It’s no secret that running a business can have its challenges. Particularly in today’s turbulent economy, we’re using more resources, time and energy to stay afloat. Making payroll mistakes can have disastrous consequences.

But mistakes will happen, and when they do, businesses will have to pay the price. In fact, over a third of New Zealand businesses get fined each year for misrepresentation in their payroll.

Here are 4 payroll mistakes your business might be making

Skipping payroll

No, your employees can’t wait. Regardless of the state of your cash flow, your workers should be a top priority when it comes to payments. Missing a day or pushing payments back until that big invoice gets paid is not how it should be done.

Not paying taxes correctly

One common misconception for international business employing in New Zealand is that tax gets paid annually. This is far from the case.

There is a whole raft of taxes New Zealand must adhere to that are connected to payroll. Although there is no payroll tax, individuals must pay tax on their income. For full- and part-time workers, this process is called pay-as-you-earn (PAYE), whereby businesses are responsible for processing their employees’ income tax for every payroll period on their behalf. For example, if you pay your employees monthly, then you’ll have to process PAYE income tax for your employees monthly.

Another common mistake businesses make is not aligning personal income tax contributions with the correct pay period. For instance, you pay a portion of your staff fortnightly and the remaining portion monthly. If you choose to pay all your employees’ income tax monthly, you could be up for some severe penalties.

The taxing system in New Zealand is highly complex, and penalties are high for those businesses who don’t comply. In addition to this, law change regularly, so remaining compliant can be an added complication they just don’t need.

Contractors vs. full-time employees

When it comes to how you classify employees, many employees will try to limit their liability and obligations towards their staff by classifying them as contractors instead of full-time employees when they pay them.

If a member of your team is conducting regular work for you at a part- or full-time capacity, then legally, they’ll need to be classified as a part- or full-time worker, not a contractor.

A freelancer or contractor should really only be brought on on a project-to-project basis or when capability gaps in the businesses aren’t met.

In New Zealand, there are very different laws that apply to both contractors and permanent workers. Permanent employees, for instance, will cost a business around 30% more than contractors, so if you misclassify an employee as a contractor, your business could be absorbing this margin.

Inadequate reporting and documentation

The importance of adequate reporting should not be underestimated. Business reports provide useful insights into spending, profits and growth. Using reports correctly means you’d have a wealth of resources to develop forecasts and manage cash flow.

As a business manager, you’re legally required various payroll reports on file. If you don’t, then you could be up for penalties from the tax office come the end of financial year.

There are also a number of documents you must keep on file as an employer, including correct tax numbers and specific information regarding Inland Revenue registration.

The solution to avoiding payroll mistakes

If you’re feeling overwhelmed with the many laws, regulations and obligations you’re bound to as employers in New Zealand, you’re not alone.

By working with a Professional Employment Organisation like ANZPEO, we as your employment partner will take on all the responsibilities associated with paying your staff so you can concentrate on crucial areas of your business that require your attention.

As your partner in employment, we co-employ your staff and so share half of the risk and liabilities associated with payroll compliance, superannuation and workers compensation.

Speak to us today about how we can relieve the burden associated with your payroll.