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22-09-2021

EOFY: How to sort your end of year payroll.

The end of financial year is an important time to be on top of all things payroll, especially after the added complexities of 2021 wage subsidies and sick leave entitlement changes to name a few.
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To help you prep for the end of the 2020/21 financial year, we’ve covered off the following things:

  1. Watch out for upcoming changes to legislation
  2. Processing your final pay run
  3. Cashing up annual leave
  4. Reports you might need
  5. COVID-19 support payments
  6. Updating and reviewing your payroll

Watch out for upcoming changes to legislation.

 

Minimum wage increase

 

Starting from 1 April 2021 the minimum wage is increasing from $18.90 to $20 per hour. You need to make sure this is accounted for and ready to go as part of your payroll. If you’re using Smartly, it’s pretty straightforward to update pay rates, and we’ll prompt you along the way if you forget.

What you need to do:

Review your payroll, work out which people are on minimum wage or close to it. Next, make sure you update any pay rates impacted by the change. All details about the minimum wage increase are on the Ministry of Business, Innovation and Employment’s (MBIE) website.

When you’re in Smartly, type ‘change pay rate’ into the 'Need Help' section  of your site,  it will provide step by step instructions on how to update pay rates for your team.

 

New tax rate

 

A new tax rate of 39% will come into effect from 1 April 2021 for employees earning over $180,000 per annum.

 

New Zealand’s personal income tax rates now look like this:

NZ tax rates

Using Smartly? We will automatically switch to the updated tax rates. Learn more about tax rates in New Zealand.

 

Sick leave entitlement changes
 

From 24 July 2021, minimum sick leave entitlements increased from five to 10 days. 

The changes will roll out gradually, with employees gaining the extra five days when they reach their next entitlement day. This will either be after 6 months of employment or on their sick leave anniversary (12 months after they were last entitled to sick leave). The maximum amount of unused sick leave that an employee is entitled to remains at 20 days in any year, under the Act.

If you’re a Smartly customer, we’ll sort everything for you in the background. But also check out our Changes to sick leave entitlements blog for more information.

Processing your final pay run.

 

It’s simple, make sure you process your final pay run of the 2020/21 financial year on time. This will help you reconcile any payroll related information for the year and ensure pay data is in the correct period for your reporting. When using Smartly this is all sorted for you and you can pull any reports as and when needed. Easy right?

Cashing up annual leave.

 

End of financial year is a common time for staff to cash up annual leave.

Here’s a couple of things to remember:

  • A maximum of one week (of an employee’s four-week entitlement) can be cashed out every 12-months of continuous employment. This can be done all at once, or through multiple requests to cash up until the entire week is cashed up.
  • Cashing up annual leave needs to be requested by the employee in writing and agreed by both parties. The employer may say no. Employment NZ has some useful information about cashing up annual leave.

Reports you might need.

 
Year to date earning and allowances report

 

You may want to pull this report to look at your employee total earnings and allowances for the year. It’s likely an accountant will be interested, so ask them about the specifics.

 

63-day holiday report

 

This report shows all earned and taken leave, including any adjustments that have been made. The amount shown for annual leave paid in advance is based on the weeks value calculated at the time of the payment. This report is often used as part of the end of financial year reporting. It also allows employers work out which annual leave is deductible for the financial year.

To find this report in Smartly, follow these steps:

  1. Log into your Smartly site
  2. Go to Reports
  3. Click on 63 Day Report in the left-hand menu
  4. Enter the date range
  5. Click Export
  6. Open or Save the file
Covid-19

COVID-19 wage subsidies

 

Throughout 2020 COVID-19 support payments were paid out to many Kiwi businesses. You do not get a tax deduction for COVID-19 wage subsidies paid from the Government. So, you’ll need to separate this out for the financial year and in any reporting you do. In Smartly you can do this by selecting ‘Allowances Report’ and then select the ‘COVID-19 Leave Payment’ option.

 

It’s also useful to see the total amount every member of your team earned from the wage subsidy. To learn more about all things COVID-19 visit Work and Income.

Updating and reviewing your payroll

 

It’s a great time to check the pay rates of all of your employees and make sure their tax rates are correct. A general tidy up of your payroll is also a good idea. Check employee details, who has access to make changes, and who has the authority to approve your pay runs. Get it sorted for the year.

 

You’ll also want to check the Employer Superannuation Contribution Tax (ESCT) rate for each employee. Employers need to work out the ESCT rate for each employee. ESCT rates depend on the employee’s income. If an employee’s salary or wage changes throughout the year, you won’t need to change the ESCT rate until the end of the tax year. This is something to be aware of, but for Smartly customers it’s all dealt with behind the scenes.

Not using Smartly? Switch today.

 

Payroll can be complex, we’re here to help make it simple. Smartly takes care of most of the faffing, but if there’s something you want to talk through our support team are always there to help. We offer free support and training to our customers. End of year payroll is made simple with Smartly.

 

If you’re interested in signing up to Smartly, please check out what we have to offer here. Everything mentioned in this blog is something our product or awesome support team can help you with. We’ll make it simple for you and your people.

More information

 

It’s not always a straight forward situation so we suggest contacting Employment NZ on 0800 20 90 20 if you’re unsure about anything to do with your team. IRD are also there to help when it comes to any tax-related queries.

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