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Payroll and Holidays Act

Payroll and Holidays Act

KPMG are subject matter specialists in payroll services and Holidays Act compliance.

KPMG are subject matter specialists in payroll services and Holidays Act compliance.

Payroll Health Checks

The payroll environment in New Zealand is becoming more complex with issues ranging from payroll tax and employment obligations through to administration of the Holidays Act 2003. KPMG offers a wide range of services and opportunities for meeting the challenges of payroll administration. Based on our experience and market leading expertise on tax and specifically payroll matters, we have unique insight into the key payroll issues facing organisations and the expertise to assist. Examples of payroll issues which we have identified and managed for other clients include:

  • Treatment of taxable and non-taxable allowances
  • Calculation of tax on emoluments and discretionary income components
  • Categorisation of income and the implications for ACC, working for families, student loans etc.
  • Fraud identification and management
  • Consideration of taxable benefits in kind
  • Management and reporting of bonuses
  • Employee share scheme management and taxation
  • Non-compliance with delegated authority structure and policies and procedures 
  • Leave calculation and management
  • Lack of adequate internal control
  • Security of payroll system and related information.

A timely payroll review assists with the identification and management of key risks and further, creates opportunities for process improvement in areas such as:

  • General payroll handling and process
  • Cost reduction
  • Process optimisation
  • Time efficiency
  • IT infrastructure
  • System and management controls.

Our multidisciplinary team leverages our collective industry expertise to create the best solution for an organisation.

The Holidays Act 2003 and remediation support

Employers are legally required to ensure that employee’s holiday and leave entitlements are correct and meet the minimum standards set out in the Holidays 2003 (the Act). Following numerous stories in the media over the last 18 months regarding employers making holiday pay calculation errors, The Ministry of Business, Innovation and Employment  (MBIE) are undertaking active reviews of compliance through the Labour Inspectorate.

The Labour Inspectorate, which monitors compliance with the Act have clear expectations regarding full compliance with the obligations and calculations set out in the Act.

While the Act has been around for over a decade, many organisations are struggling to comply with it. Recent media attention in this area has generated a lot of interest, and many organisations are taking proactive steps to assess their compliance with
the Act and to compensate employees for any historic underpayments. Back-pay of up to millions have been reported.

In light of the challenges with the application of the Act, the MBIE has also commissioned a review of the current legislation, which may result in changes to the Act and/or further guidance on the application of the Act in the near future.

Areas where issues can arise and where employers (and their payroll providers) may not be applying the Act correctly include, for example:

  • Incorrect classification of certain payments for example bonuses for the purposes of determining gross earnings
  • Application of the “greater of” calculation to determine the rate of annual holiday entitlement
  • Use of Relevant Daily Pay or Average Daily Pay for the payment of BAPS leave calculations for employees with variable hours or irregular work patterns
  • Treatment of leave payments at termination
  • Calculation of leave entitlements based on a 52 week period (rather than 12 months); and
  • Determination of an Otherwise Working Day and a standard working week for variable hours employees.

How can KPMG assist?

KPMG’s team of payroll tax experts are available to provide bespoke and wide ranging support to ensuring organisations are correctly calculating and managing payroll tax obligations. Our services cover a wide range of compliance and advisory support

We can guide your organisation through the Holidays Act 2003 Remediation process from issue identification to calculation of historic back-pay obligations and methodologies which ensure compliance into the future.

We appreciate that dealing with non-compliance and remediation issues is a sensitive and cumbersome area for organisations, given the number of stakeholders impacted, the volume of historical data and the need for clarity and transparency. We understand these relationships and challenges and are able to work with clients to provide effective and practical support in calculating and reframing Holidays Act obligations.

Our experience to date covers both public and private sectors across a number of industries giving us key insights into the working environments and industry specific challenges.

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