Christmas is around the corner. How well are your systems equipped to support holiday pay?

Date: 24 Nov 2021

Author: Jemini Team

It’s almost that time of the year again. You know… Secret Santa’s. Gripes about who you’re going to be sat next to at the Christmas party (assuming there can be one this year!). Oh yes, and that mad rush to hire all those extra seasonal staff (aka Santa’s little Elves). And finally, those dreaded words, annual leave, and HOLIDAY PAY!!! Why does holiday pay cause HR and payroll so much heartburn? Because it’s damn complicated, that’s why — and the systems that run it rarely have any Christmas cheer to share.

Now if your payroll system makes things complicated when it comes to holiday pay, don’t be too hard on yourself. Even the ‘experts’ get it wrong. Do you remember New Zealand’s worst payroll disaster, when the NZ schools system spent $56.8 million on a failed system that left 90,000 teachers and education staff unpaid, overpaid or not even paid at all. Then there was the $38 million that the NZ post had to set aside to settle owed holiday pay for up to 22,000 workers. Now surely the NZ Ministry of Business, Innovation and Employment would have their holiday payroll calculations down to a T? The real truth: they repeatedly miscalculated pay for their staff. Now we can’t say for certain, but these horror stories likely happened because of a disconnect between the people running payroll and the systems that were supposed to make it easy for them.

Let’s look at some of the key reasons why holiday pay is so problematic and confusing, meaning that payroll systems are often so ill-equipped to deal with it properly.

First there’s the holiday’s act itself in NZ, which became law in 2013. Since its launch, it’s been criticised by accountants and payroll professionals alike. It’s ambiguous and complex — and even the most experienced experts seem to disagree on how it should actually be applied. Then there’s the complicated awards system setup in Australia.

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Unless your payroll software is specific to NZ or Australia, there’s a good chance that it might not be calculating holiday pay in accordance with the relevant laws and regulations. In addition, changes were made to the holidays act in 2013, 2018 and 2019. Therefore, it’s not a matter of ‘set and forget’. You need to check if your payroll solution is continually updated by your software provider to reflect the up to the minute rules and legislation. This is more likely if you’re running a cloud-based system, rather than something that is local or on-premises (and not updated automatically).

It starts to get tricky — and that’s why the MBIE set up the Holidays working group to try and advise businesses and get to the bottom of all this confusion. Some of the things they’ve looked at include:

  • Whether ADP (average daily pay) rules need to be applied for sick leave?
  • Where you stand if employees have changed their agreed employment conditions or their working pattern
  • The way you may need to exercise judgement or consult expertise to decide how entitlements should be paid
  • The ambiguity and complexity about the definition of ‘gross earnings and the definition of a normal working week

Have you ever come across Double Dipping? It sounds like it might be something delightful. Like dipping marshmallows twice into gourmet chocolate. Well, prepare to be disappointed. “Double Dipping” is something you need to beware of; it’s where staff can be overpaid while on leave due to you paying them their average rate of pay and then paying an additional allowance on top of their leave. Truly joyful.

Multiple lockdowns certainly haven’t helped. During Christmas 2020, teams found that finalising payroll was near to impossible. With a remote and home-working workforce, payroll had to be done manually and it was incredibly hard to gather all the required information, including timesheets, checking for errors, and addressing urgent employment changes. For those with cloud-based payroll systems, things were probably a lot easier. For those with creaking on-premises systems, they deserve a medal if they managed to get everyone paid on time.

Some businesses rely on a single person who navigates a legacy payroll system. If they experience sickness (or take a holiday themselves), it’s often very difficult for other people to take on that payroll responsibility. The level of extensive user training needed means it difficult for others to step up to the plate. The good news is, the latest generation of cloud-based payroll software is way simpler to learn, to setup and to deploy.

Spreadsheets have also tended to be a source of payroll stress leading up to the busy Christmas period. If you’re having to do manual calculations in spreadsheets (to then manually re-enter data into your payroll software), you could be putting an extra layer of potential error and risk into your workflow.

If you are going to gift your business a new payroll system this Christmas, here’s some of the must-have features that you’ll want to tick-off on your wish list…

  • Demand cloud-based payroll software (aka online payroll software), that you and anyone in your team can access anytime, anywhere, with secure round-the-clock access (if you’re spending Christmas in Bali - you want to know you can securely access for any last-minute payroll changes).
  • You’ll want to be sure that you can customise your payroll solution to the way that you work (and not the other way around).
  • Flexibility — ensure your payroll solution can accommodate part-timers, contractors, and other flexible types of employment such as ‘gig work’
  • A biggie for your Payroll wish list — seamless integration with your HR management and time and attendance
  • Something that is completely non-negotiable - complete local compliance regarding pay rates, PAYE, KiwiSaver, holiday pay and tax credits
  • A locally supported system, so you get the on-demand support necessary exactly when you need it
  • Support for Electronic payday filing
  • The icing on the Christmas cake — a self-service portal, so your people can securely access their payslips, pay records and even make their holiday requests

So there we have it. We’re running into one of the busiest (and most exciting times) of the year. It’s time to gear-up, plan for even the most unexpected of eventualities and most importantly, enjoy. There’s no need to fret about payroll this Christmas — take a closer look at Jemini and spread some festive cheer. Everyone deserves some this year.

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