CASHING UP ANNUAL HOLIDAYS

From 1 April 2011, employees will be able to ask for their employer to pay out in cash up to one week of their minimum entitlement to annual holidays a year.

This can only be at the employee’s request and the request must be made in writing. Employees may request to cash up less than a week at a time. More than one request may be made until a maximum of one week of the employee’s annual holidays is paid out in each entitlement year (a period of 12 months’ continuous employment from the anniversary of the employee’s starting date.)

Any request must be considered within a reasonable time and may be declined – unless the employer has a policy that does not allow cashing up. The employee must be advised of the decision in writing and the employer is not required to provide a reason for their decision.

If an employer agrees to pay out a portion of the employee's annual holidays, the payment should be made as soon as practicable, 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.

An employer cannot pressure an employee into cashing up holidays. Cashing up cannot be raised in wage or salary negotiations or be a condition of employment.  Requests to cash up cannot be included in an employment agreement.  However, an employment agreement may outline the process for making such a request. The process must meet the minimum requirements set out in the legislation.

Employers may have a workplace policy that they will not consider any requests to cash up annual holidays. This can apply to the whole or only some parts of the business. The policy can only be on whether the employer will consider any requests.  It cannot be about the amount of annual holidays an employee can cash up or the number of requests an employee may make. An employer should consult with employees on the development of such a policy, and new employees of the policy when they make an offer of employment, as part of their good faith obligations.

If an employer does not have a workplace policy on cashing up that applies to the employee, they must consider any request to cash up annual holidays in good faith.

If an employer is found to have incorrectly paid out a portion of the employee's annual holidays where the employee did not request it, the employee is still entitled to take the portion of annual holidays concerned and to keep the money. The employer may also face a penalty.

If an employer has agreed to pay out a portion of the employee's annual holidays, but the employer and employee cannot agree on the proportion or payment amount, a Labour Inspector may determine the proportion or amount for them.

Employees cannot cash up annual holiday entitlements that arose before 1 April 2011. For example, an employee who becomes entitled to annual holidays in March 2011 could not make a request to cash up until they next become entitled to annual holidays in March 2012.

There are other details that employers and employees considering cashing up holidays will need to know, for example how it affects superannuation payments, income tax and what happens when there is parental leave.  The Department of Labour can assist with information about parental leave and you can be contacted on 0800 20 90 20. 

 

MINIMUM WAGE

From 1 April 2011 the adult minimum wage will increase to $13.00 an hour, and the new entrants' minimum wage and the training minimum wage will increase to $10.40 an hour. More information on the minimum wage can be obtained  by going to website www.dol.govt.nz and typing in "Minimum Wage"

 

COMMON ERRORS ON PAYE EMPLOYER MONTHLY SCHEDULES

IRD have identified some common errors when employers complete their employer monthly schedule (EMS) on manual/paper-based forms. Here's a checklist to help you.

Send your IR 348 to IRD before the due date, it's best not to leave it until the last day!

IRD Number Checklist

• IRD numbers will have 8 or 9 numbers. If 9 they will start with 10X-XXX-XXX.
• Other numbers are not valid, eg, 999 or 111.
• To process KiwiSaver deductions IRD need an IRD number.
• If you can't provide an IRD number you must use the no-notification (ND) tax rate of 47.04%.

KiwiSaver Checklist

• Check you're familiar with automatic enrolment criteria, how to calculate KiwiSaver and when compulsory employer deductions are required.
• Make sure employees are 18 or over before you automatically enrol them in KiwiSaver. Employees must also be a New Zealand resident and less than 65 years old.
• KiwiSaver employer contributions must be 2% - this is regularly not calculated correctly on holiday pay and final pay.
• You'll need to complete a KiwiSaver employee details (KS1) form. The full address of your employee is compulsory. You can send your KS1 to IRD before your EMS.
• When completing the New employee opt-out request (KS10) form you must include your IRD number, name and address. Also include your employee's start date.
• Make sure the total KiwiSaver is the sum of the KiwiSaver deductions you've made for your EMS period.
• KiwiSaver is calculated on gross salary or wages, which generally means total salary, wages or allowances, including bonuses, commission, extra salary, gratuity, overtime and other remuneration before tax. KiwiSaver isn't deducted from:
  • redundancy payments
  • the value of providing board or lodging, or use of a house or part of a house, or the payment of an allowance instead of the provision of this benefit
  • the value of overseas accommodation and cost of living allowances.

Completing the Correct Fields

• Make sure you complete student loan and child support deductions in the correct column (if applicable).
• If you only have one employee you still need to complete all applicable fields for that employee, including the totals.
• Only include employee(s) details once, ie don't repeat them on another page.
• WT tax code - make sure the same amount is included in both the "Gross Earnings and/or Schedular Payments" column and "Earnings and/or Schedular Payments not liable for ACC Earners' Levy" column.
• M tax code - make sure you complete only the "Gross Earnings and/or Schedular Payments". You only use the "Earnings and/or Schedular Payments not liable for ACC Earners' Levy" column if there's redundancy or the earnings are over the maximum for ACC purposes.
• Write clearly and inside the boxes, and use a blue or black pen to complete the EMS. Don't use red or green pens or vivid markers.
• If the amount is 0.00  leave it blank. Don't write "NIL" as te IRD image machine can read this as $1.11.
• Only complete "Start and/or Finish" dates when your employee commences or ceases employment.

Amendments to your EMS

Sometimes an error is made on an employee's earnings. For changes for one or two employees call IRD on 0800 377 772 or send a message by secure online services. Alternatively, complete an Employer monthly schedule amendments (IR344) form and return it to IRD.

Negative amounts can't be accepted as the adjustment needs to be made in the same month the error occurred.

 

 

CREATING A CULTURE OF CHARITABLE GIVING

New Zealanders are considered generous people with approximately 1.3 million New Zealanders regularly donating their time, money, goods and services to charities and other non-profit organisations. In an effort to further encourage and reward charitable giving, the 2007 Budget created a basis for a stronger culture of charitable generosity, which has been affirmed and incorporated into our Income Tax Act 2007. Changes in recent years increased thresholds for tax deductions and protocols have been implemented that make philanthropic endeavours easier and more convenient.  

Deduction Incentives  

Individuals - All individuals twho donate to charities are able to claim a 33.33% tax rebate on the amount of cash donations. Previously, deductions for charitable donations could not exceed $630 regardless of the amount.  

For example, Jack donates $3000 to charities and non-profit organisations in a year. His taxable income for the year is $35,000. Previously, Jack would only be entitled to a deduction of $630. The recent change now means that Jack is entitled to a rebate claim of $1000 being 33.33% of the $3000 in donations.  

Individuals are also able to donate direct from their pay to their chosen charitable organisation(s). In doing so, individuals receive immediate tax credits that decrease their PAYE. Payroll giving is only possible when it is offered by the employer, and is limited to employers who electronically file their monthly PAYE schedule. The only other condition is that the chosen charity/organisation must also be one that is approved by the IRD.  

Companies - All companies, even those with five shareholders or less, are eligible for tax deductions when they donate to charitable organisations (as described in the Income Tax Act 2007). Previously, companies could only claim a rebate for a sum up to 5% of their revenue. The 5% limit on deductions has now been removed and companies are entitled to deductions limited only by the company’s net income.  

For example, in the 2010/2011 year ABC Ltd made charitable donations amounting to $10,000. Its income before taking into account the donations was $100,000. Previously, the deduction entitlement for the company would have been $5000. The company is entitled to a $10,000 tax deduction, which also reduces its taxable income to $90,000.

Maori Authorities - Incentives for Maori Authorities are much the same as that of companies. These authorities will be able to claim deductions for cash donations made to charitable organisations limited only by the amount of their net income.