their current anniversary year. It doesn’t reduce as they take annual leave. See how holiday pay and annual leave works.

Your permanent employees are paid annual leave via an annual leave request for the number of hours they’ll be on leave. Leave requests can be submitted on behalf of an employee from the employee’s Leave tab. Once approved, the amount of annual leave is shown in the next pay run. See how to submit and approve a leave request.

How do I know how many hours of annual leave my employee can take in advance of their next anniversary?

Just make sure the checkbox for the option Include leave available to take in advance in the balance is ticked – it’s ticked by default for all new employees. The annual leave balance will then display with an amount that includes annual leave available to take in advance, up until the end of the next pay period. See more details on annual leave in advance and how it’s calculated in Xero.

Why isn’t the public holiday line showing in some of my employees’ pay runs or payslips?

Either the holiday group is not set, or was set after the draft pay run was created. You can set a holiday group in the employee’s Employment tab. If the group was set after the draft pay run was created, you need to select Reset Payslip in the employee’s draft pay run. See how to manage holiday groups.

How do I pay an employee for working a public holiday?

To pay an employee for working a public holiday, you can add a new earnings pay item (e.g. Public holiday worked, with a multiple of 1.5 times the employee’s normal pay rate). Add it to the employee’s draft payslip and enter the hours worked. To update the alternative holidays balance, go to the employee’s payslip within the draft pay run and manually add the hours to accrue in the Leave Accruals section.

See detailed instructions for paying an employee for working a public holiday.

My company has an annual close-down. How do I pay the employees all their leave and holiday pay?

If your company has an annual close-down, you’ll need to process annual leave for your employees for the close-down period. Here’s how to process leave for annual close-down in New Zealand.

Why is my employee’s annual leave pay rate higher than usual?

The employee’s annual leave rate can sometimes be higher than their hourly rate. This is because annual leave is paid at the higher of ordinary weekly pay or average weekly earnings. See the official guidance on calculating payments for holidays and leave.

The ordinary weekly pay calculation uses the information from the Employment and Pay Template tabs. The average weekly earnings calculation uses information from the Opening Balances tab plus the pay runs that have been processed in Xero.

Can I process payroll in advance and how will this work with payday filing?

Certainly! As long as it is a normal, scheduled pay run, the pay calendar will automatically roll forward. How far in advance you can file a pay run with IR depends on the date the pay run is posted.

For pay runs posted before the 19th of a month, the Payroll Admin can set a payment date up to the end of the current month. For pay runs posted on the 20th of a month onwards, Payroll Admin can set a payment date in advance up to the end of the next month.

If you need to post pay runs for dates in advance of the dates available, you may get an error message that says “Filing period does not yet exist / has not yet been generated”. In this case, you can contact IR who may be able to open up the next month for you.

You can still post the pay run in advance in Xero even if the filing period does not yet exist/has not been generated. However, the payday files for that period will not be filed automatically even if the payroll admin is connected. Once the filing period eventually opens, any connected user will need to go into the posted pay run and manually file this with IR. Any pay runs posted ahead in advance of a filing period being open will not be automatically filed.

If you have any other questions, check Xero Central for more content about payroll. You can also take a look at the Employment NZ website for details on annual close-down periods. Have a safe, fun and festive holiday.

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