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Employing Summer Staff
Tax on Christmas Presents and Parties
Whether you’re in hospitality, retail, horticulture or tourism, casual staff will be required over the busy summer months. But even if you are only employing someone for a few weeks, you still have obligations as an employer, and they still have rights as an employee.
Casual workers are employees who work only when required, with intermittent or irregular work patterns. They don’t have any guaranteed hours or income. Casual workers are usually hired for one-off business needs or ongoing, irregular work. For example, a retail store may need extra help over the Christmas period. Casual employees have the same employment rights and entitlements as all other full-time New Zealand workers. This means they need an employment agreement and are entitled to holiday pay and leave allowances. Read more on employing casual staff.
Every employee has minimum employment rights
to ensure they are treated fairly and can work safely. These cover things
like employment agreements, health and safety, minimum wages, rest and
meal breaks, holiday pay, and annual, sick and bereavement leave.
There’s more about minimum
Minimum Wage Rates
The adult minimum wage rate (before tax) that applies for employees aged 16 or over is $14.25 an hour, which is:
The minimum rate that applies to starting-out workers and employees on the training minimum wage (before tax), is $11.40 an hour, which is:
Employees have to be paid at least the
minimum hourly wage rate for any extra time worked over eight hours a day,
or over 40 hours a week or 80 hours a fortnight. There is no minimum wage
for children under 16, but all other employment conditions apply.
Read more about the minimum wage
Even if your new employees will only be
working for you for a short time, you still need to make sure they fill
out a tax code declaration (IR330). You’ll also need to make sure that
when they start and finish working for you, you show their start and/or
finish dates on the employer monthly schedule (IR 348).
Depending on your industry, there may be special requirements when hiring
casual workers, such as agricultural workers.
Read more about special types of workers on the IRD Website.
It’s the law to have a written employment agreement for all staff. A clear, written employment agreement ensures employees know what you expect from them and what their duties are, and protects both of you.
Make it easy with the employment agreement builder.
Calculating and paying holiday pay is easy when you know what your obligations are, and IRD has a calculator to help you work it out.
Holiday pay is pay for an employee's annual leave and pay for statutory holidays. You need to include holiday pay as earnings in the period you pay your employee. If you don't have a payroll package or a payroll provider, there are two ways you can work it out:
To work out how much tax to deduct from holiday pay use IRD’s calculate tax on holiday pay calculator.
Your employees can ‘cash-up’ a maximum of one week of their annual leave if you both agree. Cashing up annual holidays can only happen at the employee’s request and it must be submitted to you in writing. Employees can request to cash-up less than a week, and more than one request can be made until a maximum of one week of annual leave is paid.
Once you have agreed to cash-up a portion of
your employee's annual leave, you need to provide the payment as soon as
possible, which will usually be the next pay day. The value of the payment
must be at least the same as if the employee had taken the holidays.
Employers can’t encourage or pressure employees into cashing up leave. Likewise, cashing up can’t be raised in wage or salary negotiations or be a condition of employment. Requests to cash-up can’t be included in employment agreements, but an employment agreement can outline the process for making a request.
To find out more about your obligations as an employer or the Holidays Act, read the Holidays and Leave booklet [PDF 1.9 MB] from the Ministry of Business Innovation and Employment.
If you’re holding a Christmas function or
giving work gifts, you may be able to claim tax back. If you don't hold a
function but give your employees some sort of entertainment – like a
voucher that they can use at any time – you may need to pay FBT (fringe
benefit tax). You can generally claim 50% of your party expenses in your
GST and income tax returns. Party expenses can include things like venue
hire, food, drink and entertainment. You can generally claim 100% of the
cost of gifts, such as food, wine or event tickets.
If you give your employees a gift you can claim the full cost as an expense, as long as it doesn't fall within the business entertainment rules, but you may have to pay FBT. You won't have to pay FBT on the gift if it's less than the general employee exemption and maximum employer exemption.
If you file your FBT returns quarterly there's a $300 exemption per employee per quarter if you provide free goods, or subsidised or discounted goods and services. If the value of the benefit for an employee goes over $300 for a quarter, you must pay FBT on the full value of the benefit.
For example, Charlie and Sam are given gifts of mystery weekends. One is valued at $250 and the other $350. The $250 gift is not subject to FBT but the $350 gift is.
The maximum employer exemption you can claim is $22,500 per annum. If the total value of benefits for all employees goes over $22,500 for the current quarter and the three previous quarters, you must pay FBT on the total value of the benefits in the current quarter.
If you file annual or income year returns
there's a yearly exemption of $1,200 for each employee, with the maximum
employer exemption for all employees of $22,500 per year. If the period
covered by the return is less or more than a normal income year, an
adjustment per employee is needed as: (Days covered by return ÷ 365) ×
If you provide your employees, clients and suppliers, or prospective clients and suppliers, with any of the following items you can only deduct 50% of the cost because they're counted as ‘entertainment expenditure’.
If you claim a 50% deduction for a business entertainment expense you’ll have to make a GST adjustment so you're only claiming 50% of the GST, if you previously claimed 100%.
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