Navigating NZ Payroll: A Guide to Payday Filing

Payroll in New Zealand can be a daunting task if you’re not familiar with the process. 

It’s all very well to simply transfer pay to employees on every payday, but payroll comes with plenty of legal requirements that need to be adhered to. Whether the person in charge makes a deliberate omission or accidental mistake, the consequences can be severe, with fines for businesses well into the five figures. 

In our new series, we’ll be looking at all aspects of NZ payroll, from the basics of payday filing to important considerations around leave entitlements.

We’ll be releasing monthly instalments of our series, so keep an eye out! This month, we’re looking at payday filing - one of the main legal requirements in New Zealand. 

What is payday filing in New Zealand?

Payday has come around and it’s time to pay employees in the business. That action should always be accompanied by payday filing – no exception. 

Payday filing is the action of providing Inland Revenue with accurate information about all employees on the payroll, including the selected payday, deductions and the pay cycle that the employees have worked. Payday filing was introduced back in 2019 as a mandatory step for businesses, and can either be done electronically or by paper. 

To file electronically, you must send the relevant information to Inland Revenue within two working days of each payday. For paper filing, you need to file within 10 working days of each payday. 

What happens if you don't submit payroll information in NZ?

If you don’t submit the relevant employment information with every payday, you will incur penalties and potentially additional interest. There’s a current single penalty for every late filing of $250, which needs to be paid no later than 30 days past when the employment information was originally due. Continued non-compliance will see further penalties and potential legal action.

Inland Revenue stresses that payday filing is crucial to ensure that employees are getting their correct pay, with the right deductions and contributions. With that in mind, it’s as much about ensuring your clients stay compliant as it is about keeping their records straight. 

What's required when filing employment information to the IRD?

The same kinds of information is needed with every payday filing. What will likely change from month to month will be the actual data and figures involved. You should also submit the employee details of any new team member before their first payday, as well as any departing employees on behalf of your client.

The employment information you will need to file is:

• An employer monthly schedule (details can be seen on form IR348)
• Deductions made from pay for each employee
• Business revenue for the month
• Employer Superannuation Contribution Tax (ESCT) for each employee
• The pay period start and end dates
• The chosen pay cycle for each employee (eg. weekly or monthly)
• The chosen payday 

What deductions should be made from pay? 

Assessing the right deductions in employee earnings can be tricky to get your head around. 

However, it’s essential to know exactly which deductions you should be taking from wages with every pay period and to work on a by-employee process, rather than blanket deductions across all employees.

That’s because it’s likely to vary by employee depending on their individual circumstances. It’s also important to note that any deductions that aren’t permitted under the Wages Protection Act are deemed illegal.

The following deductions are legally required if they’re applicable to the employee in question:

PAYE 

PAYE is calculated through an employee’s tax code, which they should provide to their employer. Inland Revenue has a handy calculator to give you an idea of what PAYE deductions will be.

Child support

Inland Revenue will inform the business directly if child support payments have to be made by an employee.

Student loan repayments 

Student loan repayments are decided with the employee tax code, as they’re included with PAYE.

KiwiSaver employee contributions

KiwiSaver employee contributions are chosen by the employee upon commencement of employment, providing they’ve opted into the KiwiSaver scheme.

KiwiSaver employer net contributions

Contributions are decided by the employer, but should be a minimum of 3% of the employee’s gross salary or wage.

To learn more about KiwiSaver, download our guide for payroll professionals.

Employer Superannuation Contribution Tax 

This is deducted from KiwiSaver employer contributions.

There are a few other types of deductions that can be made under very specific circumstances, such as in the event of an overpayment or if there’s an agreement around lodging payments. However, these deductions have to be legally justified so ensure that you’ve done your due diligence before taking any steps. 

How do you submit employment information to the IRD?

If you’re a business owner, you can begin by registering as an employer on the Inland Revenue website, and create a specific myIR account for your business. If you’re running payroll for a client, you should ensure that you have access to their account to organise this for them. 

The next steps of digital payday filing are taken using the online platform. This should be fairly self-explanatory as you can work through the forms in the myIR portal, which will prompt you for all the different payroll information. That said, the form entries will require manual data entry throughout. 

Alternatively, if you’re still a bit old school and prefer to file by paper, you can fill out the relevant forms and send them to Inland Revenue by post. It’s worth noting that you can only file by paper if your total annual PAYE and ESCT is less than $50,000.

Why you should use a payroll software provider

If this all sounds like a lot of work, it doesn’t have to be. Payroll software like KeyPay can even send the payday filing to Inland Revenue for you.

This isn’t just a significant time saver – it reduces the chance of error. All that manual data entry, whether through submitting the information yourself through myIR or sending on paper forms to Inland Revenue, brings with it a high probability that at some point, there will be a mistake. Since the consequences of incorrect filing bring with them fines and penalties, these mistakes can be costly.

Contrast that with payroll software, which takes the original information that is already in the system and automatically generates a complete file. Software like KeyPay will also automatically highlight any potential errors made in data submission, giving you and your clients extra peace of mind.

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Find out how payroll software like KeyPay can make payday filing a breeze and get in touch with our team today.