Employer’s Guide: How To Prepare Payslips

All employers understand the significance of treating your employees well, as they are the cornerstone of your business. Ensuring they are compensated fairly for their efforts is crucial.

However, paying employees involves more than just transferring funds. There are several factors to consider, such as:

• Is my employee permanent or on a fixed-term contract?
• What are their employment rights?
• Do I have record-keeping obligations?
• How does KiwiSaver work in this context?
• What about insurance?
• What obligations do I have according to New Zealand employment law?

When you pay your employees, you also need to think about your obligations as an employer and their minimum entitlements to ensure they’re being compensated correctly (if you’re not sure how much you should be paying your employees, you can use Employment New Zealand’s tools).

This article will guide you through all the key things you need to consider when paying your employees in New Zealand (and ways you can make the process a lot easier!).

What Is A Payslip?

When employees receive payment, it isn’t always the same for everyone. For example, some employees might have deductions, or receive additional pay for overtime work. Since each payment is personalised based on various factors, each employee receives their own payslip.

What Is Included On A Payslip?

While most payslips are personalised, they should generally include the following:

• Employer and employee’s name
• IRD number
• Pay period
• Gross and net pay
• Applicable hourly or salary rates (and the number of hours worked)
• Any other paid entitlements (for example, holiday pay)
• Authorised deductions (for example, KiwiSaver or student loan repayments)
• KiwiSaver contributions (if applicable)
• Employee’s employment status (for example, are they a part-time or full-time employee?)
• Any applicable employment agreement or collective agreement
• Employee’s bank details

Despite any small differences between each employee’s payslip, it should clearly state the final amount they take home. It’s also important to remember that payslips must be provided to employees within 1 working day of the pay date, even when an employee is on leave.

Employment New Zealand discusses the rules around payslips in more detail.

Do I Need To Register For PAYE Withholding?

Employers typically deduct PAYE (Pay As You Earn) withholding amounts from their employees’ wages to cover their income tax and ACC earners’ levy. You’ll need to register for PAYE if you make payments to:

• Employees
• Contractors (if they are on the PAYE schedule)
• Businesses that don’t provide their IRD number to you

Once registered, you deduct certain amounts from their payments and send it to Inland Revenue. If you’re not sure how to calculate the tax you need to withhold, you can use Inland Revenue’s PAYE calculator.

Thankfully, to make the reporting process much easier, employers can use the Payday Filing system.

Payday Filing

As mentioned earlier, employers need to report the amounts withheld from their employees to Inland Revenue. This can be done through Payday Filing, which is a requirement for all employers.

So, what kind of information do I send?

• Salaries and wages
• PAYE (including KiwiSaver and student loan repayments)
• Other deductions

Thankfully, this new way of reporting is integrated into most payroll software.

It’s important that employers understand their obligations around PAYE withholding as there are penalties for non-compliance. Inland Revenue has provided guidelines for how to use Payday Filing.

How Do I Generate Payslips For My Employees?

Each employer might have their own preference for how they issue payslips to employees. For example, you might provide an electronic version if you like to keep all your important files in one accessible place.

If you opt for electronic payslips, they must be:

• Sent via email or into an electronic personal account, and
• In a printable format

Some employers might prefer to give payslips in printed form. However, electronic payslips are often easier to distribute via email, and they don’t take up physical space. They’re also more accessible when reporting details to Inland Revenue.

No matter which form you prefer, using a template can be helpful. This ensures you include all the correct information and can issue payslips quickly.

Do I Have An Obligation To Keep Payslips?

Employers have an obligation to keep employee records, including payslips, for at least seven years. Other requirements include:

• Ensuring there is no false or misleading information
• Ensuring the records are not altered
• Ensuring records are in a form that is accessible to a Labour Inspector

Payslips are only one of the general records you should be keeping – Employment New Zealand has listed other records you should be keeping.

What If I Don’t Have The Correct Information On The Payslips?

Mistakes can happen, but it’s important to ensure payslips are accurate. They outline each employee’s entitlements and serve as evidence that you are providing the correct payments.

If a payslip contains incorrect information, you could face penalties. It’s crucial to double-check the details on every payslip. If you become aware of false or misleading information, the penalties can be severe, including legal action.

How Can I Avoid This?

To avoid mistakes, encourage employees to report any issues. If you identify an error, notify affected employees and rectify the situation promptly. If an employee requests access to their records, you must provide them.

Addressing issues with your employees directly can help avoid fines or legal action.

Need Help?

Payslips are a fundamental part of your obligations to employees, but errors can occur. To avoid issues:

• Verify employee details are correct (e.g., are casual workers paid the right amount?)
• Issue payslips on time
• Ensure wages are accurate (e.g., compliance with employment agreements)
• Comply with payslip requirements (e.g., accessible format)
• Keep multiple copies of each payslip for records

If you need assistance with payslips or other employee records, reach out to us at [email protected] or contact us on 0800 002 184 for an obligation-free chat.

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