Contractors refer to people who are not permanent employees of the business but are engaged on a contract-for-service basis to complete specific jobs. In New Zealand (NZ), the earnings made by contractors are known as Schedular Payments. If you run payroll for clients who employ contractors, it’s important to be aware of these payments, and how to process payroll for these clients.
Hurdles of Schedular Payments for NZ businesses
Schedular Payments are often more tedious and time consuming than regular payroll due to these aspects:
- Earners’ levy, KiwiSaver deductions and student loan repayments are not applicable to contractors
- GST must be included in the total schedular payment (where applicable)
- Contractors use a different tax code and have different tax rates applied compared to regular employees
Accountants, bookkeepers and outsourced payroll providers thus either end up outsourcing contractor payroll to third parties which increases costs, or payroll administrators have to put in extra long hours to painstakingly process each contractor’s payroll separately and accurately.
The good news
With Employment Hero Payroll’s contractor functionality, NZ businesses can process Schedular Payments alongside regular payroll, in a fuss-free way that saves them significant time and money in the long run. Additionally, businesses will also experience the convenience of having contractor data and employee data all stored under one roof for easy retrieval.
About the functionality
The new contractor functionality makes schedular payments fuss-free in the following areas:
- Employee setup
To minimise confusion on what details are required from contractors and to create a simpler onboarding experience, the new employee wizard has been enhanced to allow the option of setting up a contractor. Where this is the case the rest of the wizard is then simplified to remove the fields that are not applicable for contractors.You and your clients will be also able to nominate a tax rate for the contractor for any tax the contractor wishes to have deducted from their earnings. This enables you to cater to the various preferences of each contractor without the need for manual intervention. - Pay run processing
To ensure data accuracy and provide relief from manual calculations, we’ve added a “registered for GST” setting and where the contractor’s business is registered for GST, we will automatically calculate the GST applicable and include this in the pay run and pay slip. - Reporting
You and your clients will be able to utilise existing reports in Employment Hero Payroll such as payment history and employee details to provide necessary information requested by contractors at the click of a button. - Payday filing
Payday filing can be submitted directly from Employment Hero Payroll and this now includes submitting contractor information as per Inland Revenue Department’s requirements.
- Expanded API library
We have expanded our API library to include contractor functionality. This allows external third party systems the ability to interact with our APIs so that contractors can be set up in Employment Hero Payroll automatically although the information has originally been added via another platform
We’re excited to release this functionality which will make managing contractor payroll much easier each pay run. For more information on our contractor management functionality, check out these useful support articles:
Disclaimer: The information in this article is current as at 20 June 2022 and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article.
