Payroll for small business

Common Payroll Errors: What’s Payroll Costing You?

Payroll errors are a risk for any business. Getting it wrong can be costly, not only in terms of time and money but also legally. Processing payroll requires meticulous calculations, data entry, record-keeping, and ensuring you stay compliant with IRD. Not to mention, getting it wrong can affect trust amongst your employees.

Do you get frustrated with the ever-changing legislation and regulation updates in employment law in New Zealand? Minimum wage adjustments, leave calculations, tax code bracket updates, KiwiSaver changes. Business owners already have a lot on their plates. Keeping up with these changes can be incredibly time-consuming.

If you’re running a business in New Zealand, payroll can feel like a bureaucratic maze. That’s where a good bookkeeper could become your secret weapon. 

What is Payroll

Payroll is the process of paying your employees. A payroll system is what businesses use to pay salaries and wages to staff on required dates. Payroll consists of:

  • Calculating pay (including benefits and reimbursements)

  • Deducting employment tax and other deductions, such as insurance, KiwiSaver contributions, and child support.

  • Paying those taxes to the IRD

  • Keeping payroll records so you can demonstrate to the government that you are doing things correctly. 

Common Payroll Errors

#1. Complying with minimum wage

As of April 2024, the current New Zealand minimum wage is $23.15 per hour. New Zealand businesses are required by law to pay employees at least the minimum the wage for every hour they work. 

There are harsh penalties for businesses that do not comply with payroll regulations. In April 2024 a Southland dairy owner was ordered to pay $215,000 in penalties after being found to have exploited three migrant workers. 

He was found to have breached numerous minimum employment standards including, not paying minimum wage, not paying leave or holiday pay, unlawful deduction from their wages, not keeping accurate pay records, and forcing them to pay premiums. So, it pays to get it right! 

#2. Overpaying and underpaying staff

As an employer, you are responsible for making sure your employees receive their correct entitlements, and that you pay them correctly for the work they do. It is surprisingly easy for an employer to make a mistake — especially with holiday pay.

In 2016, the Ministry of Business, Innovation & Employment (MBIE) stated that across New Zealand there was an estimated $2 billion in payroll underpayments, which affected more than 700,000 employees.  

Overpaying staff can be costly to your employees and your business, especially if your employees are not in a financial position to repay the overpayment. Underpaying staff can result in financial penalties, cash flow pressure, and staff trust issues, which could lead to high staff turnover. 

You just have to look at the news to see numerous examples of how complex and confusing it can be to ensure that employees receive their correct entitlements.

Recently, the Government made another promise to overhaul the Holiday Act, because it is “widely agreed the Holiday Act is a mess”. The New Zealand Payroll Practitioners Association states that up 80-90% of their time is taken up helping members who have issues with the Act. 

So, it’s important to stay up to date with current legislation and review all payments closely. Your payroll system can only do what you tell it to do. So, make sure all amounts are correct. 

#4. Missing PAYE filing

Don’t forget about your payroll filings, to ensure you avoid penalties. Filing Employment Information each payday can be challenging for many employers; however, it is important to ensure you file on time to ensure your employees have the right deductions and entitlements. 

Why You Need a Payroll Partner

A good bookkeeper goes beyond crunching numbers. They act as a trusted advisor, offering insights into your financial health and identifying areas for cost-optimisation within your payroll system. They can also help you:

  • Choose the Right Payroll Software: Selecting user-friendly payroll software streamlines the process and minimises errors.

  • Automate Repetitive Tasks: Bookkeepers can automate tasks like calculating deductions and generating payslips, saving you even more time.

  • Generate Reports: They can provide clear and concise reports that give you valuable insights into your workforce costs and trends.

New Zealand employment law is constantly evolving. Keeping up with minimum wage hikes, tax code updates, and KiwiSaver changes can be a full-time job in itself. A qualified bookkeeper stays on top of these changes, ensuring your payroll adheres to the latest regulations.

Time is money. Payroll processing involves meticulous calculations, data entry, and record-keeping. By outsourcing this task, you free up valuable hours to focus on your core business activities, like growing your customer base or developing new products.

Accuracy is essential. Even a minor payroll error can lead to unhappy employees, penalties from the IRD, and reputational damage. Bookkeepers have the training and experience to ensure your payroll is processed accurately and efficiently.

Payroll mistakes can cause significant stress. Knowing a professional is handling this critical function allows you to focus on your business strategy with peace of mind. It’s not just about ticking boxes; it's about protecting your business and your employees. By partnering with a qualified bookkeeper, you gain a valuable asset who ensures your payroll runs smoothly, frees up your time, and minimises the risk of costly errors. 

Invest in your success. Protect your business and your employees and get in touch today! If you have any questions about payroll, legislation, payroll software, or reporting then have a free no-obligation chat.