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Employers receiving penalties for Payroll mistakes

12 months ago the Ministry of Business, Innovation & Employment (MBIE) estimated the total cost around the country of payroll underpayments could top $2 billion, affecting more than 700,000 employees. Kearin Pollard discusses the effect this has on businesses and what to do to avoid this happening to you.

Most employers want to pay their employees their full entitlements but sometimes employers and payroll systems do get it wrong. For example, the correct application of the Holidays Act 2003 is particularly complex and confusing for many.

Are you aware of the penalties being handed down to employers for failing to get their payroll obligations right? It is the sole responsibility of the employer to ensure that employees receive all entitlements when paid for work performed, and any organisation found in breach will face consequences. Just because you pay your employees on time does not necessarily mean you have paid them correctly.

Often employers will utilize an electronic payroll system to process their payroll requirements. These can work brilliantly, but do rely on the integrity of the calculations being made strictly in accordance with the employer’s legal obligations. We have found that payroll calculations are often accepted as being correct, despite that actually not being the case. During our payroll audits we have found that it is often a misunderstanding of the application of the Holidays Act which has led to an under or over payment to employees. We know how complex the Holidays Act 2003 can be – 15,000 police members had leave incorrectly paid, so it is tricky!

How confident are you that your payroll calculations fully comply with your legal obligations? If you answer yes to any of the questions below, we strongly recommend you have your Payroll processes checked:

  • Have you had staff query the amount they have been paid?
  • Is your payroll regularly inconsistent each pay period above or below what your expectations would be?
  • Are you, or your payroll officer, unsure of aspects of your employment law obligations?

Pay and payroll is such a personal and emotive subject for so many employees. To be confident you are meeting all of your obligations you should periodically have your payroll independently reviewed. Baker Tilly Staples Rodway can do this for you.

We are able to analyse and audit payroll records objectively and without emotion which reduces stress to both the employer and employee. Please contact me to arrange a free, no obligation consultation to discuss your needs.

DISCLAIMER No liability is assumed by Baker Tilly Staples Rodway for any losses suffered by any person relying directly or indirectly upon any article within this website. It is recommended that you consult your advisor before acting on this information.

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