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FINANCIAL LITERACY •  27 MARCH 2024 • 2 MIN READ

Why getting payroll right is so important for employees

Why getting payroll right is so important for employees

Paying employees correctly and on time, and ensuring they get their entitled leave and holidays, plays a huge part in keeping them happy and motivated.

For most people, earning money is a principal reason to go to work each day. It’s also one of the easiest ways for them to measure themselves and their achievements.

While this can all sound obvious, there are many Kiwi businesses that don't get this right. Back in 2016, the Ministry of Business, Innovation, and Employment (MBIE) estimated that payroll underpayments could affect more than 700,000 New Zealand employees and add up to more than $2 billion. In the years since, there have been a slew of high-profile cases of large organisations getting employee pay wrong, including Woolworths, McDonalds, the Ministry of Education, Te Whatu Ora Health NZ, and MBIE itself.

Business owners and management are ultimately responsible for any pay mistakes and their consequences. At best, you may have to repay your employees. At worst, you could face prosecution and fines by MBIE or the Inland Revenue Department (IRD), as well as any interest and potentially expensive legal fees.

Having integrated payroll and HR systems that pull directly from the same data will go a long way towards making sure your people's leave, pay, and tax calculations are accurate, timely, and compliant with the law. It will also make it quicker to identify and resolve any issues.

Let's look at the top reasons why it’s so important to get payroll right for your employees.

It's a legal requirement

Every employee must be paid at least the minimum wage for every hour they work.

It doesn't matter if the person is full-time, part-time, fixed-term, or works casually, or whether they are paid by wages, salary, or commission. The minimum wage is the lowest that a worker can be paid (you and your employees can agree to any wage rate higher than the minimum).

You also need to adhere to the provisions agreed to in the employment agreement around how much someone is paid, how their pay is calculated, and how often they are paid.

Then there are other legal requirements around tax and other deductions (e.g. KiwiSaver),
annual leave entitlements, and correctly calculating and paying public holidays.

By coupling your payroll processes with the oversight of a good HR team, you’ll ensure you're always meeting all your legal requirements and obligations to your employees.

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