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Payroll is the essential process of recording and paying employees fairly in accordance with the law. This page guides you through the correct payroll rules and regulations, ensuring that employees are paid according to their employment agreement and legal requirements, including minimum wage and deductions like PAYE and KiwiSaver. It emphasises the importance of keeping accurate records and outlines considerations for selecting a suitable payroll system or service for your farming business. The page also highlights various types of leave and deductions, minimum wage compliance, and other factors to look out for when handling payroll. It's essential to ensure compliance to protect your farming business.
Payroll is an essential process to understand, especially when you are managing employees. Employees must be paid fairly for the work they do and with legislative requirements becoming increasingly complex, having a comprehensive recording and payment system (payroll) is vital. It makes pay transparent, decreases misunderstandings and protects your farming business. In this page you will be able to discover the correct payroll rules and regulations, and what payroll system may be right for your business.
Following good practice and the essential rules and regulations is important when managing employees payroll. Although, sometimes that’s easier said than done! Recently even large organisations aren’t always getting this right. So, what do you need to do to be compliant?
The information and hours of work inputted into a payroll system plays a large part in whether you are correctly paying employees. If you are not recording accurate time and hours of work data via a timesheet or time recording system, you will not be paying employees correctly - for example holiday pay will be incorrect, and minimum wage top ups may not be happening.
There is a lot of terminology involved in paying employees. For the most up to date and correct information we suggest you look at the MBIE website.
Completing pay calculations on spreadsheets and using IRD/MBIE tools at home can be sufficient. However, with the complexities listed above and with the added headache of varying hours a payroll company/service takes the hassle out of calculating and paying staff and is more accurate.
Over the past few years there has been a move for farmers to use payroll software. Overwhelming, employers have found that the time savings in doing the calculations and the knowledge that all those records were readily available, outweighed the cost of the software.
If you are considering a payroll system we have put together some handy ideas on what to consider, read further below.
Please be aware that this is generic advice and every situation is different. We suggest that you seek your own legal advice before making a decision regarding pay and payroll to ensure that you meet legal requirements.
It’s also important to consider if your payroll provider is selling you a software product or an advisory service. If it is just the software, then you will need both the technical and legal knowledge to operate the software so that it calculates correct payments. If an employee is paid incorrectly the employer is usually required to pay them the correct amount at their cost.
Several payroll companies have partnered with the rural sector to make their products more customised to a farming business. Mention DairyNZ to them to see if they currently have any specials.
Below is a guide that outlines some considerations to make when choosing a payroll system.
A payroll provider may not always give the correct advice - if something doesn’t seem right or you’re not sure, it is best to seek legal advice or speak to MBIE. ‘Because the payroll provider said so’ is not a defence and unfortunately they are not always correct.
The information below is not intended to provide legal advice. If you are not familiar with some of the terms used, please visit Ministry of Business, Innovation and Employment
Employees must be set up as you have arranged with the employee and in their Individual Employment Agreement.
If the system won’t let you set them up correctly, then ask why - it may be that the system isn’t flexible enough for the type of work they are doing, or perhaps your arrangements with them may not be the most appropriate. For example, a casual staff member should be able to be paid a public holiday if they work it.
Likewise, discuss with the payroll company what happens if an employees work situation changes. In particular if patterns of work are different than those in the employment agreement. Often casual employees can sometimes start working in patterns, this means their leave and holiday entitlements need to change accordingly.
Ask what deductions your payroll system can make. The main ones you will need to use may include:
A key determinant for public holidays and how they are paid is whether or not it is an otherwise working day for that employee.
Be aware different payroll systems set employees up differently for this. Don’t assume that anything is automatic but ask how it determines public holiday payments for all employees especially casual employees and those with variable hours.
Ask how a termination pay is calculated. Look out for future public holiday not worked entitlements, does it project forward ALL annual holidays or just outstanding annual holidays.
These need to be accounted for; employees can receive their sick leave and ACC payments for an at-work accident and also receive correct entitlements for non-work related accidents.
Unsure of the information in this page or the best way forward? For free employment information try MBIE’s Employment call centre on 0800 20 90 20 during business hours.