Final Pay NZPPA Annual Conference 2013 PRESENTED BY Katie Leitch & Grant Bond
When to pay • What to pay – all termination types • What to deduct • Additional treatment of specific termination types • Paying leave • Lots of Q&A What is covered in this session?
Filling the knowledge gap... What do you want to know
Final Pay When to pay • Employment AgreementsIf stated and signed, use what’s in the E.A; otherwise, refer to… • Wages Protection Act 1983 • States it should be paid on their final day • Note: The Holidays Act 2003, section 27 (2) can confuse matters as it says you can pay in the period that relates to the final period of employment.
Final Pay What to pay ALWAYS check your employee’s Employment Agreement
Final Pay What to pay • Payments for any/all of the following: • Wage & salary entitlements still outstanding • Leave entitlements, as per the Holidays Act 2003 • Other benefits, e.g. in lieu of notice, redundancy • Any other payments, e.g. bonuses, commissions, incentive payment
Final Pay What to deduct from the final pay • Deduction should include any of the following: • Child Support • KiwiSaver (including complying funds) • Student loan • IRD arrears • Court fines • WINZ deductions • Any other deductions can only be made if there is a written agreement.
Resignation – notice given • Resignation – no notice given • Retirement • Redundancy • Dismissal • Death Termination Types
Final Pay Resignation – notice given If the employee works out their notice period, you must pay salary/wages to the end of the notice period Unless justifiably dismissed during this period.
Final Pay Resignation – notice given If you do not require the employee to work out their notice period, you may need to pay an “In lieu of notice” payments Check your E.A’s
Final Pay Resignation – no notice given You are only required to pay up to last actual working day You can only monetarily penalise the employee if the employee’s E.A contains a “consequences” clause or the employee agrees in writing
Final Pay Retirement • What you may be required to pay • Retiring Allowance • Early Retirement Incentive
Final Pay Redundancy You have no obligation to pay redundancy unless specified in the E.A. But if you do make a redundancy payment it must be taxed as lump sum payment….
Final Pay Retirement/Redundancy Payments and Tax
Final Pay Redundancy Payments Q&A Q. Are redundancy payments liable for ACC Earner Levy? A. No - redundancy payment is considered compensation not a wage or salary payment. Q. Is student loan calculated on redundancy payments? A. Yes – compulsory repayments still paid at 12% Q. Do redundancy payments count for KiwiSaver? A. No - employee contributions are not deducted and employer contributions do not have to be included.
Final Pay Dismissals • What you may have to pay • In lieu of notice payments • Any other payments outlined in the E.A.
Final Pay Death • What you may have to pay • Any other payments outlined in the E.A. • When to pay • Upon receiving a letter from the executor of the employee’s estate.
Final Pay Annual Leave • Accrued Leave (Holidays Act 2003, Section 23 & 25) • 8% of gross earnings in the current AL year less any amount paid in advance. • Entitled Leave (Holidays Act 2003, Section 24) • The greater of Ordinary Weekly Pay or Average Weekly Earnings (52weeks).
Final Pay Annual Leave – Gross Pay
Final Pay Annual Leave – Gross Pay Case Study Q. Is a bonus an incentive-based payment or a discretionary payment? A. It can be both. When paying bonuses make sure it is clear what type of payment the bonus is classified as, because this has a huge impact on the value of “Gross Pay” when paying accrued leave on termination. Example http://www.stuff.co.nz/business/better-business/9035298/Holiday-pay-case-could-rewrite-rules
Final Pay Annual Leave and Public Holidays Unused ANNUAL LEAVE entitlement must be notionally added to the last day of employment. Holidays Act 2003, Section 40 (3) b
Final Pay Annual Leave and Public Holidays Example Joe’s termination date will be 21 Dec 2012. At that date he has 2 weeks (10 days) annual entitled leave owing and he works a 40hr week Mon – Fri. This means any public holidays that occur in the 10 otherwise normal working days following his termination date MUST also be paid in the final pay.
Final Pay Annual Leave and Public Holidays So what does this mean for Joe? It means Joe is entitled to be paid his 2 week annual leave + the 4 public holidays (Christmas Day, Boxing Day, New Years Day and the Day After New Years Day). For your organisation this could be a significant final pay amount.
Final Pay Alternative Holidays • Untaken alternative holidays must be included in the final pay. • Do not affective annual leave (unlike public holidays).
Final Pay Sick Leave, Bereavement Leave & Long Service Leave Only paid out if stipulated in an employment agreement
Final Pay Payment for other holidays and leave Pay either relevant daily pay or average daily pay for: • Public Holidays • Alternative Holidays • Sick Leave • Bereavement Leave Advisable to calculate an employee’s relevant daily pay in the first instance
Final Pay Questions
Final Pay Thank you