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Leave Entitlements and Other Payroll Questions
Payroll
Employers must deduct PAYE, including tax on schedular payments (formerly withholding payments) from payments made to staff or contractors. Deductions may also be needed for student loan repayments, child support, Kiwisaver, or any benefits, bonuses or other allowances that you pay.

Tax codes
All staff and contractors receiving schedular payments must complete a tax code declaration. This tells the employer the rate of PAYE to deduct or any student loan repayments.

Accounting for allowances and benefits for staff
Holiday pay, bonuses, allowances, and special benefits paid to employees such as loss of earnings compensation or life insurance premiums are usually liable for tax.

Special types of workers
There are different ways of calculating PAYE for non-residents and other special types of workers.

Deductions from salaries and wages
There are tools available to help employers calculate PAYE and student loan repayment deductions. If child support deductions must be made, we will inform you of the amount. Employer superannuation contributions (ESCT), formerly specified superannuation contributions withholding tax (SSCWT), are subject to tax. Employers must also use the PAYE system to deduct employees' KiwiSaver contributions.

Fringe benefits
Most benefits paid to employees in addition to their salary or wages, for example motor vehicles or low-interest loans, are liable for fringe benefit tax (FBT).

Tax on schedular payments
Employers must deduct tax on schedular payments (formerly withholding payments) from payments made to self-employed contractors, and to companies operating in the horticultural and viticultural industries unless the contractor holds a current certificate of exemption from tax on schedular payments.

Correcting employee tax codes
If an employee is using an incorrect tax code we will send their employer a letter asking them to correct their employee's tax code.
Rest and Meal Breaks

These provisions come into force as a result of the Employment Relations (Breaks, Infant Feeding, and Other Matters) Amendment Act 2008 passed in September 2008.

The Amendment aims to improve health and safety in workplaces and increase productivity by establishing a minimal standard across all industries.

Rest and meal breaks --- what you’re entitled to
Employees will be entitled to the following paid rest breaks and unpaid meal breaks:

•one paid 10-minute rest break if their work period is between two and four hours;
•one paid 10-minute rest break and one unpaid 30-minute meal break if their work period is between four and six hours;
•two paid 10-minute rest breaks and one unpaid 30-minute meal break if their work period is between six and eight hours.
If more than an eight hour period is worked, these requirements automatically extend to cover the additional hours on the same basis.

Timing of rest and meal breaks
The timing of rest and meal breaks is flexible and can follow any arrangement agreed between employer and employee. 

If an agreement can’t be reached, the rest and meal breaks should be spread evenly throughout the work period, where reasonable and practicable.

Additional rest and meal breaks
The Amendment’s provisions will establish minimal standards that apply across all industries.

Employers and employees are free to agree to additional entitlements to rest and meal breaks — either paid or unpaid.

The new provisions will not affect existing agreements that provide for additional paid or unpaid rest breaks and meal breaks.

Legislative exemptions
Where an employee is required to take a rest break under another enactment, that enactment applies instead of the entitlements to rest and meal breaks under the Act.  This would include, for example, the Land Transport Rule: Work Time and Logbooks 2007 made under the Land Transport Act 1998.

Compliance
Employers may be liable to a penalty imposed by the Employment Relations Authority if they do not comply with minimal standards for paid rest breaks and unpaid meal breaks.

The Authority will also have the power to order employers to comply with their obligations.
Parental Leave - Which employees are eligible?

The following circumstances will entitle an employee to parental leave under the Parental Leave and Employment Protection Act 1987:

-     Where a female employee is having a baby
-     The spouse/partner of an employee is having a baby
-     Where two spouses/partners assume the care of a child under six years they intend to jointly adopt. They can nominate which of them
      is primarily eligible for the parental leave.
-     An employee who assumes care of a child they intend to adopt alone.

To become eligible for parental leave, an employee must have:

Worked for the same employer for an average of at least 10 hours a week, including at least one hour in every week or 40 hours in every month in the six or 12 months immediately before the baby’s expected due date or the date they assume the care of a child they intend to adopt.

There are different entitlements available to employees depending on whether they meet the 12 or six month criteria.

Some employees may have worked for the same employer for more than 12 months but have an inconsistent work pattern and do not meet the average hours of work criteria over the 12 months.

In this case, they can also calculate their hours of work over six months as they may still be eligible for parental leave under the six month criteria.
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How often can an employee take parental leave?

An employee can take parental leave multiple times, as long as six months elapse between the date they returned to work and the expected date of birth of the subsequent child. They must also meet the eligibility requirements each time.

Additional parental leave provisions in employment agreements

Some employment agreements include additional parental leave or parental leave payment provisions.

These will be unique to your workplace and are additional to the parental leave and payment provided under the law.

These provisions are lawful if the employment agreement has adequate arrangements for the following:
-     Who can take parental leave
-     How long the various types of leave last
-     How well the employee’s job is protected during and after parental leave
-     What obligations, if any, the employer has to pay the employee during the leave
-     What procedures the employee has to follow.

Employees can use their employment agreement provisions if they are as favourable or more favourable as those under the law. The employment agreement cannot change an employee’s eligibility for the government’s parental leave and parental leave payments, and they can receive additional parental leave payments through their employment agreement.
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Employees on genuine fixed term agreements

The entitlement to four weeks paid leave after 12 months' service is sometimes not the best way to deal with holidays when the employment relationship is short-term.

The Employment Relations Act 2000 allows for fixed term employment agreements, if on appointment there is a genuine reason for the fixed term and the reason for the fixed term and how the employment will end are set out in writing in the employment agreement. Examples of genuine reasons are:

“The job is to prune trees in the west block, and your job will cease when all of the trees are pruned. I estimate that this pruning job will take you and your co-workers two months from the start date.”

“This appointment is for a fixed term to cover for an employee who is taking four months' leave. The employee will return on [dd/mm/yyyy] and there will be a hand-over period of one week. As a consequence your employment will cease on [dd/mm/yyyy].”

Where such a fixed-term agreement is for less than 12 months, an employee may agree to the employer adding 8% to the gross weekly earnings in lieu of getting annual holidays or in lieu of getting an aggregated 8% at the end of the fixed term.

Any such arrangement should be included in the employment agreement, and the 8% should appear as a separate and identifiable amount on the employee's pay slip. On the completion of the fixed term, the employee will have received all pay for annual holidays. No further payment will be outstanding and no holidays are available.

If the employee is later employed on one or more further fixed term agreements of less than 12 months with the same employer, then the same arrangement can be made even when there is no break in employment, provided the two parties agree and document the arrangement.
When pay-as-you-go provisions can be used

The Holidays Act 2003 allows “pay-as-you-go” holiday pay arrangements in two circumstances only. These are:

-     employees on genuine fixed-term agreements of less than 12 months - this reflects the fact that these employees are not expected to
      reach the date on which they would normally qualify for annual holidays; and

-     employees with a work pattern that is intermittent or irregular (genuine casual work) - this reflects the fact that the employee's
      employment pattern may mean it is not meaningful or practicable to attempt to provide them with four weeks paid annual holidays.

Employees paid on a pay-as-you-go basis are not entitled to paid time off for annual holidays.

Moving from fixed term to permanent employment with the same employer

If an employee enters into a permanent working arrangement, the payment of the additional 8% annual holiday pay in the employee's regular pay must cease.

The employee will then become entitled to four weeks annual holidays one year after the final fixed term period started. Because the employer has already paid the additional 8% annual holiday pay during the fixed term period, the pay for annual holidays is reduced by the amount of holiday pay already paid at 8% during the final period of fixed term employment.
Where the fixed term agreement is not genuine or exceeds 12 months

If an employer has incorrectly paid annual holiday pay on a pay-as-you-go basis, after 12 months' continuous employment the employee will become entitled to paid annual holidays, and any amount paid on a pay-as-you-go basis may not be deducted from the employee's annual holiday pay.

Examples of circumstances where this occurs are:

-     where a fixed term agreement was not genuine
-     where a fixed term agreement was for a period of greater than 12 months
Issues to consider with pay-as-you-go arrangements

Fixed-term agreements are in some cases linked to the completion of projects. In these circumstances there is a risk to the employer that the fixed term will exceed 12 months, at which time the employee becomes entitled to paid annual holidays, despite having already been paid on a pay-as-you-go basis.

Therefore, pay-as-you-go arrangements are not recommended where it is possible that the employment will last longer than 12 months.

You should seek to clarify entitlements and renegotiate the relevant employment agreement as soon as it appears likely that a fixed term arrangement will unexpectedly last more than 12 months.

Holiday pay is additional to the minimum wage and must be shown as a separate identifiable component of an employee's pay.

Please note any annual holiday pay (such as pay-as-you-go holiday pay) is not included in the minimum wage rate and must be added on top of and paid with a regular pay.
Employees with a work pattern that is intermittent or irregular (genuine casual work)

Many employees who are described as “casual” are part-time employees whose future employment pattern is actually clear -
for example, supermarket or hospitality employees whose work pattern is established on a fortnightly roster.
These employees are entitled to four weeks leave.

For a minority of employees, however, this clarity is not the case.

Generally, these are employees whose employment is triggered by an event that cannot be accurately anticipated, or whose work pattern can be described as so irregular or intermittent that the concept of four weeks away from work is difficult to apply. In such cases, an arrangement can be agreed to add to their pay 8% of the employee's gross earnings as annual holiday pay.

For these employees, the arrangement must be by genuine agreement and be included in the employment agreement, and the 8% annual holiday pay should appear as a separate and identifiable amount on the employee's pay slip.

At the end of the employment relationship, no additional pay for annual holidays is due.

If an employee agrees to enter into such an arrangement, the employer would be wise to keep it under review to see whether a regular cycle of work has developed.

If this occurs, the employer and employee should enter into a new employment agreement that provides for annual holidays to accrue, and that removes the 8% payment.
Examples of genuinely irregular or intermittent employment

The Holidays Act 2003 contains no reference to “casual work” because the term is colloquially applied to so many types of employment arrangements.

Instead, the Act refers to intermittent or irregular employment.

Here are some examples of intermittent or irregular work for the purposes of the Holidays Act:

-     a retired employee who is called back in emergencies to cover for sickness
-     specialist tradesperson who is employed only when a particular process (such as repairing a broken machine) is required.
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What are my obligations under the parental leave legislation?

You have the following responsibilities under the law:

-     Inform your employee of their paid parental leave entitlements
-     Consider, then approve or decline your employee’s request to take parental leave
-     Accurately confirm the length of employment and income details on the employee’s application for the parental leave payment
-     Confirm the parental leave arrangements with your employee.

Your employee has the responsibility to approach you and apply for leave
Your employee is in most cases expected to give you three months notice of their intention to take parental leave. In the case of adoption this requirement can sometimes not be met and a shorter notice is acceptable, or if you agree, a shorter notice period can be given.
You can approve parental leave at a later stage.

Your employee should apply in writing stating:

-     What type of leave they want to take
-     When they plan to start their leave
-     The period of leave they intend to take
-     If they are sharing any part of their leave with their spouse/partner, the letter must also say:

-     The dates on which they and their spouse/partner plan to start and finish each period of leave
-     Their spouse/partner’s name and, if they are an employee, the name and address of their employer
-     That they are both eligible for the leave they are applying for
-     That the total amount of leave they are taking will not be more than their maximum entitlement – 14 or 52 weeks depending on whether
       they have a six or 12 month qualifying period.

They must attach a certificate, or a copy of a certificate, from their doctor or midwife, stating when the baby is due. If they are sharing leave with their spouse/partner they must also include a written declaration stating that they and their partner are going to share the care of the baby, or the child they are adopting.

When you receive their application
After you receive the application for parental leave, you have seven days in which to ask for any required information that has not been provided. This seven day period starts from the date on which it comes to your attention that the application is incomplete.
The employee must provide the additional information within 14 days. Once you have received all the information, you have 21 days to reply.

The reply should state:

-     Whether the employee is entitled to take parental leave, and if not, the reasons why not
-     The main legal rights and obligations they have, especially those relating to when they can start their leave
-     Whether the job can be kept open or not. If it cannot, the letter should explain that they are entitled to dispute that, and will have
      preference for similar jobs for six months after the end of the parental leave.

Examples of the letter can be downloaded from the Department of Labour, click here for the employers forms.

When can I decline leave?
An eligible employee has a statutory right to take leave. In certain circumstances you have the right not to hold the employee’s position open for them. You cannot exercise that right if the period of leave they are applying for is four weeks or less.
If the employee is seeking a longer period of leave, you can decline to hold a ‘key position’ open. For a position to be described as ‘key’, you would be required to prove that the position is critical to your business and prove that it is not possible to find a short-term replacement for the employee. It is very rare that a job cannot be kept open.

How do I handle an employee’s application for the government-funded parental leave payment?
The payments for government-funded paid parental leave are processed by the Inland Revenue Department.

Once you have agreed on parental leave arrangements with your employee, they should make an application for paid parental leave to Inland Revenue as soon as possible.

Application forms can be obtained by phoning the Department of Labour on 0800 20 90 20.

The employee should complete the application form, but may require your assistance in providing details of average income over the course of the year or six months, as applicable.

You are required to verify both the length of employment and income details on the application form. You are not approving the payment, only confirming those details. It is the employee’s responsibility to forward the application form.

Confirm arrangements
Once the parental leave period has started, you must write to the employee to confirm the arrangements you have made. You have 21 days to do this after the start date of the employee’s leave. The letter must include the date the employee is to return to work and remind them to write to you 21 days before they return to work. The employee must write to you 21 days before their leave ends and let you know whether they are planning to return to work.

Are there any other obligations I need to consider?
If there are additional provisions regarding parental leave or parental leave payments in your employee’s employment agreement, or in your workplace’s policy, it is good practice to make your employee aware of them.

You should also consider your obligations under the health and safety in employment legislation, and manage any new issues that arise due to the pregnancy.
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