The following rules apply in relation to the ACC scheme:
- When the employee is taking leave for the first week of a non-work related accident, sick leave may be used.
- If an employee has a work-related accident, the employer has to pay “first week compensation” (see below) and cannot require the employee to take that time off as Sick Leave.
- If an employee is receiving “first week compensation” for a work-related accident, an employer and employee can agree that the employer will top up the “first week compensation” payment from 80% to 100% by reducing the employee’s sick leave entitlement by one day for each five days’ leave taken.
- If an employee has a work-related or non-work-related accident and remains on weekly compensation, the employer cannot require the employee to take time off as sick leave.
- If an employee is receiving weekly compensation from ACC, the employer has no obligation to pay the employee.
- Where the period of leave on ACC is in excess of five days (for either workplace or non-work accidents), the employer and employee can agree that the employer will top up the ACC payment from 80% to 100% by reducing the employee’s sick leave entitlement by one day for each five days’ leave taken.
- If you're topping up an employee's earnings, the employee may need to be taxed at Secondary tax rates. Your employee should check this, and complete an IR330 tax code declaration form if needed.
To pay an employee Sick Leave for either the first week of a non-work related accident, or for topping up their ACC payments by 1 sick day per week, you can use Leave Requests to record the Sick Leave.
For the 1 day per week top up which doesn't necessarily relate to taking a particular day off, you can add the Sick Leave pay code directly to their pay if preferred. For employees working less than 5 days per week, the Sick Leave top up should be 20% of their regular earnings.
First Week Compensation
To pay the employee for "first week compensation" at 80% of their normal pay rate you'll need to add a new Pay Item.
Under Manage > Pay Items > Earnings create a new Other Earnings pay item. Name the pay item, set the Rate Multiplier to 0.8, and select Replaces Salary, as shown here:
Once you've created the pay item you can add this directly into an employee's draft pay.
The rate will automatically be set to 80% of their normal pay rate. The quantity should be set to the hours the employee would have worked that week.
When adding the pay item to a salaried employee's pay, the salary payment line will 'unlock' for you to zero out. Learn more about editing salary payments here.
The Accident Compensation Act says that the week should be paid out at the average of what the employee earned the seven days prior to the injury and what they would have earned in the seven days after the injury. Our advice from ACC is that it is also acceptable to use the average from the previous four weeks (i.e. the Ordinary Pay Rate used for annual leave). Either of these methods can be used to determine how many hours should be specified.
For more information about what to do when an employee is injured see the ACC website.
Unpaid ACC Absences
For employees on unpaid ACC absences, you can process this the same way you would any other absent, non-paid employee - either don't include them in the pay at all, or include them and process the pay period as Unpaid Leave.
Please note, this will behave in the same way as regular Unpaid Leave and there's some important processing to be aware of. ACC absences are considered part of an employee's continuous employment period. If you choose to use Unpaid Leave you'll need to ensure it isn't treated as Extended Unpaid Leave, which pushes out the employee's Next Anniversary for Annual Leave by the number of days of extended unpaid leave.
This will occur automatically if you enter an Unpaid Leave request which spans more than 1 week. To prevent this processing, you will need to either:
- Intervene in each pay after the first week, to set it back to standard Unpaid Leave
- Enter the Leave Requests in single week stint
ACC and Finishing Employees
Annual Leave Due must always be paid at the higher of the employee's Ordinary and Average Weekly Rate. For more information on how these are calculated in PayHero, refer to our support article: Annual Leave Rates
If the employee has been on unpaid ACC leave for an extended period of time, their calculated rate for Annual Leave may be low or zero in PayHero. While this may be correct, if the employee's Ordinary Weekly Rate can be manually calculated and is higher than their Average Weekly Rate, this should be used instead. See the below guidance from MBIE:
Many employees will still have an ordinary weekly pay even after being off work on ACC for a lengthy period, which is normally covered in the employment agreement. If there is nothing specified in the employment agreement, then the pattern of work and payment from when the employee was last working would decide what an ordinary weekly pay is for the employee. For example, an employee who works 40 hours a week at an hourly rate of $20 per hour would have an ordinary weekly pay of $800 despite being off work on ACC for over a year.
If it is genuinely not possible to determine ordinary weekly pay (for example, an employee with variable and unpredictable hours of work), the four-week average formula is applied to calculate the ordinary weekly pay. Because this formula involves an average of the earnings in the four weeks prior to termination, for an employee who is off work for more than four weeks, this would equal zero. For these employees, although they will have an entitlement to their unused weeks of annual leave, those weeks will have no monetary value.
You can find more information on this here: Employment NZ
If the employee's Annual Leave rates do require any adjustment, this can be done by changing the units on the Annual Leave Taken line to Hours, and manually inputting the required rate.
You can then proceed with processing the employee's Final Pay as usual.