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A Day in the Life of Payroll – Mysteries of Payroll Revealed

A Day in the Life of Payroll – Mysteries of Payroll Revealed

by | Sep 2, 2024 | Article

payroll

Last year I went to the Secrets of Stonehenge Revealed exhibition and it has inspired this title – Mysteries of Payroll Revealed, because for many people payroll is as much of a mystery as Stonehenge.

Every week/fortnight/month money appears in personal bank accounts and everyone breathes a sigh of relief – bills can be paid, that new outfit can be bought, that dinner date can go ahead.

The biggest sigh of relief comes from the one who have processed that payroll – the payroll administrator/officer/specialist/manager: Another pay run over, xxx number of employees paid, …until the next pay run when it starts all over again.

Let’s explore the day in the life of a payroll administrator. For the purposes of this exercise I have condensed the process into an 8-hour day. While payroll can take more time than this, the steps are often the same.

Minus 8 hours to payroll commit

Check that timesheets are approved. Out of 10 timesheets, 1 is not approved. Send email to manager. Get an out of office: “I’m currently walking Milford Track and have limited access to emails. If your request is urgent, please email…” Try to track down an alternative approver because the suggested email belongs to someone who does not the authority or access to approve the timesheet.

Dayforce Solution:  Managers can delegate authority to another person in their team who can approve timesheet while they are away.  They can also approve leave requests so that these can be included in the pay run.

Minus 7 hours to payroll commit

All timesheets now approved. Download timesheets/leave approvals for upload to payroll software. Upload fails. Refer to IT Support to assistance. It may surprise most people to know that often the schedules/timesheets are held in one application and payroll in another so there is a download/upload required to process payroll.

Dayforce Solution: Dayforce is an integrated system meaning both time and attendance and payroll processing are held in the same system so therefore file downloads/uploads of timesheet and/or leave data is not required.

Minus 6.5 hours to payroll commit

Issue with upload resolved and timesheet/leave approvals uploaded to payroll software.

Minus 6 hours to payroll commit

Manager now remembers that an adjustment needed to be made to someone’s pay/hours/overtime and meant to tell you last week but has just remembered. Could this be done this pay? Unlock timesheets so that manager can add hours/overtime, wait for approval, lock timesheet again. As upload has already been done and can’t be uploaded again, add the adjustment manually to correspond to the timesheet entry.

Dayforce Solution: If a last-minute adjustment to a timesheet needs to be done, the payroll admin can unlock the timesheet, the manager makes and approves the adjustment and the timesheet can be locked again. The payroll admin then needs to do is recalculate the pay run for the adjustment to be included in payroll.

Minus 5.5 hours to payroll commit

Run payroll in the system. Very often this is not just a matter of pressing a button, but having to go through a series of steps as the payroll system takes the payroll data such as rate of pay, hours worked, overtime, leave etc, draws that into the payroll system, matches up the days/hours worked then works out tax rate and superannuation etc according to the settings in payroll.

Dayforce Solution: What makes Dayforce payroll unique in the payroll workspace is that a pay run can be opened and calculated at any time in the pay period and can be checked for anomalies continuously throughout this period. This means that errors can be fixed ahead of time which allows in-depth analysing, reviewing and correcting pay data prior to pay period end.

Minus 5 hours to payroll commit

Software system throws up a calculation error – something is not matching up in the system. Investigate and attempt to discover what this is and fix the system. Log a ticket with Support.

Dayforce Solution: Dayforce has dedicated payroll support 24/7 that allows system errors to be logged as a Severity 1 Case. This is reserved for genuine emergencies where an issue is impacting payroll commit. This service “follows the sun”, that is, the support team is world-wide so the ticket will be attended to in real time, without waiting for a support team in another region to arrive at work. So applicable to New Zealand which can be as much as a day ahead of other regions.

Minus 4.5 hours to payroll commit

Run payroll reports. In most systems this also includes a report to compare the last pay run to current pay to identify where a particular pay may be over/under. This works well for normal Monday to Friday 8 hours a day, 40 hours a week staff but a little trickier for those with variable hours. Unpaid leave can also skew a regular pay as well as extra hours worked. Find and correct any discrepancies. This can be the most labour-intensive part of payroll.

Dayforce Solution: Dayforce has several audit tools within the payroll module which allows checking according to several parameters, such as gross pay comparison to last gross pay, audit summary whereby individual earnings, deductions, tax etc can be reviewed, as well as summary audits. And, as per the point above, this can be done at any time ahead of the pay period end date to identify discrepancies and errors well ahead of pay date.

Minus 3 hours to payroll commit

Send payroll reports to payroll authoriser to be checked and approved.

Minus 2.5 hours to payroll commit

Approver has query on some employees’ earnings and/or deductions of the payroll report. Investigate and report back.

Dayforce Solution: Within the payroll module, payroll admins can filter on an individual employee and view their actual payslip in a fly-out screen. This fly-out also has additional tabs such as timesheet, time data and GL preview (if configured). This makes investigating and reporting on elements of an employee’s pay fast and an explanation provided timeously so that the authoriser can proceed. 

Minus 2 hours to payroll commit

Payroll approved. Next step is to create the bank file to upload to the bank so that staff can be paid. File downloaded and uploaded to the bank. Bank returns an error message – a bank account number is incorrect. Delete upload and track down the bank account causing the issue, go through employee records, find the bank account on file and compare. Amend bank account and attempt to upload file again. Note that in some software programs, you must reprocess the pay run again for the bank file to download with the new bank account. This is a security feature but takes up time.

Dayforce Solution: The bank file is created as soon as the pay run is committed. If a bank number is incorrect, this can be corrected in employee’s records and the bank file generated again without having to reprocess the pay run.

Minus 1 hours to payroll commit

Send message to bank file approvers to authorise the payment files in the bank. Follow up with approvers. Breathe sign of relief when this is done.

Zero hour – payroll committed

Post Payroll

Send out payslips and print/download payroll reports. Upload payroll journals to accounting system.

Dayforce Solution: While providing a payslip is not a legal requirement in New Zealand, it is best practice to do so. Dayforce produces payslips as an Earnings Statement which are added to an employee’s record and are available within Dayforce for the employee to log in and view. 

Furthermore, these earning statements are stored in one area of the employee’s record so that they access not just the current payslip but also previous payslips. Payroll reports run automatically on payroll commit so are available to download from Archived Reports within the pay run. And if the GL export has been enabled, this is also available either as an archived report or as a file transfer to a SFTP system such as Filezilla.

Plus 1 hour after payroll commit

Employee sends email; “My pay is wrong, you didn’t pay me for…”

Dayforce Solution: While errors in payroll can always occur, especially as payroll personnel tends to be the last to know, as Dayforce is an integrated system the possibility of persistent errors is reduced. The HR record within Dayforce holds all compensation data such as employee’s salary, days and hours worked, entitlement policy, pay policy and payroll policy. 

The payroll elections feature holds regular earnings such as allowances, as well as regular deductions. The Time Away From Work module holds leave information and feeds approved leave directly into the employee timesheet.

All these elements are loaded into the pay run once it is opened and calculated. An amendment made to any of these elements can be calculated and viewed at any time in the pay period to ensure that the pay is correct. Mistakes happen but with all these elements embedded in the one system, there is less chance of a mistake occurring.

And a mistake-free pay run makes for happy employees 😊

Public Holidays and Mondayisation – 2022

Public Holidays and Mondayisation – 2022

by | Dec 12, 2021 | Guide

Public Holidays

Please note, this is an overview only, based on practical experience in dealing with these matters on a daily basis. We describe only the minimum requirements outlined by the Holidays Act 2003. Companies may go over and above, or have collective agreements that provide specific additional entitlements for public holidays. We are not lawyers and this post should not be seen as legal advice

New Zealand has 11 official public holidays until 2021. Following that, an additional public holiday comes into effect (Matariki)

The 10 fixed (11 from 2022) days are:

  • 1 January (New Year’s Day)
  • 2 January (Day after New Year’s Day)
  • 6 February (Waitangi Day)
  • Good Friday
  • Easter Monday
  • 25 April (ANZAC Day)
  • Queen’s Birthday
  • Matariki (from 2022) – falls on 24 June in 2022 and will change year on year
  • Labour Day
  • 25 December (Christmas Day)
  • 26 December (Boxing Day)

In addition to these fixed days are regional public holidays (Anniversaries). This is a single day, which is recognized on a different day across each of New Zealand’s regions.

Anniversary days are generally observed in their respective region on the Monday closest to their official date, except for Canterbury and Hawke’s Bay, which fall on a Friday. However, this does vary year on year. The Anniversary days in each province for 2022 are:

  • Auckland – 31 January
  • Taranaki – 14 March
  • Hawke’s Bay – 21 October
  • Wellington – 24 January
  • Marlborough – 31 October
  • Nelson – 31 January
  • Canterbury – 11 November
  • Canterbury (south) – 26 September
  • Westland – 28 November
  • Otago – 21 March
  • Southland – 19 April
  • Chatham Islands – 28 November

 

Otherwise Working Day

The first step is to determine whether the day would have been an otherwise working day for the employee in question. All calculations following that, rely on this to be known.

From Otherwise working day » Employment New Zealand

“In many cases it is easy to work out whether or not an employee would otherwise have worked on the day in question because the working pattern or roster is constant, and the employer and employee can easily agree about whether the employee would otherwise have worked that day.”

 

Unclear whether a day is an otherwise working day

If it is unclear whether the day is an otherwise working day for an employee, the things that the employee and employer must consider in trying to reach agreement include:

  • what the employment agreement says
  • the employee’s usual work patterns
  • any other relevant factors such as:
    • if the employee works for the employer only when work is available
    • the employer’s rosters or other similar systems
    • the reasonable expectations of the employer and employee as to whether the employee would have worked on that day
  • if the employee would normally have worked if it were not a holiday (public or alternative) or if the employee were not on leave (sick or bereavement)

The employer and employee must consider all these factors when trying to reach agreement, e.g., the employer cannot just rely on one and then conclude that the day is not an otherwise working day.

Working out whether the day is an otherwise working day is a practical task, and each situation needs to be considered based on the employee’s specific situation and work pattern.

If the day falls during a closedown period, the above factors need to be considered as if the closedown period weren’t in effect.

 

Entitlements for Public Holidays in New Zealand

Entitlements for Public Holidays are covered in the Holidays Act 2003, sections 46 to 50.

 

When an employee does not work

If the day would otherwise have been a working day, then the employee should be paid at Relevant Daily Pay or Average Daily pay for the day in question.

If the day would not otherwise have been a working day, then the employee has no entitlement.

 

When an employee works

If the day would otherwise have been a working day, then the employee is entitled to:

  • be paid at their Relevant Daily Pay or Average Daily Pay rate for the hours worked on the public holiday at T1.5
    • We believe that “Average Daily Pay” in this instance is not being correctly referred to in the Holidays Act 2003, because it is always possible to determine what the employee would have earned, because they actually worked on the day
    • Note it is not necessary to multiple already existing penal rates by a further 1.5. For example, if a company already pays T1.5 for working on a Saturday, it is not necessary to pay T1.5 x T1.5 for working that day, if it were a public holiday
  • Receive a full alternative holiday (1 unit / day, regardless of how many hours are worked on the public holiday)

If the day would not otherwise have been a working day, then the employee is entitled to:

  • be paid at their Relevant Daily Pay or Average Daily Pay rate for the hours worked on the public holiday at T1.5
    • We believe that “Average Daily Pay” in this instance is not being correctly referred to in the Holidays Act 2003, because it is always possible to determine what the employee would have earned, because they actually worked on the day
    • Note it is not necessary to multiple already existing penal rates by a further 1.5. For example, if a company already pays T1.5 for working on a Saturday, it is not necessary to pay T1.5 x T1.5 for working that day, if it were a public holiday

Monday & Tuesdayisation

This scenario occurs when a public holiday falls on a weekend (either Saturday or Sunday or both). In this case it becomes necessary to determine whether the actual public holiday (weekend day) should be recognized or whether it should be Monday or Tuesdayised. Tuesdayisation only occurs when both Christmas and both New Year days fall on a Saturday and a Sunday.

In this case it is still just as important to determine whether the day(s) in question is(are) an otherwise working day for the employee.

 

Simple reference

  • Under no circumstances is it necessary to pay an employee entitlements for the same public holiday twice
  • If an employee’s otherwise working day falls on the Sunday and not the Monday, then Sunday is their public holiday
  • If an employee’s otherwise working day falls on the Monday and not the Sunday, then Monday is their public holiday
  • If both Sunday and Monday are an otherwise working day for the employee, then Sunday is their public holiday
  • If both Christmas and Boxing Day fall on a weekend, then Saturday could be Mondayised and Sunday could be Tuesdayised
  • Whichever day is determined to be their public holiday, should have the normal public holiday entitlements applied as per above

NB: it should not be necessary to make these calculations manually. Any good rostering, time and attendance and award interpretation software should be able to fully automate this process.

Employment New Zealand Flowchart

Below is a flow chart that has been published on the Employment New Zealand Website

 

Figure 1 – Mondayisation logic Employment NZ
Calculating the Average Weekly Earnings Rate

Calculating the Average Weekly Earnings Rate

by | Nov 9, 2021 | Guide

Average Weekly Earnings Rate

The New Zealand Holidays Act legislation is complex to say the least. We’re here to make it easier. Over the coming months we will release mini videos covering specific areas of the Holidays Act in bite sized chunks, to help you better understand how it works.

Here is the first edition, covering the calculation of the Average Weekly Earnings (AWE) rate

Calculating Average Weekly Earnings on Biteable.

 

 

 

 

 

 

 

 

RDP or ADP, that is the Question

RDP or ADP, that is the Question

by | Oct 12, 2021 | Article

RDP or ADP

In this post I will analyse some of the findings of the case GD (Tauranga) Ltd (Plaintiff) vs Clayton Price, Paul Keown and Stephen Lim-Yock (Defendants), heard by the Employment Court on 13th March 2019.

Please note, this is an opinion piece, providing a logical assessment, based on practical experience in dealing with these matters on a daily basis. We are not lawyers and this post should not be seen as legal advice. Please refer to The Case for details and context

Overview

To provide some perspective and background, GD Tauranga is a building company that sells house and land packages. The three defendants are (at the time of this case) employed as sales consultants. Their remuneration is made up of a base salary equivalent to minimum wage x 40 x 52 and in addition to this they receive commissions for selling house and land packages. The commissions are deemed to have accrued on the day when the deal goes unconditional.

Since 2013, as advised by their external accountants who ran the payroll, GD Tauranga have been paying sales consultants using Average Daily Pay for their FBAPS (other) leave. When they hired an internal accountant, this was questioned and subsequently changed to Relevant Daily Pay.

It should further be noted that employment contracts stated that for Public Holidays and Bereavement Leave they will be paid Relevant Daily Pay but for sick leave states they are “entitled to sick leave in accordance with the Holidays Act 2003”. It does not specifically appear to mention Alternative Holidays.

In a nutshell

This case was initially raised with the ERA but then referred to the Employment Court, because it’s ruling would have ramifications for the wider industry and similar roles in other industries.

The plaintiff:

  • Seeks determinations that for the purposes of calculating payments to each of the defendants pursuant to sections 49, 50, 60 and 71 of the Act for each day of Other Leave that is taken by them under the Act
    • The plaintiff is permitted to pay the defendants their RDP as calculated under section 9 of the Act; and
    • That each defendant’s RDP is correctly calculated under s9 of the Act

GD Tauranga are calculating the Relevant Daily Pay for the defendants as their daily base rate and, if a commission payment falls due on that day, pays them the full commission payment.

The Defendants:

  • Have pleaded as affirmative defences that, through usage, leave taken was calculated according to ADP as against RDP and accordingly, has become incorporated into the contractual terms
  • Alternatively, the defendants raise affirmative defences that the facts as pleaded constitute a waiver or give rise to an equitable estoppel and/or estoppel by convention, given mutual assent to a common assumption as to the relevant facts such that it would be unjust to allow GD Tauranga to unilaterally go back on a mutual assumption.
  • In addition to their affirmative defences, the defendants have included a counter-claim requiring payment of losses suffered by way of wage arrears during the period when the plaintiff has made payment for the leave based on RDP rather than ADP

Context of The Act

Now that we have a very high level view of the background and arguments, lets put some context to the Sections of the act that are referred to in the case

9 Meaning of relevant daily pay
(1) In this Act, unless the context otherwise requires, relevant daily pay, for the purposes of calculating payment for a public holiday, an alternative holiday,
sick leave, bereavement leave, or family violence leave,—
(a) means the amount of pay that the employee would have received had the employee worked on the day concerned; and
(b) includes—
(i) productivity or incentive-based payments (including commission) if those payments would have otherwise been received had the employee worked on the day concerned:
(ii) payments for overtime if those payments would have otherwise been received had the employee worked on the day concerned:
(iii) the cash value of any board or lodgings provided by the employer to the employee; but
(c) excludes any payment of any employer contribution to a superannuation scheme for the benefit of the employee.
(2) However, an employment agreement may specify a special rate of relevant daily pay for the purpose of calculating payment for a public holiday, an alternative
holiday, sick leave, bereavement leave, or family violence leave if the rate is equal to, or greater than, the rate that would otherwise be calculated under subsection (1).
(3) To avoid doubt, if subsection (1)(a) is to be applied in the case of a public holiday, the amount of pay does not include any amount that would be added by virtue of section 50(1)(a) (which relates to the requirement to pay time and a half).

9A Average daily pay
(1) An employer may use an employee’s average daily pay for the purposes of calculating payment for a public holiday, an alternative holiday, sick leave, bereavement leave, or family violence leave if—
(a) it is not possible or practicable to determine an employee’s relevant daily pay under section 9(1); or
(b) the employee’s daily pay varies within the pay period when the holiday or leave falls.
(2) The employee’s average daily pay must be calculated in accordance with the following formula:
a / b
where—
a is the employee’s gross earnings for the 52 calendar weeks before the end of the pay period immediately before the calculation is made
b is the number of whole or part days during which the employee earned those gross earnings, including any day on which the employee was on a paid holiday or paid leave; but excluding any other day on which the
employee did not actually work.
(3) To avoid doubt, if subsection (2) is to be applied in the case of a public holiday, the amount of pay does not include any amount that would be added by virtue
of section 50(1)(a) (which relates to the requirement to pay time and a half).

Discussions

This case centres on the meaning of the word “may” as it appears in s 9A(1), and whether GD Tauranga retains a discretion to pay RDP when it is still possible to calculate RDP, but the pay varies within the pay period when the other leave falls. In other words, whether use of the word “may” in the section requires payment of ADP when either one of the circumstances in s 9A(1) exist. Is the use of the word “may” in this context permissive or empowering or does use of the word “may” mean “must”?

GD Tauranga’s position is that in this case it is possible and practicable to calculate RDP. This is so even though the employees’ daily pay varies within the pay period when the other leave falls. In such circumstances GD Tauranga submits that it is entitled to elect whether to pay RDP or ADP. This discretion, it submits, arises under s 9A by use of the word “may”. That discretion is then incorporated into the employment agreements, which provide that other leave is to be “in accordance with the Holidays Act”.

The defence, however, argues that their position on this point is that even if it is possible and practicable to calculate RDP, if the pay varies then s 9A requires ADP to be paid. In other words, use of the word “may” in s 9A(1) does not vest a discretion in GD Tauranga but is used in a mandatory sense. If one of the circumstances specified in s9A(1) exists, then ADP is to be paid.

The court then goes on to analyse Parliamentary materials, including explanatory notes for the Holidays Act Amendment Bill 2010 which introduced s 9A. As part of the amendment, the wording was specifically changed to “may”, indicating the intention that discretion can be used when deciding on RDP or ADP and whether either RDP cannot be determined or the pay fluctuates.

Analysis

If we look at Section 9 and 9A of the Holidays Act 2003, the intention here is that

  1. Employees are not worse off when they take any form of FBAPS leave
  2. Section 9A provides for cases where employees work variable hours or earn variable income, making it impossible or impracticable to determine RDP

Relevant Daily Pay means the amount an employee would have received, had they been at work on the day in question. Average Daily Pay constitutes 52 weeks’ Gross earnings as defined in Section 14, divided by the whole number of actual or part days worked over the same period, giving an average daily rate that may be used as an alternative.

The intention of these sections is not to pay someone substantially more on an FBAPS leave day than what they would otherwise have earned, which would be the case for these Sales positions.

Application

In the case of the sales consultants working for GD Tauranga, it is possible to determine RDP. We know they work 8 hours a day and we know what rate they are paid at. Further, we know what commission amounts they are due. Therefore, if GD pay them both of these amounts as they are due, then they will comply with S9.

One very important factor in these or similar situations is whether the taking of any form of FBAPS leave would have a negative impact on the commission that is earned. In the case of selling house and land packages, these are usually longer term deals and taking a day of sick leave will not impact the amount able to be earned.

On the other hand, however, is an employee is a shop assistant and earns commissions on everything they sell at the till, if they are not at work for a day, they will not be able to earn any commissions. It would also be impossible to know what commissions they would have earned on the specific day in question. In these cases it is therefore possible to use Average Daily Pay instead, to ensure the employee is not worse off.

We have also seen companies still paying relevant daily pay in situations where sales depend on their presence at work, however where they have calculated a nominal amount of commissions earned on other days and added this to their Relevant Daily Pay calculation. As long as it can be evidenced that the employee is not any worse off, this would still be an acceptable calculation.

Important Notes

  • As a company, you are responsible for ensuring compliance (whether that be over or under compliance). Make sure you understand what is required and apply this correctly.
  • If you do not have the internal capacity to do so, make sure you choose a vetted and proven partner with sound knowledge and/or get independent legal advice
  • Always try first to determine Relevant Daily Pay. Even if someone is waged or their pay fluctuates within a period, if you have a solid rostering / scheduling system working with an award interpretation engine, then chances are you will know what they would have earned that day and be able to calculate it (automatically even)
  • If you do have to use ADP, beware of situations where employees work hugely varying hours on different days. E.g., if an employee works 2 hours on a Monday and 10 hours on a Tuesday, chances are their ADP rate will be vastly higher than a normal 2-hour day and vastly lower than a 10-hour day. Consider whether it may be possible to determine RDP, or as a fallback (although not legislated), you could compare their ADP rate to their roster x base rate and pay the higher
  • If you are paying ADP, you only have to pay ADP! That means, any earnings that are already included in the ADP rate calculation do not need to be paid in addition to this. An example might be higher duties. If included in gross earnings (which it should be), there is no need to pay higher duties on top of ADP on a sick day. Beware however, if you decide to pro-rata permanent allowances when someone takes FBAPS leave to avoid double dipping, make sure you are not in breach of contract in regards to how it states that the allowance is to be paid. E.g., if the contract says you will be paid $500.00 per month and does not have a clause regarding the impact of leave on this allowance, then you cannot simply start to pro-rata the allowance. Such change will require consultation, amendments to contracts and unions if such are involved.
  • Do not hard code into your employment agreements at what rate employees will be paid for FBAPS leave unless this is to be an agreed rate which complies with section 9(2). Notably, we have never seen this in use. The main reason for that is, in order to be able to determine whether the agreed rate is higher, we still have to be able to determine RDP, which defeats the purpose.
  • You cannot contract out of law, meaning regardless of what you write into your contracts, the minimum you are required to comply with is the Holidays Act. Therefore, if you said in your agreements that employees will be paid base rate for all leave and employees sign this, that will nullify that specific clause, which will be superseded by the Holidays Act. It will not, however, render the contract as a whole invalid.

Conclusion

In this case, the court ruled that GD Tauranga do in-fact have the discretion to pay either RDP or ADP:

In the present case it is possible for GD Tauranga to calculate RDP even though the employees’ daily pay varies within the pay period when the other leave falls, but as indicated from the authorities and materials relied upon, in that situation the employer has a discretion as to whether it applies RDP or ADP. We can see no impediment to GD Tauranga altering the previous method of payment from ADP back to RDP. That discretion vests in the employer in this case. Indeed, it is conceivable that a need arises for an employer to change between RDP and ADP for other leave on a reasonably regular basis if the employment circumstances periodically change such that calculation of RDP becomes neither possible nor practical and s 9A comes into effect. That has not occurred in the present case, but as Minister Wilkinson stated in the parliamentary debates, the ability is there as a means of reducing compliance costs if an employer finds difficulty in calculating RDP or the daily pay varies to such an extent that calculation of RDP for the other leave is too complex to be cost efficient.

We agree with this ruling and find that logic has prevailed.

Be practical, be pragmatic, simplify, automate, all while acting in good faith.