Accountants using a calculator
thought leadership

Raising the profile of payroll in NZ

Nov 2020

Payroll is challenging for NZ businesses, especially with the complexities of The Holidays Act. Employers continue to be found miscalculating or misinterpreting holiday pay of employees, showing system-wide confusion for the Holidays Act, complemented by inefficient payroll systems.

David Jenkins, CEO of the New Zealand Payroll Practitioners Association (NZPPA) is passionate about payroll compliance and training payroll professionals to find their way through the complexities of The Holidays Act. We spoke with David about his role at the NZPPA, the biggest issues employers face with payroll, and how to best ensure payroll compliance in NZ.


Tell us about how the NZPPA came to be

I founded the NZPPA in 2007 because at the time there was no official body that looked after payroll. Payroll was left to its own devices and wasn’t seen as a profession; no one supported it. We now have well over 1400 members, and the membership covers corporate, business, individual, NFP, overseas, and small business. We’ve grown a lot; we now have a certification in place. The NZPPA is all about creating payroll as a profession; so people can see it as a career. It’s about ensuring the largest cost a business has (labour costs) has a professional looking after it.


What common payroll challenges do your members face?

When the payroll system is not giving them the options to be compliant with Holidays Act. A lot of systems are non-compliant. It’s sometimes not about people configuring the system wrong - the base system often doesn’t give users the options to configure data correctly to begin with.

Many payroll systems are stated in hours rather than weeks and days. Payroll providers aren’t up to the requirements of the Act. Only just in the last couple of years am I seeing payroll providers putting weeks into the payroll system for leave entitlements.

Record keeping is another issue - payroll providers only build the bare minimum into the payroll system. There’s nothing in the Act that says record keeping has to be in the payroll system, yet employers are obliged to keep 6 years’ worth of records of employee hours and leave entitlements. A lot of employers get called out because keeping track of hours worked for 6 years is tricky when you’re using paper timesheets or an inefficient time and attendance system. 

There’s also a lack of understanding in payroll. It’s never been invested in or developed. Employers do the best they can but don’t have the skills they should have. Payroll people often just rely on the system and don’t have the knowledge to test it. The system is often wrong to start with, so they’re set up to fail. A payroll professional needs to question everything they're doing in payroll before publishing a pay run.


What issues do you find when carrying out audits?

I do auditing all the time. I’m very surprised that payroll people don’t understand the payments they make. They can’t explain how the system is actually doing the calculations. They should know it inside out. 

Payroll systems show the results, but not the calculation. When testing a system, I want to be able to drill down on things to see where it came from and why the calculation happened, so if there’s an issue, I can solve it straight away. Some payroll people don’t have the skills to do that.

But things are changing. When I do training now, the employer sends the whole payroll team on training. This might be because of the media calling out employers that aren’t getting it right.

If it’s not about the software provider, it could be how it’s set up or how it’s managed. Sometimes you have people in HR telling payroll to do the payroll in a certain way, even though it’s wrong. Proper training needs to be put in place to call out these issues.

I came from the days where payroll was all on paper, and I hope we’re moving away from that now. There are time and attendance apps that help you get the right data and make sure it’s correct. One of the biggest issues I have of auditing is looking at 6 years of data when it’s not recorded efficiently; it’s a nightmare getting it all together.


What industries are most impacted by The Holidays Act?

Any industries that have employees working irregular hours. If people don’t work Monday to Friday, 9-5, it’s going to cause complications. That could be hospitality, retail, manufacturing; anywhere where people are working variable hours.


Is cloud payroll popular in NZ?

It’s the next step but i don’t see it as popular. There are advantages and disadvantages - payroll may be in the cloud but it might still not have the functionality required. It should be about the functionality, about transparency, and correct calculations. But having the cloud obviously helps with the record keeping side and data management.

Some providers come to NZ with smartphone apps where you can look at leave balances, and all of these add-ons. But when you get the payroll implemented, you realise it’s not compliant to NZ legislation. You need to get the meat and potatoes of payroll right, and then add all the extras. 


Would you trust automation?

A payroll person should always check calculations. A lot of payroll systems group employees - they treat them the same way with the same calculation. But that’s an issue because the Act is all about the individual. For example, if one employee works 40 hours a week, and another is variable, but they both work in the same area of the business, some employers would group them in the same calculation. But if they did that, one would be compliant and one wouldn’t be. You still have to have the flexibility to be able to say one person is different from another. A system needs the tools to be able to warn a user to tell them if someone has changed their work pattern, or if they need to change the calculation.


What should employers do to better ensure compliance?

A lot of employers outsource payroll. What they don’t seem to understand is you can’t outsource the liability. They have to take that responsibility if it’s wrong. So they still need to understand payroll, and give instructions to the provider on how they want it run.

I don’t trust any software until I check it. There are different payroll systems that work better in different environments, so employers need to have that insight.

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