Paying your staff correctly is one of your most important responsibilities as an employer.
However, payroll can be complex! With deductibles, varied wages and salaries, and changing IRD requirements, it can be confusing figuring out employee wages every pay cycle.
In this guide, we’ll go through your basic employer payroll requirements, the different types of employee payments, minimum wage requirements in New Zealand, as well as a few tips to help you pay the correct wages every time.
As an employer, you are not only responsible for paying staff correctly. You are also responsible for paying income tax on their behalf.
This is the main reason why it is important to get payroll correct!
Your basic payroll requirements as an employer should include:
With the right systems and software in place, most of these payroll obligations can be straightforward.
Using a New Zealand based payroll software like Smartly means that you will always be up to date with any government changes.
The next step of paying staff correctly is to figure out what kind of employee wage they will be on.
Depending on the number of hours and type of work, employees might be paid the same amount every paycheck or a different amount every time.
This is when people get paid per hour that they work. You set their hourly rate and multiply it by the number of hours they work.
Hourly rates are more common for
One important thing to remember with hourly workers is that their annual leave rate may change. If someone works variable hours or gets paid extra in different pay cycles, their annual leave calculation may change.
A salary is when an employee works a set number of predetermined hours each week. It is usually negotiated as a yearly figure.
For payroll, this means that if they haven’t taken leave or had a public holiday, their fortnightly wage and deductions are the same every single time.
Commission may be offered as an incentive on top of hourly rates or salary. This is when employees get paid a percentage or dollar amount based on how many sales they make for example.
You may choose to pay employee wages as commission only. The rate, percentage and pay cycle is set in their contract.
If you choose to do this, their pay must still be equal to or greater than minimum wage in New Zealand. In cases where they don’t meet the threshold on commission alone, employers are required to top up their wages.
Rate per piece is an employee payment commission where they get paid based on the number of pieces or units they have worked on. For example, fruit pickers might get a rate per piece unit based on the number of buckets they have picked.
Like commission based wages, employees must still be paid minimum wage and must still pay income tax and deductions in every paycheck.
New Zealand requires businesses to pay employees minimum wage. Minimum wage rate is adjusted over time by legislation for things like cost of living, and it is a legal requirement of running a business.
Employees hourly rate must be equal to or greater than minimum wage for every hour worked.
You cannot average their earning out over a month or season, they must be paid the minimum prescribed for the period (see table below from Employment NZ).
The current New Zealand minimum wage as of April 2022 is $21.20 per hour for an adult employee. Complying with this requires adjusting all your employee contracts and updating your payroll services.
Using a New Zealand based payroll service like Smartly ensures that you are up to date with the changes.
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To help you pay staff correctly, we have a few quick tips to get you started.
Regardless of whether staff are on salary or an hourly rate, you must pay them at least the minimum wage. Before tax, this means you need to be able to pay a full time worker $848 per week.
As an employer in New Zealand, this is the absolute bare minimum for paying staff correctly.
With the rising cost of living, you may choose to pay your staff more than minimum wage. This will usually help reduce turnover and give employees better work satisfaction.
It is also a good idea to check what your industry standards are. To be a competitive employer where good workers stick around, you may need to agree to slightly higher salaries.
All workers are entitled to 10-minute paid rest breaks and unpaid 30-minute meal breaks. There are a minimum number of breaks that must be provided to employees for each time period worked.
For employees on salary this is automatically calculated, and for people on hourly rates this is added into time sheets. You will need to take these breaks into account when paying their wages.
Still manually entering timesheets?
With Smartly, employees can easily draft and submit their digital timesheets in their app. You can then approve them in your own app. All hours, breaks and leave can be tracked in one place with a simple calendar view and then automatically added to payroll.
Employees rely on their employer to pay income tax on their behalf. Things like PAYE, ACC levies, student loans and KiwiSaver are all “deducted” from their total wage. This is a big part of making sure you pay staff correctly.
It is your responsibility to calculate what their deductions will be based on their tax codes and total wage. Payroll software makes this relatively simple (as long as employee data and timesheets are up to date).
IRD requires you to keep payroll data for at least seven years. Payslip information also needs to be available if employees request it (even if you don’t automatically create payslips).
Payslips and record keeping are one of the biggest benefits of payroll automation. Payroll software like Smartly keeps all your payroll information in one place and creates audit reports at the click of a button. It also sends all of your payday filing information to IRD on your behalf so that you are always paying staff correctly. Simple!
Paying the correct employee wages doesn’t have to be complicated. With Smartly payroll, you can easily calculate employee wages, digitise timesheets, and submit payday filings without doing any extra work. With minimal set up, simple pricing structures and customer service support to help you every step of the way, you’ll never worry about payroll again!
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If you want to learn more about how your day-to-day tasks can be made simpler, you can chat to us to get some insight on how payroll software could benefit your business. Smartly can make the complex tasks seem simple including payroll, timesheets, leave and more! Smartly takes care of most of the faffing, so you can focus on the important stuff.
