Payroll & Finance
2023 End of Financial Year Payroll - A Checklist
February 9, 2023
When it comes to payroll, despite what many people think, the end of the financial year isn’t a big deal.
Payroll just rolls over month to month, but every year there are a few legislative changes that kick in from 1 April. Most updates should be taken care of by your payroll software, but in some cases you may also need to make a few changes in your account.
The start of a new financial year is, however, a great opportunity to review the settings in your payroll system to ensure everything is up-to-date.
This End of Financial Year Payroll Checklist should help you identify any actions you may need to take to ensure you continue to get your payroll right.
Make sure you know what’s changing – It’s important to be aware of all legislative changes that take effect from 1 April. You also need to know which changes will be applied automatically in your payroll software (if you’re using a cloud-based system) and which changes you need to apply yourself. This helpful MBIE page provides an updated list of current and past changes.
Review salary and wage info – Before your first pay of the new financial year, review and make any necessary updates to pay rates for your employees (such as an increase in the minimum wage). If 1 April falls in the middle of a pay period you’ll need to pay some of the employee’s time for the period at the old rate, and the rest of their time at the new rate. Alternatively, applying the increase from the start of the pay period containing 1 April will be beneficial for your staff and may be administratively easier.
Update any automatic payments – If you’ve got automatic payments set up to pay your staff make sure you update these, as there are often tweaks to ACC and Student Loan thresholds that can result in small changes to an employee’s take home pay.
Check employee contracts – Occasionally there may be legislative changes that require amendments to existing employment agreements or the template you use for future employment agreements. For example changes to rest and meal breaks or trial periods. Also consider if you have enough detail in your employment agreements about how leave entitlements will be calculated for employees with no set work pattern - we advise including a clause describing how the portion of leave entitlement taken will be determined, for the avoidance of doubt.
Review changes to employee work patterns – The start of a new financial year is a great time to review any recent changes to employees’ work days or hours. Ensure your payroll system is up to date with the correct employee settings so it can calculate the right entitlements for leave and public holidays.
Claim annual leave paid out – New Zealand tax legislation allows employers to claim any Annual Leave paid out within 63 days of the end of the financial year as a deduction in that year. Have a chat with your accountant or bookkeeper about this. Total Holiday Pay Due plus Total Annual Leave Due equals the balance of outstanding leave due, as at the end of the financial year. You should be able to access this info via the reporting provided by your payroll system.
Check the ESCT rate for each employee - To prepare for the incoming tax year, employers need to work out the ESCT (Employer Superannuation Contribution Tax) rate for each employee. ESCT rates greatly depend on the employee’s income. If an employee’s salary or wage changes throughout the year, wait until the end of the tax year to review their ESCT rate. Ask PayHero - What is ESCT?
Review your IRD account - If you use a payroll system that has payday filing, it’s worth checking your company IRD to ensure all the amounts are reconciled in comparison with your payroll records.
Generate any helpful reports - Downloading reports from the past financial year is good practice for record-keeping purposes. Some of the most useful reports to download from your payroll software include time summaries, pay summaries, employee pay details and holiday leave history.
Review casual employees - While reviewing your casual employees’ status is something you should do throughout the year, the end of the year can be a good reminder to check in on your casual contracts. It’s recommended practice to review the casual employees in your payroll system to see if they are still working for you. If they are not, remove them so you don’t accidentally pay them in future. If they are still working for you, this is also a good time to ensure their casual contract is still valid, or consider if it's time to start thinking about moving them to a permanent contract.
What you WON'T need to do as a PayHero customer:
Download or update your software to account for the tax changes – Updates are applied automatically behind the scenes.
Set up new pay calendars/pay frequencies – everything will roll over from the previous year!
File anything with IRD – This is all taken care of via our automated payday filing.
Print payroll reports – Save the trees! With our cloud based payroll, all your data is always available online.
Provide Certificates of Earnings – It’s useful for employees to have a record of their earnings, tax payments and deductions for the past financial year, but the old Certificate of Earnings is no longer required. Just invite your employees to use the employee portal for ongoing access to that information, or direct them to myIR.
Figure out ESCT rates yourself - At the beginning of each new tax year PayHero will automatically update each employee’s ESCT rate based on their earnings in the previous year or their salary.
Update automatic payments - If you’re using one of PayHero’s employee payment methods, your employee payments will be automatically adjusted to match any changes in deductions, or variations in leave rates.
The end of the financial year can be a stressful time, but by following these steps you’ll be able to ensure that your payroll responsibilities are under control. If you ever need further explanation or clarification, feel free to contact our support team here at FlexiTime. We’re always happy to help!
Download this checklist as a PDF and get sorted for the EOFY today.