Payroll Bulletin 1

WHEN AN EMPLOYEE MOVES

Information provided by NZPPA

Within the business

Moving within a business still means you are working for the same employer, but it may mean a variation of the employee’s employment agreement on the changes.

It is essential to find out if the change has impacted the employee’s terms and conditions, such as:

• Changes in agreed payments.

• Changes to the employee’s week, work pattern, shifts, etc.

• Converting leave entitlement earned before the new agreed week if the week has changed.

From one business to another when the business has been sold

If an employee moves from one business entity to another, they become an employee of the new entity (their new employer). This means they get a new employment agreement as it is a new employment relationship. For payroll, that means a Termination pay with their existing employer (to ensure minimum entitlements have been paid).

Presently, nothing in the legislation allows the movement of entitlement, such as leave, to be transferred from one employer to another (separate entities) when a business has been sold.

From country to country

Any minimum entitlement leave, such as annual holiday entitlement and accrual (8%), must be paid out in a termination pay when the employee finishes their employment with the New Zealand company. If the employee was provided with additional leave on top of a minimum entitlement, the employee could have this transferred to the Australian company they are moving to because it is outside the scope of the Holidays Act. 

Relocation (within the business but in a different location)

This is where the employee stays in the business but moves to another location. What can happen is that in the agreement to move, the employer offers to cover part or all the moving costs (because they want the employee in the new location). This is an agreed term, not a legislative requirement. If the employer has agreed to pay, then this would not be a taxable payment subject to PAYE for the employee, but if not treated correctly, the payment could be taxable for PAYE. 

Employee leaves (resigns) and then comes back

This is another type of movement when an employee decides to resign, leaves (payroll processes their termination pay), and then asks to come back a short time later.

Just because the employee comes back after resigning, there is no link between their past and the new employment that has now started. Payroll does not need to reset leave as continuous employment from the termination date to their return.

 There is only one option based on a termination where leave is treated as continuous employment under the Holidays Act, and that is when the employer dismisses and rehires an employee within a month (section 85). This is not about the employee choosing to resign.

Travel allowances (taxable and reimbursement)

All travel allowances are by agreement. There is no legislative requirement that states an employee must be paid some form of travel allowance.

So, for payroll, if the transport allowance reimburses the employee for travel-related expenses, as long as it was for an expense the employee incurred while working for their employer, then it won’t need to go through payroll. There is no taxable PAYE component involved. The most common is the reimbursement for using the employee’s car that IRD publishes. But the rates published by IRD should be seen as a threshold, and the rate does not need to be used as what the employee is paid for using 
their car per km is an agreed term. Note: if you agree to pay over the published IRD rate, anything above the rate becomes taxable for PAYE. 

For a clearly defined taxable motor vehicle allowance, this would be processed in payroll as it is part of the taxable gross for the employee. What is paid is a matter of agreement and usually is a flat rate.

For further information and examples, contact Olga at olga@topflight.co.nz