Start using Xero for free Sign up now

You're on our website.

Get your NZ payroll fit for the festive season

Author Profile Picture

Anthony Jones

Dec 7, 2022

As we near the end of the year and begin to wind down for the summer break, it’s a good time to make sure you’ve got your payroll sorted. We get asked lots of payroll questions around this time of year so here are the answers to the most common ones.

How do I pay my employees all their holiday pay?

It’s not possible to pay out holiday pay as such. The holiday pay figure in Xero shows 8% of an employee’s total gross earnings for their current anniversary year. It doesn’t reduce as they take annual leave. See how holiday pay and annual leave works.

Your permanent employees are paid annual leave via an annual leave request for the number of hours they’ll be on leave. Leave requests can be submitted on behalf of an employee from the employee’s Leave tab. Once approved, the amount of annual leave is shown in the next pay run. See how to submit and approve a leave request.

If your permanent employee works irregular hours, then you may need to review their earnings to ensure that their leave is calculated correctly. 

My employee wants to cash in their annual leave. How do I process this?

After an employee has completed 12 months of employment, the employee can ask, in writing, for their employer to pay out in cash, up to one week of their four weeks’ minimum entitlement to annual holidays per year for each entitlement year.

If the request is approved you transfer the approved hours from Annual Leave to Annual Leave – Cash Up before submitting and approving an Annual Leave – Cash Up request. See more details on how to cash up an employee’s annual leave.

How do I know how many hours of annual leave my employee can take in advance of their next anniversary?

You can find out how much leave your employee can take in advance of their next anniversary by making sure the checkbox for the option Include leave available to take in advance in the balance is ticked – it’s ticked by default for all new employees. The annual leave balance will then display with an amount that includes annual leave available to take in advance, up until the end of the next pay period. 

See more details on annual leave in advance and how it’s calculated in Xero.

My employee has changed standard working days and hours this year, how do I update the leave balances?

Once the new days and hours have been updated in the employee’s Employment tab, the leave in advance balance for the current year will be updated. However, you will need to manually update any annual leave balance entitlement from previous year(s). 

Why isn’t the public holiday line showing in some of my employees’ pay runs or payslips?

The public holiday line may not be showing because either the holiday group is not set, or it was set after the draft pay run was created. 

You can set a holiday group in the employee’s Employment tab. If the group was set after the draft pay run was created, you need to select Reset Payslip in the employee’s draft pay run. 

See how to manage holiday groups.

How do I pay an employee for working a public holiday?

To pay an employee for working a public holiday, you can add a new earnings pay item (for example, public holiday worked, with a multiple of 1.5 times the employee’s normal pay rate). Add it to the employee’s draft payslip and enter the hours worked. To update the alternative holidays balance, go to the employee’s payslip within the draft pay run and manually add the hours to accrue in the Leave Accruals section.

See detailed instructions for paying an employee for working a public holiday.

My company has an annual closedown. How do I pay the employees all their leave and holiday pay?

If your company has an annual closedown over the holidays, for any employees who have been employed for more than 12 months, or for whom the Holidays Act Closedown rules do not apply, you’ll need to process annual leave for your employees for that period. Here’s how to process leave for annual closedown in New Zealand.

For any employees who’ve been employed for less than 12 months who need their Holiday Pay paid out, please contact our support team for further guidance on this.

Why is my employee’s annual leave pay rate higher than usual?

The employee’s annual leave rate can sometimes be higher than their hourly rate. This is because annual leave is paid at the higher of ordinary weekly pay or average weekly earnings. See the official guidance on calculating payments for holidays and leave.

The ordinary weekly pay calculation uses the information from the Employment and Pay Template pages. The average weekly earnings calculation uses information from the Past earnings tab plus the pay runs that have been processed in Xero.

Can I process payroll in advance, and how will this work with payday filing?

Certainly! As long as it is a normal, scheduled pay run, the pay calendar will automatically roll forward. How far in advance you can file a pay run with the Inland Revenue (IR) depends on the date the pay run is posted.

For pay runs posted before the 19th of a month, the payroll admin can set a payment date up to the end of the current month. For pay runs posted on the 20th of a month onwards, the payroll admin can set a payment date in advance up to the end of the next month.

If you need to post pay runs for dates in advance of the dates available, you may get an error message that reads “Filing period does not yet exist / has not yet been generated”. In this case, you can contact IR who may be able to open up the next month for you.

You can still post the pay run in advance in Xero even if the filing period does not yet exist/has not been generated. However, the payday files for that period will not be filed automatically even if the payroll admin is connected. Once the filing period eventually opens, any connected user will need to go into the posted pay run and manually file it with IR.

Does IR have a closedown period for payday filing over the holidays?

Yes, IR will have a grace period closedown from 25 December to 15 January. Any paydays within this timeframe are due from employers on or before 18 January. Visit the IR website for more details on filing employment information with payday filing.

If you have any other questions, check Xero Central for more content about payroll. You can also take a look at the Employment NZ website for details on annual closedown periods. 

Have a good break, stay safe and be kind. Hararei koa!

Share this article


Start using Xero for free

Find out why 4.2 million subscribers locally and across the world trust Xero with their numbers.

Try Xero for free

Related articles: