Make sure your systems don’t suffer the holiday blues

Published on the 02/05/2017 | Written by Newsdesk

Holidays Act

After a spate of glorious public holidays, Kiwis across the country are doing their best to get back into the swing of things…

But even if you can adjust well to the unusual patterns presented by the holidays, there is a serious question which needs to be asked of your payroll systems – are they set up to be compliant with the Holidays Act?

Paul Manins, payroll consultant, said compliance is important because organisations can inadvertently expose themselves to violations of the law and rack up large liabilities in unpaid holiday leave. But compliance isn’t straightforward, as he explained: “Probably the area most problematic with annual leave is the fact that the Act specifies entitlement in weeks, but just about every payroll system records in units other than weeks – typically, hours or days. Problems occur in the translation of entitlement specified by the Act into the units with which organisations are trying to manage it.”

Further issues arise, he said, when workers transition from part time to full time employment. “Nearly all the payroll systems used in New Zealand don’t do a retranslation of leave entitlements when someone changes working patterns. This can leave individuals short on their entitlements, and it can leave your business with financial and legal liabilities.”

Then there are potential problems which can crop up with annual leave allotments, routine overtime for weekly-paid workers (and which, owing to its ‘standard’ nature, should be treated as ‘regular income’), discretionary pay allowances and sick and bereavement leave allocations.

Manins said the vagaries between how payroll systems work and how the Act sets out the law can have the result of tying those computer systems into knots – and if the system cannot automatically resolve these issues, manual intervention is necessary.

“Where these issues are identified, they result in a lot of frankly tedious manual work and potentially grumpy people. It isn’t necessarily a problem with the computer systems, but rather one of how you have configured that system.”

Agilyx implementation consultant Mary Meyer said systems which are highly configurable are part of the solution; obviously, it then falls to the system owners to ensure that the appropriate measures are programmed in. “For example, Unit4’s  Business World Payroll makes it possible to ensure compliance as the system produces results based on transparent calculations and provides a comprehensive transactional history. The evidence of every calculation is visible to the user and can be subjected to scrutiny without complicated interpretation.”

Where the issues are not identified, your business could be exposed, continued Manins. “Most employees are unaware of their entitlements and rights, but [if compliance isn’t assured] you could be in line for an audit from MBIE and be forced to make amends. We’ve seen organisations which have had to go back in time as much as 6 years – that can mean a lot of compensation on one hand, and some embarrassment on the other, as most firms want to do the right thing not only by the law, but also for their employees.”

The good news, said Manins, is that it is relatively easy to assess compliance, with a methodology which runs through every section of the Holidays Act and assesses payroll system compliance. “There are about 90 sections and for each one, we ask the question, ‘does the company or system comply’ and we look for examples of compliance, too, to pinpoint potential problems. That’s assessed in conjunction with payment transactions, where we look for patterns; for casual employees, for instance, if they are working what could constitute regular hours which would make them a Full Time Equivalent, then they should be getting public holiday payment.”

His advice to all businesses is to start by reading the Holidays Act. “Most have not. If you have a perception that your payroll isn’t aligned, it’s a good idea to do something about it without delay.”

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