PKF Francis Aickin Limited, Far North, New Zealand
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Common payroll fishhooks, by Dale Adamson
10 Oct 2019
Written Employment Agreements are a legal requirement. They should be signed and both parties should have a copy. The agreement may be enforceable even if not signed. The aim is to provide clear expectations to both parties on the role, working conditions and employment rights. A clearly drafted agreement can reduce risk of misunderstandings.
The Adult Minimum Wage, currently $17.70 per hour, applies to employees aged 16 years or older, though lower rates may apply in specific circumstances (e.g. trainees or disabled workers). There is no minimum wage for children under 16 years, but all other minimum standard employment rights and PAYE apply.
For agricultural workers, the minimum wage applies to each hour worked on the farm and can’t be averaged over the season. If board or lodgings is provided as part of the employment package, its value becomes part of the gross wage for minimum pay calculations. Note that this value is also part of the taxable gross for PAYE calculation purposes e.g. say an employee’s hourly rate is $16 for a 40-hour week, with board of $70 per week provided. This gives a gross taxable weekly income of $710 ($17.75/hr). PAYE is calculated on the $710 and the $70 board is deducted from the net pay.
Payslips are not compulsory but are useful. Employees have a legal right to see information about how their pay is calculated, and access to their time and pay records.
Legality of deductions from wages is controlled by the Wages Protection Act 1983 and includes those required by law or a court order. Other deductions must be authorised in writing by the employee. Even if a general deduction clause exists in the Employment Agreement, the employee must be consulted before making a specific deduction and may withdraw their consent.
Termination is a minefield. It is wise to get specialist advise before commencing action to dismiss, lay off or make an employee redundant. There are protocols and procedures that must be followed to minimise exposure to legal action. Be aware also of constructive dismissal, whereby the employee resigns but felt forced to do so.
Final pay on termination is often miscalculated. Wages can only be “withheld in lieu of notice”, if agreed to in writing (e.g. the Employment Agreement). If an employee appears to have abandoned their employment, the Employer must make reasonable efforts to contact them.
It is important to understand the difference between annual leave earned (remaining days outstanding from last anniversary entitlement) and annual leave accrued (the 8% or 10% calculation from the anniversary.) Employment does not terminate until the annual leave earned days have been utilised. e.g.an employee resigns on 24 December 2019 with six days annual leave owing. December 25 and 26 and January 1 and 2, 2020 are public holidays and paid as such. The six days leave covers December 27, 30 and 31 and January 3, 6 and 7 (termination date). In addition, accrued holiday pay will be paid at 8% (if four weeks entitlement) of the gross taxable pay from anniversary date to termination date, including the annual leave and public holidays.
If there were no holidays earned outstanding, termination date would have been December 24, with no entitlement to public holiday payment. The accrued annual leave payment would have been based on the gross taxable earnings since anniversary (at 8%) less any holidays paid in advance.
These are only a few of the payroll fishhooks. A timely query to your adviser can minimise headaches later.
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