It‘s coming up to the end of the financial year for many businesses – an important time to be on top of all things payroll, especially after the added complexities of 2020 (wage subsidies, minimum wage increases, changes to parental leave entitlements to name a few). Need a bit of help, or just want to check you’ve got it all under control? Keep reading…
To help you prep for the end of the 2020/21 financial year, we’ve covered off the following things:
- Upcoming changes to legislation
- Processing your final pay run
- Staff bonuses and annual leave pay-outs
- Reports you might need
- COVID-19 support payments
- Updating and reviewing your payroll
1. Upcoming changes to legislation
Minimum wage increase
Starting from 1 April 2021 the minimum wage is increasing from $18.90 to $20 per hour. You’ll need to make sure this is accounted for and ready to go as part of your payroll. If you’re using SmartPayroll, it’s pretty straightforward to update pay rates, and we’ll prompt you along the way if you forget.
What you need to do:
Review your payroll, work out which people are on minimum wage or close to it. Next, make sure you update any pay rates impacted by the change. All details about the minimum wage increase are on the Ministry of Business, Innovation and Employment’s (MBIE) website.
When you’re in SmartPayroll type ‘change pay rate’ into the Need Help section of your site, it will provide step by step instructions on how to update pay rates for your team.
New tax rate
A new tax rate of 39% will come into effect from 1 April 2021 for employees earning over $180,000 per annum.
New Zealand’s personal income tax rates will soon look like this:
Using SmartPayroll? We will automatically switch to the updated tax rates. Learn more about tax rates in New Zealand.
Other changes coming soon
Although changes to sick leave aren’t here yet, keep an eye out. The proposed changes include the minimum sick leave entitlement changing from 5 to 10 days. Employees will receive 10 days on their next sick leave entitlement date (rather than all employees receiving the additional sick leave on the same day). There will be no change to the maximum amount of unused sick leave an employee can carry over, which remains at 20 days.
2. Processing your final pay run
It’s simple, make sure you process your final pay run of the 2020/21 financial year on time. This will help you reconcile any payroll related information for the year and ensure pay data is in the correct period for your reporting. When using SmartPayroll this is all sorted in the background and you can pull any reports as and when you need to. Easy right?
3. Staff bonuses and annual leave payouts
End of financial year is a common time to pay out staff bonuses or for staff to cash up annual leave.
Here’s a couple of things to remember:
- A maximum of one week (of an employee’s four-week entitlement) can be cashed out every 12-months of continuous employment. This can be done all at once, or through multiple requests to cash up until the entire week is cashed up.
- Cashing up annual leave needs to be requested by the employee in writing and agreed by both parties. The employer may say no. Employment NZ has some useful information about cashing up annual leave.
4. Reports you might need
Year to date earning and allowances report
You may want to pull this report to look at your employee total earnings and allowances for the year. It’s likely an accountant will be interested, so ask them about the specifics.
63-day holiday report
This report shows all earned and taken leave, including any adjustments that have been made. The amount shown for annual leave paid in advance is based on the weeks value calculated at the time of the payment. This report is often used as part of the end of financial year reporting. It also allows employers work out which annual leave is deductible for the financial year.
To find this report in SmartPayroll, follow these steps:
- Log into your SmartPayroll site
- Go to Reports
- Click on 63 Day Report in the left-hand menu
- Enter the date range
- Click Export
- Open or Save the file
5. COVID-19 wage subsidies
Throughout 2020 COVID-19 support payments were paid out to many Kiwi businesses. You do not get a tax deduction for COVID-19 wage subsidies paid from the Government. So, you’ll need to separate this out for the financial year and in any reporting you do. In SmartPayroll you can do this by selecting ‘Allowances Report’ and then select the ‘COVID-19 Leave Payment’ option.
It’s also useful to see the total amount every member of your team earned from the wage subsidy. To learn more about all things COVID-19 visit Work and Income.
We’ve also created a page where we provide up-to-date details relating to SmartPayroll and COVID-19.
6. Updating and reviewing your payroll
It’s a great time to check the pay rates of all of your employees and make sure their tax rates are correct. A general tidy up of your payroll is also a good idea. Check employee details, who has access to make changes, and who has the authority to approve your pay runs. Get it sorted for the year.
You’ll also want to check the Employer Superannuation Contribution Tax (ESCT) rate for each employee. Employers need to work out the ESCT rate for each employee. ESCT rates depend on the employee’s income. If an employee’s salary or wage changes throughout the year, you won’t need to change the ESCT rate until the end of the tax year. This is something to be aware of, but for SmartPayroll customers it’s all dealt with behind the scenes.
Not using SmartPayroll? Switch today.
Payroll can be complex, we’re here to help make it simple. SmartPayroll takes care of most of the faffing, but if there’s something you want to talk through our support team are always there to help. We offer free support and training to our customers. End of year payroll is made simple with SmartPayroll.
If you’re interested in signing up to SmartPayroll, please check out what we have to offer here. Everything mentioned in this blog is something our product or awesome support team can help you with. We’ll make it simple for you and your people.
It’s not always a straight forward situation so we suggest contacting Employment NZ on 0800 20 90 20 if you’re unsure about anything to do with your team. IRD are also there to help when it comes to any tax-related queries.