Christmas Holiday Payroll 2023: Your FAQs Answered
November 24, 2023
The silly season is upon us once again! To keep your payroll running smoothly these holidays, we’ve pulled together some answers to the most common questions we get at this time of year.
Where do I begin?
We would suggest taking some time to review your situation, so you know exactly what to prepare for. Do you have any new employees? Will you have a close down period? When will pay days be processed?
This background information will help you understand what elements to consider when running your Christmas holiday payroll.
Our employees are taking time off. Do we pay them like normal?
Technically the law says that holidays should be paid in full before they are taken, but with the agreement of employees, they can be paid out in the regular pay cycle. In practice, most companies and employees prefer to keep to their regular pay cycle, as it's much easier to manage, particularly as many payroll systems have pre-configured pay cycles.
Whatever your approach, ensure that the pay period matches the period the employee is being paid for. Don’t manually add four weeks of leave to a single weekly pay period or it will get taxed incorrectly.
In PayHero, the best approach for managing employee time off is to use our Leave Requests feature.
We are closing the company down for some of the holiday period. What do we do?
Employees who have leave due can have their time off processed with leave requests as normal.
When an employee has been employed by a company for less than 12 months, they won’t yet have any Current Leave Due. For the close down period, the employee should be paid out their Holiday Pay Due balance and their leave anniversary changed to the date the close down began (or just before if this would avoid having a different date for annual leave entitlements each year).
While this special processing seems unnecessary, and the Holidays Act Review has recommended it be removed, the recent Metropolitan Glass case has confirmed it is still required.
PayHero has a built-in setting to easily handle this for you. Simply use the Close Down setting in the Draft Pay to pay out their Holiday Pay and move their next leave anniversary.
Take note that you have to give employees 14 days' notice of a closedown period, so don’t wait until the last minute to tell your staff.
Can I run multiple pays in advance?
In PayHero, employees can only be in a single Draft Pay at a time, so you can’t have three separate draft pays lined up in advance. However, there are still other options if you want to get ahead of the game.
Firstly, you can pay the employees early (i.e. you’re paying for the next three pay periods now, rather than sticking to your usual pay dates). Simply send and finalise the three pays now, all with the same pay date.
As an alternative, if you want to generate the pays now but pay them in the future, you can run and send the three pays in advance using the actual future pay dates, then upload the bank file for each pay on the pay date (some banks also accept future dated bank files, allowing you to upload those now). Instead of using bank batch files, you can also take advantage of PayHero’s Pay Now options to quickly make your payments once the pay date rolls around. Take note that if you send pays in advance the payslips will be emailed to the employees as you finalise the pays, so they will receive their payslips in advance.
The options above work well if your employees are paid the same amount from week to week. However, if you have waged employees and don’t know what their future pays will be, it's better to run each pay normally.
Better yet, turn on Payroll AutoPilot® and let PayHero do the work for you. Payroll AutoPilot® will automatically email you when it's time to pay your team. All you need to do is review the details and send the pay, which you can do from any device without logging in.
If you really want to pay employees estimated amounts in advance and adjust their pays later, then that is possible. When you come to do the catch-up, you’ll need to run a One Off Pay for each pay period you need to make adjustments for. One off pays will automatically pick up any extra hours or leave entered since you ran the original pay, and if any employees were overpaid you can use Time Credits to arrange automatic repayments from their upcoming pays.
And what about the public holidays?
Processing public holidays in PayHero is a breeze – if Automated Public Holidays is enabled in your account, PayHero will handle it for you.
Once you’ve created the pay, you should download the Public Holiday Audit Report, which will show you how PayHero has worked out the public holiday for each employee.
For an overview of the different public holiday entitlements, it’s worth checking out our Guide to Public Holiday Payroll.
My employee wants to cash up some of their holiday entitlement. How does this work?
Employees can ask to cash-up up to one week of their four weeks’ minimum entitlement to annual holidays each year.
It’s important that employees have time off from work each year to recharge. After all, the purpose of annual leave is to provide employees with the opportunity for paid time off work for rest and recreation.
However, at this time of year, some employees may prefer to “buy” some annual leave to get some extra cash in hand. Requests must be submitted in writing and employers must respond within a reasonable amount of time. It’s totally up to you whether you do this - employers can say no and don’t have to give a reason for the decision.
See our guide to Cashing up Annual Leave for more info and FAQs.
If you do agree to cash up annual holidays, you’ll need to pay it as soon as you can (normally the next pay day), and keep a record of the date and amount paid. The payment must be for at least the same amount as if the employee had taken the holidays. Here’s how you do this in PayHero.
How do we pay out Christmas bonuses?
If you’re lucky enough to be in a position to pay out a Christmas bonus this year, it’s important to be aware of how this should be processed. Christmas bonuses are generally treated as a discretionary payment, not a gross earning, which means the employee does not accrue holiday pay on the payment and their leave rates remain unaffected. Our helpful Employer's Guide to Bonuses provides more details about these payments and how to do this in PayHero. Note that it is much easier to enter a gross amount and have the tax calculated on that than it is to start with a net amount (for example, if you hand an employee a cash bonus) and work backwards.
Help! How can I contact PayHero Support over Christmas?
Over the Christmas period, we won’t be offering scheduled calls, but we will be providing email support within business hours (9 am - 5 pm Monday-Friday, excluding public holidays). Our response time will be slightly slower than normal as we will be operating with limited numbers, so please plan ahead. We appreciate your patience while we too enjoy some time with our friends and whānau.
The PayHero team wishes you all a Merry Christmas and a very Happy New Year!