KEY POINTS:
When the law changed to allow employees 20 working days of annual holiday leave in addition to statutory days and sick leave, large employers left it to their finance and HR people to get on with reorganising payroll and HR systems while small employers panicked.
Now, all employers must come to terms with administering the new Holidays Act as well as making compulsory employer contributions to the KiwiSaver scheme.
It's a lot all at once and, with many employers struggling to understand the nuances of the new legislation, recalculating payroll and leave allowance is a further headache. So how can IT systems help?
The most important step is probably deciding to use an IT system or upgrade an existing one - the current "environment of compliance" not being conducive to manual bookkeeping or payroll administration.
One South Auckland small business manager with 12 staff says using a computerised payroll system for the first time turned out to be a "sanity saver" after years of manual payroll processing.
The decision to move to an automated system was made when the IRD informed the business it needed to begin paying PAYE fortnightly.
"At that point, and with the new Holidays Act and KiwiSaver and everything else, I thought 'I just can't do this anymore.' It was just taking hours and hours of time out of every month to figure out PAYE and things like pay-as-you-go holiday leave and overtime," says the manager.
Traditionally, a move to an automated payroll system means a software program installed on the internal network of the business. The business may or may not then choose to make individual payroll details available to staff over the internal network via a password.
When payroll software is purchased and installed, the business pays an annual licence and support fee and receives ongoing training and support as part of the overall package.
The payroll system developer also commonly commits to making updates available at no extra charge should new law changes occur.
There are valid reasons for deciding to buy an internally installed payroll software system.
One of the most common reasons is the desire to keep payroll information internal to the company for confidentiality reasons. Another is existing internal payroll staff who would like to keep their job and a third is the possible cost advantages.
More recently though, there has been a rise in the number of online payroll systems available; developed and hosted online and accessed over the internet by individual businesses. The business pays a monthly subscription according to the number of people being paid and the depth of additional services provided by the online host.
The host then automatically completes all pay, holiday leave and KiwiSaver calculations and advises the business of the amount required to be deposited to the payroll account. Once this happens, the host automatically pays employees and possibly the IRD.
The upsides of using an online payroll system are that all payroll information is backed up and stored electronically by the host and all payroll processes are automated.
As long as the business provides the host with the correct information on staff remuneration and hours and days worked, the host will carry out all the relevant calculations.
A further advantage is that with a small amount of training, staff can log into the online system themselves and view their specific payroll or leave information without the employer having to allocate time and resources to find it.
The downside is that using an online payroll system requires a reliable internet connection. Some online payroll services may also work out to be more expensive on a per employee basis than the one-off annual cost of installed payroll software.
Whichever payroll system a business chooses, payroll system providers universally agree it's the level of customer service and training that will determine the success of a particular system.
"People don't want to call three different companies to learn about the computer side, the payroll side and the legal side of payroll and compliance - they want to deal with [a provider] who knows about all three sides and can quickly get their payroll back on track, right then," says Phil Erikson of Ace Payroll.
