Final Pay

A final pay will automatically include:

• The 8% Holiday Pay accrued since the employee's last anniversary date (which will also include an additional 8% of any payments or leave in the final pay).
• Any Annual Leave Due as at the employee's last anniversary date, paid at the higher of the employee's Average Pay Rate or Ordinary Rate.
• Less any Annual Leave Taken in Advance, paid back at the same rate it was originally paid at.
• Any Alternative Leave owed to the employee.

Additional information is available in our support article on Annual Leave and Holiday Pay, and in this handy flowchart from MBIE. 

Employees often take leave before it becomes due, resulting in a negative Current Leave Due balance. In a final pay, the employee still receives their full 8% Holiday Pay, and any leave taken in advance then needs to be deducted.

In these cases, you'll see 'Annual Leave Taken in Advance' pay lines added, to deduct the amounts owing. 

If the employee has multiple instances of leave taken in advance, extra 'Annual Leave Taken in Advance' lines will be added to their Final Pay for each instance of leave. 

The date shown on each pay line reflects the pay date of the pay the leave was originally paid in, and each deduction will reflect the rates the leave was originally paid at. 

Annual Leave Taken in Advance should be deducted from a final pay at the same rate it was originally paid at. However, in cases where the leave was taken in a previous payroll system, PayHero won't know these rates, so will default to deducting the leave based on the employee's current Annual Leave Rates.

You should identify the rate the leave was originally paid at, then take the following steps:

1. Contact support@payhero.co.nz and our team can set up a custom pay item for you, to enable custom values to be deducted. This pay item requires special calculations, so should always be set up by our team.   
2. Remove the employee from the draft final pay.
3. Edit the employee's Current Leave Due balance on their Leave tab to remove the leave that was taken in a previous system. For example, if the employee has a Current Leave Due balance of -2 weeks, and half a week was taken in the previous payroll system, you should update their balance to -1.5 weeks.
4. Add the employee back into the draft pay, and ensure it's set as their final pay.
5. Add the Previous Leave Taken pay item to the draft pay, set the Quantity and specify the quantity (negative) and rate to apply:
   

If the employee has Annual Leave Due at the end of their employment, they may also be entitled to any public holidays that fall after the employee's finish date but within the period that could be covered by their Annual Leave Due.

PayHero doesn't calculate this automatically as there are too many possible variables in an employee's work pattern and final payment entitlements. This article from MBIE explains how to work out the employee's entitlement. If the employee is entitled to a public holiday, you can add the Public Holidays pay item to their final pay.

Normal public holiday rates apply for these holidays, based on the Relevant Daily Pay (if known) or Average Daily Pay for the holiday in question. You can learn more about these rates and how to override them here: Other Leave Rates

If an employee has any Alternative Leave owing from working on public holidays, these will be automatically paid out in the final pay. By default, PayHero will attempt to pay Relevant Daily Pay (if known) for the employee or their Average Daily Pay if not. 

In a final pay, Alternative Leave should be paid at the Relevant Daily Pay or Average Daily Pay (if applicable) for the employee's last day of work, so if required you can override the calculated rate to apply the required hours and hourly rate instead. You can learn more about these rates and how to override them here: Other Leave Rates

If you've finished an employee - either by processing a final pay or finishing their employment on their employee record - there will be some restrictions to be aware of when trying to add them to pays.

If you create a new pay for the employee's Pay Cycle, the employee will be automatically included in the pay, provided their finish date isn't prior to the start date of the pay period.

If you want to add the employee to an existing draft pay, or a One Off Pay, you'll first need to navigate to People > Employees, and enable the 'Show Finished Employees' toggle:

The employee will then appear in the list of employees who are available to add to pays when you navigate back to the Payroll tab.

A common question we receive is 'Why does the tax on the final pay differ from what the IRD calculator gives?'. We take great pride in matching the IRD calculator to the nearest cent, but this will seldom work for final pays because of the different ways in which the tax is calculated.

A final pay will typically include amounts for paying out leave, and any leave payments in a final pay are taxed as an Extra Pay, which the IRD calculator isn't designed to calculate.

There's more information about tax calculations in a final pay on IRD's website.

Yes. It's generally easier to simply include them in the standard pay cycle that covers their finish date, but if you wish to pay the employee before then you can create a One Off Pay for that employee. 

Note that the employee will still be pulled into the normal pay cycle when the time comes, so you'll need to make sure you manually remove them from that draft pay, or alternatively, you can remove them from the pay cycle before then.

You can find more information on processing a final pay for employees who are resigning without returning to work after Parental Leave in this support article: Parental Leave

You can find more information on processing a final pay for employees who have been on recent ACC leave in this support article: ACC Payments

You can find more information on paying Garden Leave to employees who are being asked not to return to work here: Garden Leave (Payment in Lieu of Notice)

You can find more information on processing retirement and redundancy payments in PayHero here: Retiring and Redundancy Payments

If an employee has taken more leave than they had available and is now finishing their employment, they may owe you some money.

The way to handle this will depend on whether the employee will actually be paying you back the amount owing.

If you don't intend to recoup the amount then simply don't do a final pay for them. To achieve this you'll need to edit the employee and put a finish date against them. Depending on the dates they may be added to your next pay as a Final Pay - simply remove them from the pay and proceed as usual. The negative balance will be retained which is a correct representation of the state when the employment finished.

If you intend to get money back from the employee then the final pay needs to be incorporated in the last pay when they had earnings to cover the amount being paid back. Rather than doing a single negative pay as the final pay, mark the previous pay as a draft and set that as the employee's Final Pay. Resend that pay. The difference between the take home pay in the newly processed pay and the original pay is the amount you will want to recoup from the employee. This will have correctly adjusted the tax amounts for the difference which won't happen if you process the negative pay in isolation.

Information on marking the previous pay as a draft can be found here: Fixing a Mistake in a Sent Pay