All-in-One Payroll Checklist

Accurate records aren’t just good practice—they’re a legal requirement. 

Payroll legislation places a strong emphasis on accurate record-keeping. Maintaining detailed payroll records is essential for ensuring precise calculations. Tracking annual leave is required for all companies, while average daily pay calculations are crucial for businesses with employees on variable work schedules. Every company operates differently, but all are legally required to keep these records, regardless of whether they use every calculation regularly.

What to do:

• Keep payroll records for at least 7 years
• Maintain records of hours worked, leave taken, and all pay-related transactions
• Ensure compliance with MBIE and IRD requirements for payroll audits

💡Why it matters:
One of the most overlooked areas of payroll compliance is record-keeping. While it may sound simple, many employers—and even payroll systems—still get it wrong. A key requirement under the Employment Relations Act is to record daily hours worked, not just weekly totals. But many payroll systems only store weekly totals and automatically spread them across the week, which does not meet the legal standard.

This creates a serious compliance risk. If an audit reveals that your system doesn’t capture daily hours correctly, you could be found in breach—even if your payslips and totals look accurate. This is especially important for businesses with casual or variable work schedules.

📌Tip:
Double-check that your payroll system captures and records daily hours. If it doesn’t, it may be time to upgrade to a system that does.

Make sure employees are correctly classified and their pay rate meets at least the legal minimum unless they qualify for the starting-out or training wage. Additionally, their agreed-upon salary or wage should be accurately reflected in payroll.

What to do:

• Pay at least the current minimum wage, or the starting-out/training rate if applicable
• Classify employees properly: full-time, part-time, casual, or contractors
• Correctly follow overtime, public holiday, and shift work rules
• Ensure deductions for student loans, child support, or court-ordered payments are made correctly

📌Common pitfalls:
Classifying casual employees is important for correctly paying out public holidays due to their unpredictable work patterns. Incorrectly paying for public holidays can result in back pay obligations or fines. It’s important to always refer to the employee’s agreement and relevant legislation.

A key aspect of payroll is managing payments, which generally fall into two categories: payments to employees and payments to the IRD. Filing to IRD is not optional. Accuracy and timeliness are key to avoid penalties.

What to do:

• Deduct PAYE and KiwiSaver each pay period
• Submit Employment Information (EI) to the IRD via payday filing
• Make PAYE payments to IRD by the due date (usually the 20th of the month)
• Pay employer contributions to KiwiSaver, unless the employee has opted out

💡Why it matters:
The IRD can impose penalties of $250 or more for each late or missing payday filing.  Additionally, monthly payments to the IRD must be made by the 20th of the month (and the 5th of each month if you qualify as a large employer). Any delay, even by a single day, can result in penalties. It’s important to keep note of these deadlines to avoid paying these fines.

Employees have a range of entitlements: Annual leave, sick leave, and alternative leave are common benefits that all permanent employees are eligible for. Ensure these are accurately recorded and calculated.

What to do:

• Annual leave: 4 weeks per year, paid at the greater of ordinary weekly pay or average weekly earnings
• Public holidays: Paid based on whether it would have otherwise been a working day
• Sick leave: At least 10 days after six months of continuous employment
• Bereavement leave: Available based on nature of relationship and time worked
• Parental leave: Follow government entitlements and employment protections

Best practice:
Use a system that calculates leave using correct formulas. Many payroll tools can estimate leave incorrectly—especially when work hours vary. Employees are aware of their entitlements, so getting this wrong affects both trust and compliance.

Managing an employee’s final pay can be challenging, as it’s essential to ensure all entitlements owed up to their final day—whether through resignation or termination—are calculated and paid correctly.

What to do:

• Calculate and pay all accrued annual leave
• Include any owed alternative holidays or redundancy entitlements (if applicable)
• Include any public holidays due after the final day
• Add 8% of gross earnings for any holiday pay not taken
• Include payment for the notice period (worked or paid in lieu)
• Submit a final payday filing for the departing employee

💡Why it matters:
Final pays are a common cause of disputes. A clear final pay avoids confusion and complaints. It’s crucial to include all entitlements and ensure tax is applied correctly.

📌 Watch Out!
One common error for payroll systems is they may not correctly apply payment for public holidays due to the employee after the employee’s last working date due to outstanding annual leave covering a period including those dates.

Payroll legislation places a strong emphasis on accurate record-keeping. While it may not always seem necessary, maintaining detailed payroll records is essential for ensuring precise calculations. 

What to do:

• Keep all payroll records for at least 7 years
• Maintain daily records of hours worked—not just weekly totals
• Track all leave taken, pay rates, deductions, and holiday calculations
• Ensure compliance with MBIE and IRD requirements for payroll audits

📌 Important: Under the Employment Relations Act, daily hours must be recorded.

Some payroll systems still use weekly totals and distribute hours across days automatically but this doesn’t meet the legal standard.

If your system can’t track daily hours, it may not be compliant. Switch to a system that can record accurate daily hours like Crystal Payroll.

Payroll and employment regulations change frequently and even small updates can have a big impact if your system isn’t keeping up. Staying informed and using payroll software that does the same is key to staying compliant.

What to check:

• Use a reliable payroll system to automate calculations, compliance, and reporting
• Ensure payroll software is up-to-date with legislation changes (e.g., minimum wage, PAYE rates, Holidays Act updates)
• Stay informed on employment law changes through IRD, MBIE, and payroll professionals
• Check that payroll system settings reflect current legislation
• Stay updated with minimum wage changes, tax updates, and employment law amendments

📌Best practice:
Use a payroll system that automatically updates when legislation changes. This will save you the hassle of manually updating your processes and reduce the risk of non-compliance.  To stay informed, consider signing up for the Crystal Payroll newsletter. We’ll keep you updated on important payroll changes, compliance tips, and legislative news relevant to New Zealand employers.

There are some less common scenarios you might need to take note of when processing payroll. These don’t affect every employer, such as industry specific scenarios, but when they do it’s important to get them right.

Here’s what you might need to consider:

• If providing accommodation or benefits, ensure they are correctly taxed
• If cashing up annual leave, ensure correct PAYE is applied
• If paying contractors, verify whether schedular payments or withholding tax apply

📌When in doubt:
Contact your payroll provider or accountant. Having access to knowledgeable local support makes these situations easier to handle.

Getting payroll right isn’t just about pressing “pay” each week. It’s about understanding your responsibilities, keeping accurate records, and using tools that help you stay compliant.

This checklist is a solid starting point. But if your current system makes these tasks harder than they should be or leaves you unsure about compliance, it might be time to look at a payroll solution built specifically for New Zealand legislation.

The right software can save you time, reduce risk, and give you confidence that payroll is done properly, every time.

👉 Ticked off everything in the checklist—except your software? Book a free Crystal Payroll demo and see how we can help you handle the hard parts with ease.