New Zealand Payroll

Everything you need to know about paying your NZ based staff

COVID-19 and KeyLink #2

25 March 2020- 41 min read

Operations

What is KeyLink doing?

We are treating ourselves as an essential industry until we are told otherwise.

We are working to reduce risk of our staff contracting COVID-19 by working from home as much as possible.

Please continue to e-mail edp@keylink.co.nz, but be aware that you may get e-mails from other KeyLink addresses.

Phone +64 9 280 0328, but be aware that getting our phone numbers to ring phones where staff are has been a challenge.

This document is based on the information I had when I wrote it and is my opinion only. You will want to take advice from other sources. We will act on your instructions.

Note that some of this guidance has changed over the last 24 hours, so verbal information provided today is superseded by this document.

Details of payroll processing procedures are to come.

Feedback is welcome.

Guiding principles when dealing with your staff

Document everything

You may need to produce documents to support any actions you took.

These documents should be contemporaneous. i.e. created around the time the action occurred. Don’t plan to do it later!

Open Communications

Ensure you have up to date contact details for your employees.

Communicate as much information as you have with your staff so that they understand the context of any conversations.

Act in good faith and document it

Listen to staff, their inputs and suggestions.

Consider them and provide feedback.

Use your best efforts

Don’t use this situation to terminate employment without applying your best efforts to save jobs.

Check to see what financial advice and support is available to your business from your accountants, bank, shareholders etc.

Check your Employee Agreements

Ensure you follow the correct consultation processes.

Check for redundancy clauses.

Have you got a force majeure clause? Can you use it?

Staff payments are treated as income by the IRD

This includes the Wages Subsidy and the Leave Payment.

Therefore PAYE, Child Support, Student Loan and KiwiSaver Employee Deductions and Employer Contributions will be deducted as normal.

Other deductions, e.g. WINZ and MoJ will still occur.

See Links below.

Payments to Staff before Lock Down

You may have experienced some or all of the following situations before the Lock Down took force:

 

Work is Available

Work is Not Available

Employee is Available

Paid for time worked

Paid normal income

Employee is Sick

Request Sick Leave

Request Sick Leave

Employes decides to self-isolate

No payment is required.

Employee could choose to request Alternate or Annual Leave

Employer could choose to pay normal income

Depends on who notified who first. If employer first, then normal income. If employee first then No payment is required.

Employee is not Available due to being asked to self-isolate, or being sick with COVID-19, or caring for a dependents who have to self-isolate or is sick with COVID-19

Paid Leave Payment

Can top up with Sick, Alternate or Annual Leave to 100% of Normal income.

Paid Leave Payment

Can top up with Sick, Alternate or Annual Leave to 100% of Normal income.

 

Staff after Lock Down

Apply for the “Leave Payment”

Applies to employees who:

  • need to self-isolate (as determined by the Ministry of Health guidelines),
  • cannot work because they are sick with COVID-19, or
  • cannot work because they are caring for dependents who are required to self-isolate or are sick with COVID-19.

These must be paid to the employee in full and can be topped up with other leave types.

Apply for the wage subsidy

If you are eligible for the wage subsidy , details here : https://workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null, you should apply for it.

We can provide a report with the required information for each employee.

Many of you have already asked for this information.

Notes:

  • your business must have taken active steps to mitigate the impact of COVID-19
    This should include talking to your bank and other sources of financing to see if they can help.
  • you must make best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.
  • If your employees are continuing to work during this period, they must be paid wages or salary for the time worked or 80% of their normal income, whichever is higher

Normal Income

As the Government haven’t defined what Normal Income is we will start sending out reports tomorrow that show the following for each employee:

  • ID
  • Last Name
  • Known As
  • Work Area
  • Weekly Hours in employment record
  • Weekly Days in employment
  • Ordinary Rate in Remuneration record
  • Weekly Hours * Ordinary Rate (if Perm, the perm amount)
  • 52 week average weekly hours
  • 52 week average weekly days
  • 52 week average gross taxable
  • 12 week average weekly hours
  • 12 week average weekly days
  • 12 week average gross taxable
  • 4 week average weekly hours
  • 4 week average weekly days
  • 4 week average gross taxable

You can use this to determine what your definition of normal income is for each employee.

You will need to make up the difference between the Wage Subsidy and Normal Income.

Reduction of employee payments to 80% of normal income

You may want to negotiate with your employees to drop their paid income to 80% of their normal income. We recommend dropping hours rather than days or rates. If you drop days this could interfere with the upcoming Easter Holidays.

If you can get agreement to drop employees’ normal income, document the change and let us know.

If you can document using the spreadsheet we sent you with IRD numbers, that will help us speed our work.

Employees could choose to use Alternate or Annual Leave to top up their income.

Use of Annual Leave to reduce the impact of your business

You may want to negotiate with your employees to use Annual Leave as part of the 80% minimum income, but they are not required to.

You can’t force employees to use Annual Leave as part of minimum income as the wage subsidy is to subsidise wages, not Annual Leave payments.

What if you can prove you can’t top up wages?

Make sure you have documented everything and informed your employees.

You must pay the minimum amount provided by the Government to the employees.

Employees can top up using available Alternate and Annual Leave.

Redundancy

The effect of COVID-19 on your business may mean that you must make some staff redundant. You need to go through the standard redundancy process. If you have received a wage subsidy for that employee, you may need to repay the part paid for the period after the redundancy.

Notes on Leave Types

Alternate, Bereavement, Public Holidays and Sick Leave should be paid at the employee’s current Relevant Daily Pay (what they would have been paid had they worked), or Average Daily Pay (if you can’t determine Relevant Daily Pay), or better.

None of the above leave types need to be paid if the employee is on Leave Without Pay.

If you have negotiated to pay at 80% of normal, then pay at 80% or better.

Leave types have an order of priority:

  1. Public Holidays (this means you will have to pay Easter Holidays at the employee’s current Relevant Daily Pay, Average Daily Pay or better.
  2. Bereavement
  3. Sick
  4. Annual Leave and Alternate Leave

Payroll processing

We will be providing further guidance on how we would like to receive your payroll information. Unfortunately, we are resource constrained, so while I hope it will be Wednesday 25 March, it could be Thursday 26 March before I get this published. We need to ensure that employees due to be paid on the 25th are paid.

Final Notes

Writing this document has been a painful experience as:

  • COVID-19 is having a huge effect on our world, country and communities
  • We care about our customers and their families
    Everyone is wondering how things will be at the end of this.
  • We care about our customer’s employees and their families.
    Everyone is wondering how they will survive this.
  • The guidance from the Government is incomplete at best and confusing at worst.

We can fix anything that has been incorrectly processed in your payroll, however overpayments could be impossible to fix as the employee(s) have to agree to repay the overpayment.

Links:

WINZ COVID-19 Support: https://workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null

Common questions on support for employers during COVID-19: https://workandincome.govt.nz/products/a-z-benefits/employer-questions-and-answers.html

The NZ Government site for COVID-19: https://covid19.govt.nz/

And finally stay safe and be kind to one another, it is a tough time for all of us.

Sincerely,

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Operations

About the Author

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Evan Lyon

Evan Lyon

KeyLink owner, 25+ years experience in designing, building and running mission critical IT systems. More than 12 years experience supporting and using payroll systems.

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