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NZPPA Annual Conference 2013
5/12/2018 Final Pay NZPPA Annual Conference 2013 PRESENTED BY Katie Leitch & Grant Bond
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What is covered in this session? When to pay
5/12/2018 What is covered in this session? When to pay What to pay – all termination types What to deduct Additional treatment of specific termination types Paying leave Lots of Q&A 5/12/2018
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What do you want to know Filling the knowledge gap... 5/12/2018
Collate audience questions on whiteboard or A1 size paper.
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5/12/2018 Final Pay When to pay Employment Agreements If stated and signed, use what’s in the E.A; otherwise, refer to… Wages Protection Act 1983 States it should be paid on their final day Note: The Holidays Act 2003, section 27 (2) can confuse matters as it says you can pay in the period that relates to the final period of employment. 5/12/2018 There are two things that decide how final payments are made: terms and conditions of employment agreement and the Wages Protection Act 1983. If there is not signed E.A with the terms detailing what to do then the Wages Protection Act applies.
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Employment Agreement What to pay ALWAYS check your employee’s
5/12/2018 Final Pay What to pay ALWAYS check your employee’s Employment Agreement 5/12/2018 On termination of employment, pays to check the employee’s Employement Agreement or ensure you know all of an employees entitlements to paid (or deductions need to be actioned) on termination.
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What to pay Payments for any/all of the following:
5/12/2018 Final Pay What to pay Payments for any/all of the following: Wage & salary entitlements still outstanding Leave entitlements, as per the Holidays Act 2003 Other benefits, e.g. in lieu of notice, redundancy Any other payments, e.g. bonuses, commissions, incentive payment 5/12/2018 In general regardless of the termination type, you must pay the employee outstanding wages/salary, leave, incentive payments. For some termination types other payments may apply and we will cover these later. In all instances you should check the E.A’s for any additional instructions.
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What to deduct from the final pay
5/12/2018 Final Pay What to deduct from the final pay Deduction should include any of the following: Child Support KiwiSaver (including complying funds) Student loan IRD arrears Court fines WINZ deductions Any other deductions can only be made if there is a written agreement. 5/12/2018 Examples of other deductions: Recouping overpayments, negative leave balances.
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Termination Types Resignation – notice given
5/12/2018 Termination Types Resignation – notice given Resignation – no notice given Retirement Redundancy Dismissal Death 5/12/2018
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Unless justifiably dismissed during this period.
5/12/2018 Final Pay Resignation – notice given If the employee works out their notice period, you must pay salary/wages to the end of the notice period Unless justifiably dismissed during this period. 5/12/2018
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Resignation – notice given
5/12/2018 Final Pay Resignation – notice given If you do not require the employee to work out their notice period, you may need to pay an “In lieu of notice” payments Check your E.A’s 5/12/2018
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You are only required to pay up to last actual working day
5/12/2018 Final Pay Resignation – no notice given You are only required to pay up to last actual working day You can only monetarily penalise the employee if the employee’s E.A contains a “consequences” clause or the employee agrees in writing 5/12/2018 If an employee leaves work without giving notice, you are not required to pay for time beyond the employee’s last actual working day. In this situation as an employer, you are likely to be out-of-pocket if you are having to find a temporary replacement. Unfortunately you are not allowed to make deductions from the employee’s final pay to recoup costs. Example: John says “I quit” and walks out the door. John’s E.A says he is supposed to give 2wks notice. If John had given notice and as the employer you did not want John to work out his notice, then John may have been entitled to an “in lieu” of notice payment. However, given John has quit on the stop and as the employer you now have to find someone else to fill John’s role for at least 2wks which will cost the company more than if John had worked out his notice. To recoup costs if you try to deduct the “in lieu of notice” payment off John’s final pay and there is no “consequences” clause on John’s E.A, this is considered to be theft.
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Retirement What you may be required to pay Retiring Allowance
5/12/2018 Final Pay Retirement What you may be required to pay Retiring Allowance Early Retirement Incentive 5/12/2018 Both of these payments are taxable and not liable for earner’s levy. Retirement payments are deemed to be “Lump Sums” and therefore taxed accordingly. More on this shortly.
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5/12/2018 Final Pay Redundancy You have no obligation to pay redundancy unless specified in the E.A. But if you do make a redundancy payment it must be taxed as lump sum payment…. 5/12/2018 Audience questions Who has a redundancy clauses in their E.A. Is anyone unfamiliar with how to calculate tax on redundancy payment.
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Retirement/Redundancy Payments and Tax
5/12/2018 Final Pay Retirement/Redundancy Payments and Tax When combined total of the lump sum payment & grossed-up annual value of the employee’s income for the previous 4 weeks is… PAYE applies to the whole lump sum at a flat rate of… $14,000 or less 10.5% From $14,001 to $48,000 17.5% From $48,001 to $70,000 30% Greater than $70,000 33% 5/12/2018 Both Retirement and Redundancy payment must be taxed as a lump sum. Ask audience if anyone is unfamiliar with how to calculate tax on lump sums. Whiteboard what to do if people want to be shown this.
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Redundancy Payments Q&A
5/12/2018 Final Pay Redundancy Payments Q&A Q. Are redundancy payments liable for ACC Earner Levy? A. No - redundancy payment is considered compensation not a wage or salary payment. Q. Is student loan calculated on redundancy payments? A. Yes – compulsory repayments still paid at 12% Q. Do redundancy payments count for KiwiSaver? A. No - employee contributions are not deducted and employer contributions do not have to be included. 5/12/2018
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Dismissals What you may have to pay In lieu of notice payments
5/12/2018 Final Pay Dismissals What you may have to pay In lieu of notice payments Any other payments outlined in the E.A. 5/12/2018
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Death What you may have to pay Any other payments outlined in the E.A.
5/12/2018 Final Pay Death What you may have to pay Any other payments outlined in the E.A. When to pay Upon receiving a letter from the executor of the employee’s estate. 5/12/2018 Audience questions What do you do in your organisation?
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5/12/2018 Leave Payments 5/12/2018
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Annual Leave Accrued Leave (Holidays Act 2003, Section 23 & 25)
5/12/2018 Final Pay Annual Leave Accrued Leave (Holidays Act 2003, Section 23 & 25) 8% of gross earnings in the current AL year less any amount paid in advance. Entitled Leave (Holidays Act 2003, Section 24) The greater of Ordinary Weekly Pay or Average Weekly Earnings (52weeks). 5/12/2018 Does everyone know what is included/excluded from “gross earnings” in respect paying annual leave?
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Annual Leave – Gross Pay
5/12/2018 Final Pay Annual Leave – Gross Pay Included Excluded Salary & Wages Allowances (except non-taxable work related expenses) Holiday pay (Annual, Public, alternative) Sick leave taken Bereavement Incentive-based payments, e.g commissions Overtime Cash value of board/lodgings 1st Week ACC Discretionary Payments 2nd & subsequent week’s ACC Volunteers Leave Work related expense payments Employer Superannuation contributions Holidays Act 2003, Section 14 5/12/2018
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Annual Leave – Gross Pay Case Study
5/12/2018 Final Pay Annual Leave – Gross Pay Case Study Q. Is a bonus an incentive-based payment or a discretionary payment? A. It can be both. When paying bonuses make sure it is clear what type of payment the bonus is classified as, because this has a huge impact on the value of “Gross Pay” when paying accrued leave on termination. Example 5/12/2018 There was a recent case in the media recently where there was confusion over what was included in the definition of “Gross Pay”. This related to a bonus payment. Whether this “bonus” payment is included in “Gross Pay” for annual leave payments is dependant on whether the payment has been classified as an incentive-based payment or a discretionary payment.
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Annual Leave and Public Holidays
5/12/2018 Final Pay Annual Leave and Public Holidays Unused ANNUAL LEAVE entitlement must be notionally added to the last day of employment. Holidays Act 2003, Section 40 (3) b 5/12/2018
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Annual Leave and Public Holidays
5/12/2018 Final Pay Annual Leave and Public Holidays Example Joe’s termination date will be 21 Dec 2012. At that date he has 2 weeks (10 days) annual entitled leave owing and he works a 40hr week Mon – Fri. This means any public holidays that occur in the 10 otherwise normal working days following his termination date MUST also be paid in the final pay. 5/12/2018
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Annual Leave and Public Holidays
5/12/2018 Final Pay Annual Leave and Public Holidays So what does this mean for Joe? It means Joe is entitled to be paid his 2 week annual leave + the 4 public holidays (Christmas Day, Boxing Day, New Years Day and the Day After New Years Day). For your organisation this could be a significant final pay amount. 5/12/2018
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5/12/2018 Final Pay Alternative Holidays Untaken alternative holidays must be included in the final pay. Do not affective annual leave (unlike public holidays). 5/12/2018
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Only paid out if stipulated in an employment agreement
5/12/2018 Final Pay Sick Leave, Bereavement Leave & Long Service Leave Only paid out if stipulated in an employment agreement 5/12/2018 Sick leave and bereavement leave Employees continue to be entitled to sick leave and bereavement leave during the period they are working out their notice. There is no entitlement to receive payment for unused sick leave on resignation UNLESS stipulated in an employment agreement. Long Service Leave The Holidays Act does not include any provisions for long service leave. Any payment of unused long service leave entitlement would be governed by the employees employment agreement.
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Payment for other holidays and leave
5/12/2018 Final Pay Payment for other holidays and leave Pay either relevant daily pay or average daily pay for: Public Holidays Alternative Holidays Sick Leave Bereavement Leave Advisable to calculate an employee’s relevant daily pay in the first instance 5/12/2018 It is advisable for the employer to attempt to calculate an employee’s relevant daily pay in the first instance. An employer has the discretion to use either relevant daily pay or average daily pay if their employee’s pay varies within the pay period in question. This discretion may be better exercised if the employer knows the results of both calculations.
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5/12/2018 Final Pay Questions 5/12/2018
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5/12/2018 Final Pay Thank you 5/12/2018
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