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The Business Advisory Blog

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Vanessa Williams
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Get your payroll sorted early New Zealand

Before taking your well-deserved break, check that you’ve got your payroll sorted. 

xero payrollWe get asked lots of payroll questions around this time of year, so here are the answers to the most common ones.

How do I pay my employees their holiday pay?

It’s not possible to pay out holiday pay as such. The holiday pay figure in Xero shows 8% of an employee’s total gross earnings for their current anniversary year. It doesn’t reduce as they take annual leave. 

Your permanent employees are paid annual leave via an annual leave request for the number of hours they’ll be on leave. Leave requests can be submitted on behalf of an employee from the employee’s ‘Leave’ tab. Once approved, the amount of annual leave is shown in the next pay run. See how to submit and approve a leave request.

If your permanent employee works irregular hours, then you may need to review their earnings to make sure their leave is calculated correctly. 

How do I know how many hours of annual leave my employee can take in advance?

You can find out how much leave your employee can take in advance of their next anniversary by making sure the checkbox for the option ‘Include leave available to take in advance in the balance’ is ticked (it’s ticked by default for all new employees). The annual leave balance will then display with an amount that includes annual leave available to take in advance, up until the end of the next pay period. 

Ask our Xero team about annual leave in advance and how it’s calculated in Xero.

My employee has changed standard working days and hours this year. How do I update their leave balance?

Once the new days and hours have been updated in the employee’s ‘Employment’ tab, the leave in advance balance for the current year will be updated. However, you will need to manually update any annual leave balance entitlement from previous years. 

Why isn’t the public holiday line showing in some of my employees’ pay runs or payslips?

The public holiday line may not be showing because either the holiday group is not set, or it was set after the draft pay run was created. 

You can set a holiday group in the employee’s Employment tab. If the group was set after the draft pay run was created, you need to select Reset Payslip in the employee’s draft pay run. 

See how to manage holiday groups.

How do I pay an employee for working a public holiday?

To pay an employee for working a public holiday, you can add a new earnings pay item (for example, public holiday worked, multiplied by 1.5 times the employee’s normal pay rate). Add it to the employee’s draft payslip and enter the hours worked. To update the alternative holidays balance, go to the employee’s payslip within the draft pay run and manually add the hours to accrue in the leave accruals section.

Ask us for detailed instructions for paying an employee for working a public holiday.

My company has an annual closedown — how do I pay the employees their leave and holiday pay?

If your company has an annual closedown over the holidays, you’ll need to process annual leave for any employees who have been employed for more than 12 months, or for whom the Holidays Act Closedown rules do not apply. 

For any employees who’ve been employed for less than 12 months and need their holiday pay paid out or how to process leave for annual closedown in New Zealand, please contact our team for further guidance.

Why is my employee’s annual leave pay rate higher than usual?

The employee’s annual leave rate can sometimes be higher than their hourly rate. This is because annual leave is paid at the higher of ordinary weekly pay or average weekly earnings. See the official guidance on calculating payments for holidays and leave.

The ordinary weekly pay calculation uses the information from the Employment and Pay Template tabs. The average weekly earnings calculation uses information from the Opening Balances tab plus the pay runs that have been processed in Xero.

Can I process payroll in advance, and how will this work with payday filing?

Certainly! As long as it is a normal, scheduled pay run, the pay calendar will automatically roll forward. How far in advance you can file a pay run with Inland Revenue (IR) depends on the date the pay run is posted.

For pay runs posted before the 19th of a month, the payroll admin can set a payment date up to the end of the current month. For pay runs posted on the 20th of a month onwards, your payroll admin can set a payment date in advance up to the end of the next month.

If you need to post pay runs for dates in advance of the dates available, you may get an error message that reads ‘Filing period does not yet exist / has not yet been generated’. In this case, you can contact IR who may be able to open up the next month for you.

You can still post the pay run in advance in Xero even if the filing period does not yet exist or has not been generated. However, the payday files for that period will not be filed automatically, even if the payroll admin is connected. Once the filing period eventually opens, any connected user will need to go into the posted pay run and manually file it with IR. Any pay runs posted in advance of a filing period being open will not be automatically filed.

Does IR have a closedown for payday filing over the holidays?

Yes, IR will have a grace period closedown from 25 December to 15 January. Any paydays within this timeframe are due from employers on or before 19 January. Visit the IR website for more details on filing employment information with payday filing.

If you have any other questions, check in with Alliott's Xero team for more support about payroll. You can also take a look at the Employment NZ website for details on annual closedown periods. 

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Have a good break, stay safe and be kind. Hararei koa!

Article first published by Xero as Be a star: Get your payroll sorted early New Zealand | Xero Blog. (2021). Retrieved December 2021 from

Topics: bookkeeping cloud accounting employee holiday pay employers leave entitlement Payroll Xero