If you asked people what things are fundamentally important in their working lives, getting paid and taking leave are bound to be at the top of the list.
Earning money is the basic premise for going to work and, by law, all employees must be paid at least the minimum wage for their labour. If a person isn't paid the right amount or doesn't get it when they should, then they are going to get disgruntled with their employer pretty fast.
The same goes for taking time off. The ability to take leave is enshrined in employment law because it helps give employees a balance between work and other aspects of their lives. Time away from work – whether it is for a holiday, family reasons, or just to recuperate – is vital to everyone's health. It keeps people fresh and focused, reduces stress, and improves morale and productivity.
Most businesses understand how important these things are and they invest a lot of time and resources in managing leave and payroll. But despite the attention, it's not always easy to get them right. Payroll involves a lot of data: keeping record of the hours each employee works, calculating how much they should be paid, what deductions to make for tax or other payments, and ensuring they get the money they've earned when they should.
Leave similarly takes a lot of processing, marrying up leave requests with leave balances and legal entitlements, handling requests, then making the right calculations for payments (over to payroll again).
At every step, there's the potential for errors – especially if any parts of the process are handled manually – and mistakes can cost a lot more than getting offside with your workforce. No company wants the Inland Revenue Department (IRD) or the Ministry of Business, Innovation, and Employment (MBIE) breathing down its neck because it made miscalculations or paid employees incorrectly.
In this white paper, we take a good look at managing leave and payroll, why it's essential to do them correctly, and ways your business can make both processes easier and more accurate.
Why you need to effectively manage leave
For a small company with a few employees, keeping track of leave might seem fairly easy. An employee asks for time-off, the business checks this against their leave balance and entitlement, and either approves or denies the request.
But factor in that different types of leave have different rules for calculating entitlements and payments – whether it's annual leave, parental or sick leave, or public holidays – and suddenly the job of tracking and managing leave becomes a much more complicated task. Especially for a large enterprise or a company with employees that work irregular hours or schedules.
Under the Holidays Act 2003, businesses are legally bound to grant each employee their correct leave entitlements and pay them when they are entitled to it. Employers must also keep accurate records of the leave each employee accrues and takes, as well as the daily hours they work and the pay for those hours.
Having an accurate, efficient leave management system is crucial for reducing or eliminating errors and keeping your business on the right side of the law.
In recent years, there have been numerous high-profile cases of organisations coming a cropper by not managing and paying leave properly, and employers can end up owing large backdated leave payments or incur fines from the Labour Inspectorate or Employment Relations Authority (ERA) for not complying.
Aside from helping meet your legal obligations, effective leave management helps keep your company running smoothly and can lead to a reduction in costs.
Employees taking time-off has a significant financial impact on a company’s bottom line, with added expenses like finding, paying, and managing contractors or temporary workers, or having existing employees do overtime.
If you properly plan your team members' leave, you can do your utmost to ensure you have sufficient cover, rather than having to scramble and risk getting caught short. Your employees will likely forgive situations beyond management's control, such as a virulent cold, but no one wants to regularly have their workload increase because the company didn't properly plan holiday cover.
Good planning will help the business maintain productivity and the quality of its good