Mondayisation: Is your business overpaying staff?

The chances of staff getting overpaid or underpaid is at an all-time high as a growing number of Kiwi SMEs are confused and overwhelmed by new payroll regulations, including Mondayisation.

Valerie Broomfield, CEO of payroll consultancy and outsourcing company Payroll Matters, says Kiwi SMEs are struggling to make sense of what is now a legal and workplace relations minefield.

“Even more worrying for Kiwi businesses than lost productivity and wage costs arising from new public holidays, like Matariki coming up in June, is the level of confusion and payroll errors caused by Mondayisation, which is costing both employers and employees.

“In my work with a wide variety of businesses, it is not unusual to find that staff have either been overpaid or underpaid. It is expensive enough when a company finds they have overpaid a staff member, but the discovery that somebody has been underpaid leads to resentment and can damage morale.”

Broomfield (pictured) says that where a public holiday falls on a Saturday or Sunday, some employers are paying time and a half on both the statutory day and the Monday (if the employee worked both days). In reality, they should be paid only time and a half for the statutory day they worked. Employees who work public holidays are also entitled to a day in lieu if it is an ordinary working day for them.

Another common issue is that legislation now requires holiday pay to be paid at the higher of their average rate or contracted rate. The average rate is the average of all their earnings – including bonuses, overtime, time–and–a–half, etc. The contracted rate is the one agreed to in their employment contract.

“If the contracted rate is $25 an hour, but their average rate is $30 an hour (due to something like overtime), then their annual leave should be calculated and paid on $30 an hour.

“Payroll is one of the things you can least afford to get wrong. It can result in employee grievances, reputational damage, low morale and a decline in productivity, as well as an unexpected and onerous pay-out to affected parties.”

Broomfield offers the following advice to employers.

1. Avoid one rule for all

“The most common problem I find is that employers try to apply a blanket payroll policy to all staff members, whereas in reality each case must be evaluated independently – there is no cookie-cutter solution.”

2. Understand working patterns

“Working patterns relate to an employee’s particular shifts, time off, wages, overtime, sick leave and other factors that affect their day-to-day working life. Once you understand their work patterns, you can update your employment contracts, payroll, and entitlements.”

3. Stay up to date with legislation

The minimum wage has increased, and Matariki is a new public holiday this year. There are also muted changes to KiwiSaver and variables like The Equal Pay Act, to name just a few legislative changes that could impact payroll.

“My advice is to get an independent review of your payroll to make sure you aren’t at risk from legal or financial consequences. Keep up with law changes and make sure your payroll team or provider is across the rule changes as well.”

For more information: www.payrollmatters.co.nz