Why getting payroll right is so important for employees

Paying employees correctly and on time, and ensuring they get their entitled leave and holidays, plays a huge part in keeping them happy and motivated.​

For most people, earning money is a principal reason to go to work each day. It’s also one of the easiest ways for them to measure themselves and their achievements.​

While this can all sound obvious, there are many Kiwi businesses that don't get this right. Back in 2016, the Ministry of Business, Innovation, and Employment (MBIE) estimated that payroll underpayments could affect more than 700,000 New Zealand employees and add up to more than $2 billion. In the years since, there have been a slew of high-profile cases of large organisations getting employee pay wrong, including Woolworths, McDonalds, the Ministry of Education, Te Whatu Ora Health NZ, and MBIE itself. ​

Business owners and management are ultimately responsible for any pay mistakes and their consequences. At best, you may have to repay your employees. At worst, you could face prosecution and fines by MBIE or the Inland Revenue Department (IRD), as well as any interest and potentially expensive legal fees.​

Having integrated payroll and HR systems that pull directly from the same data will go a long way towards making sure your people's leave, pay, and tax calculations are accurate, timely, and compliant with the law. It will also make it quicker to identify and resolve any issues.​

Let's look at the top reasons why it’s so important to get payroll right for your employees.​

Every employee must be paid at least the minimum wage for every hour they work.​

It doesn't matter if the person is full-time, part-time, fixed-term, or works casually, or whether they are paid by wages, salary, or commission. The minimum wage is the lowest that a worker can be paid (you and your employees can agree to any wage rate higher than the minimum).​

You also need to adhere to the provisions agreed to in the employment agreement around how much someone is paid, how their pay is calculated, and how often they are paid.​

Then there are other legal requirements around tax and other deductions (e.g. KiwiSaver),
annual leave entitlements, and correctly calculating and paying public holidays.​

By coupling your payroll processes with the oversight of a good HR team, you’ll ensure you're always meeting all your legal requirements and obligations to your employees.​

If you value your company as a place where people really want to come to work and to stick
around, you need to ensure they get the right pay when they expect it.​

US research by the UKG Workforce Institute found that 49% of employees would start looking
for a new job after experiencing just two problems with their pay. 24% would for a new job after
the first payroll mistake.​

Remember too, that an organisation's reputation and attractiveness as a workplace are very
much in the public eye, and no organisation wants to be one of those that makes the headlines
because it miscalculated pay or entitlements. You may struggle to hire top talent when you need
it.​

If your team members know they are getting their proper pay, benefits, and leave entitlements,
they will have more confidence in the business. This means happier, more engaged people who
are motivated to be productive and help the business succeed.​

Your employees also want to know that the business is organised. People rely on being paid, so
they can make payments and meet their obligations. If payroll is poorly managed, it can lead to
resentment and an erosion of trust in the business.​

Most good payroll and HR management systems allow employees to access their own
information, so they, too, are better informed about their pay, benefits, and leave entitlements.
This provides transparency and saves management and HR staff valuable time they would
otherwise spend resolving simple queries.​

Synched HR and payroll systems provide a consistent, real-time view of employee data, which
enables better analysis and reporting.​

Management will have a much more accurate oversight of labour budgeting, as well as
employee turnover, absences, and leave use.​

Digital information and reports are also more easily imported, exported or shared, whether it is
with other systems, accountants, or the IRD.​

It also helps you meet your legal record-keeping requirements - you need to keep accurate records of wages and time, and holiday and leave records for 7 years.​

Once you're sure your employees’ data is safely under control and the processing of payroll,
attendance, and leave has been streamlined through automation, data-sharing, and self-service,
you and your team will be able to better focus on building the business.​

Focusing on new projects and exploring ways to add value to the company is far more
rewarding for everyone than checking and processing timesheets, payments, and leave
requests.​

The process of calculating pay and paying people can be complicated and extensive, but having
sub-par payroll practices can be costly, ineffective, and a major risk for your business.
Whoever is in charge of payroll is critical to your company; they are performing more than
simple data entry, and should be treated and paid accordingly.​