As another year comes to a close, it’s the perfect time to touch on some of the most common challenges our clients face during this tricky season. The Christmas/New Year’s period often presents employers and payroll staff with complicated payroll like payments in advance, public holidays, annual shutdowns, annual leave periods and bonuses. Fortunately, our Crystal Payroll system can handle these challenges with ease.
In this Christmas Payroll guide, we’ll walk through these common hurdles and provide solutions to help you get through your holiday payroll, while also outlining any legislative key rules you need to follow when processing payroll during this busy time.
Payments in Advance
Everyone deserves a holiday, but that doesn’t mean the staff don’t get paid. With Crystal Payroll, employers and payroll administrators can easily process wages or salaries ahead of time by manually opening new pay periods.
All you need to do is click the grey “i” button on the “Time & Income” page and select “Create a new pay period”.
Some clients make the mistake of not manually opening pay periods in advance, which can lead to missing weeks of data/pay records. Without this information in the system, employees will not accrue their leave correctly, as there is no record of their worked hours to accrue from. This highlights the importance of having accurate data in the system to ensure employees receive their entitlements. Making this mistake can result in employees not receiving their full four weeks of annual leave, potentially leading to legal complications down the line.
To avoid this, the proper approach is to open and process each new pay period one at a time, in order. This ensures the leave pay rates are calculated accurately and your payroll is processed correctly ahead of time.
Public Holidays
With Christmas and New Year’s approaching, processing public holidays can be a hassle. The good news is that there’s no confusing Mondayisation or Tuesdayisation to deal with this year as the Christmas and New year’s public holidays fall on either a Wednesday or Thursday. You’ll still have to make sure you’re paying your employees the right hours and pay rate though! Here’s the dates of the public holidays you’ll need to keep note of :
🎄 Wednesday, 25th December – Christmas Day
🎄 Thursday, 26th December – Boxing Day
🎆 Wednesday, 1st January – New Year’s Day
🎆 Thursday, 2nd January – Day After New Year’s Day
With Crystal Payroll, processing statutory pay is simple and straightforward with the Statutory Pay Calculator.
Just click the “P.H” button then select the relevant public holiday from the top left. Remember to review the pay calculated for your employees on the public holiday. After you’ve reviewed the calculations, click “Accept” and approve the rest of the “Time & Income” as per normal.
The system will automatically calculate the employee’s entitlement and apply the correct rates. Even for employees with irregular working hours, the system ensures accurate calculations which help streamline the payroll process during the holiday period saving you the trouble. The system also keeps track of all public holidays, so there’s no need to make any manual changes.
Annual Shutdowns for employees employed for less than one year
Annual shutdowns are a common practice for many companies during the holiday season. For permanent staff with enough annual leave available or casual employees who do not accrue annual leave, the process is pretty straightforward. But things can get a bit tricky when it comes to employees who have been with the company for less than a year and do not have enough leave yet. This is where payroll processing for shutdowns can go off track.
According to the Holidays Act 2003, there are three key rules to follow when processing an annual shutdown for an employee with less than a year of employment:
- Pay out the employee 8% of their gross earnings since their commenced-on date.
- Deduct any annual leave taken in advance.
- Reset their annual leave anniversary to the date of the shutdown.
It’s very similar to the termination process, but by pushing back the anniversary date the employee can continue to accrue their four weeks of leave correctly while also receiving their entitled 8% payment from their commenced on date.
To process this in Crystal Payroll, you would navigate to:
- “Company Settings”.
- Then “Payroll Settings”.
- Select the “Leave Settings” along the top of the menu.
- Open the “Standard Leave Entitlement” section.
- Near the bottom of the section, tick the “Enable Annual Shutdown Holiday Pay for New Employees”.
- Click on “Save” at the bottom of the page.
- Head over to “Employee Settings”.
- Then “Employee Details”.
- Select the employee from the left hand side of the page.
10. Scroll down the employee details and open “Default Entitlement” under “Other Details”.
- Input the “Annual Shutdown Start Date” under “Accrue Leave” on the left hand side column.
- Select “Save” at the bottom of the menu.
After completing these steps, when you go to the employee’s “Time & Income”, “Annual Shutdown Holiday Pay” will appear at the bottom of the page. Click on the blue hyperlinked title for “Annual Shutdown Holiday Pay” to view the calculation details, and click on the grey “i” button to see where the amounts were calculated from.
Following these steps also automatically updates the employee’s anniversary date to match the shutdown date entered manually in the “Default Entitlement” section.
Annual Leave Periods
If a permanent employee has enough leave for the annual shutdown period, some employers prefer to pay out an employee’s annual leave as a singular amount rather than week by week. This is simple to set up in Crystal Payroll.
Set this up by going to the “Time & Income” page, select the “Leave Periods” feature and enable the “Include all leave in this period” option.
Enabling this option will include all listed annual leave dates in the current pay period, even if the dates fall outside of the current period date range. This way, the employee will receive their total annual leave payments in one pay-slip, and the employer or payroll staff won’t need to process another pay run until the leave period end date is reached.
This method is similar to processing payments in advance as mentioned previously, but it simplifies the process by eliminating the need to manually open and process each pay run individually.
Processing Bonuses
Some employers in New Zealand like to give their staff bonuses during the holiday season, often as an extra discretionary payment given as a reward for an employee’s extra efforts throughout the year. This type of bonus should not affect annual leave pay rates, as it is not included in gross earnings. However, it is still taxed.
To process this kind of bonus you would use the “Extra Pay” button in the “Time & Income” page.
Discretionary bonuses that happen irregularly and are made out of goodwill are lump summed – meaning that they will be taxed higher than usual as they are unrelated to their gross earnings. On the other hand, regular annual bonuses that are non-discretionary should be processed using the “Other Income” option, as they occur consistently and influence annual leave rates for employees.
It’s essential to distinguish the type of bonus being given, as processing it incorrectly can inflate annual leave pay rates, potentially leading to unwanted headaches down the line.
Simply put, if the bonus is a one-off payment, it should be processed through “Extra Pay” to ensure it is taxed correctly without increasing leave pay rates.
The “Other Income” button is for regular bonuses as they are considered part of gross earnings and will adjust leave pay rates accordingly.
Wrapping Up
In summary, managing payroll during the holiday season can be simple with Crystal Payroll. Advance payments can be handled by manually opening and processing pay runs or using the “Leave Periods” feature. Public holidays are automatically accounted for by the system, and annual shutdowns and bonuses are just as straightforward to process. We hope this Holiday Payroll blog serves as a helpful “end-of-year payroll checklist” for employers and payroll managers, ensuring compliance with New Zealand payroll regulations during this busy time of year.
Just a reminder that our support team will be available as usual throughout the holiday period, with closures only on the public holidays!
Have any questions or want to dive deeper into the topics covered above? Check out the resources below from our help center for more information:
- Processing Payments in Advance
- Processing Public Holidays
- Processing Annual Shutdowns
- Processing Annual Leave Periods
- Processing Bonuses
Disclaimer: This blog post is intended for informational purposes and should not be considered as financial or legal advice. Always consult with professionals for tailored guidance.
