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Integrate PAYE into payroll software

Should payroll software be used to send information about PAYE income and deductions to Inland Revenue when staff are paid?

At the moment employers are required to provide PAYE information on a monthly basis, regardless of their pay cycle. When PAYE compliance is facilitated by payroll software, this information could be provided on a pay period basis, rather than monthly. This would eliminate the current need for employers to aggregate information from each pay cycle in each month, which creates additional work and an opportunity for error. Submission of information on a pay period basis would eliminate the need to file an employee monthly schedule.

For employers already using payroll software and “file transfer” to submit their employer monthly schedule information digital submission of data from within a payroll system at the time the payroll is finalised, would eliminate the steps of saving the file of PAYE information, logging into ir-File through my IR and sending the employer monthly schedule to Inland Revenue.

Question

If your payroll software could be used to send payroll information to Inland Revenue at the time staff are paid would it increase or reduce your compliance costs?  If you can quantify the effect please do so.

Comments

Allan MacLachlan
I think that submitting to the IRD every time we have a pay run increases compliance rather than decreases it. In any month we may up to 5 different normal pay runs, through two payrolls (1 payroll for waged staff, another payroll for salaried staff), plus two schedular pay runs, not to mention the possibility of one-off pays for: * terminations * pay or salary adjustments Our software quite easily consolidates these two payrolls for submission to the IRD. I'm quite comfortable with the twice-monthly IR345 reporting. Conceivably we could just change this to twice monthly EMS reporting, which would eliminate 12 submissions to the IRD.

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8 months ago
David
It would reduce compliance costs because it would save having to reenter the same data on a different day to file with IRD. It saves double handling and is more efficient doing both tasks at the same time.

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8 months ago
Kaye McArthur
I'm of two minds on this, depending on a business's accounting packaging and its ease of use could impact on compliance cost, if the system they are using could well be old, or even not compatible with IRD system. Yes it could save on admin time in the long term, but could raise issues.

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8 months ago
Maxine
Nothing has been mentioned in the information I have read on this about the cost of the payroll software and who funds it. Is this a cost all businesses would have to incur? If so we would be disadvantaged straight away with extra compliance costs as we do not use a digital payroll system at present. Or is the payroll software going to be government funded and run through the present MyIR where we already login once a month and file the PAYE figures. I like the present MyIR system for filing which is smooth and does not take a lot of administration time in our business at all as we do it monthly. To use a weekly system (we pay weekly) would take up a lot more of our time and not be as efficient in our business.

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8 months ago
Administrator
Thank-you for your comment. This aspect is raised here https://payeandgst.makingtaxsimpler.ird.govt.nz/learn-more-tell-us/implementing-change-paye-information/should-government-assist-small-and-medium where the Government seeks views on the provision of financial assistance for SMEs.

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8 months ago
A
I'm with you on this one. If it ain't broke don't fix it. The present system works fine, especially for small businesses with only a couple of employees. Changing things is only going to cost us in both time and money. Software and learning how to use it to file the information.

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8 months ago
Karen
As a small business (3 staff) we do not wish to change our current system we know so well. Why create more work for no benefit. Change can only cost more and waste time. Leave things alone.

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8 months ago
MK
I think paper & Onscreen form keep continue as well.

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8 months ago
Bruce
Agree that the IRD providing a webservice that companies current or future payroll systems can optionally use to file returns is a good step forward. As others have said there also need to be the options to file by other means to accommodate those whose systems and processes cant utilise this approach.

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8 months ago
Haydn J
I think it would increase compliance costs, as I would have to compile, check and submit the data every payday, rather than just once per month.

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8 months ago
Keith
Reduce compliance costs as it would simply be part of the pay cycle, rather than a separate process as it is currently. But why stop at just the information; incorporate the payment of PAYE into the pay cycle as well e.g. we pay weekly so paying PAYE along with weekly pays would lessen the fortnightly/monthly cash flow burden when PAYE is due

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8 months ago
Martin Etherington
Some software packages can already optionally include the PAYE, KiwiSaver and other amounts paid to Inland Revenue in the same payments batch along with the employees' net wages each pay.

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6 months ago
Noel Reid
Keith How can you say having to pay money sooner "would lessen the fortnightly/monthly cash flow burden"? Think of other aspects of your business - would you prefer to pay all your Creditors as soon as you receive their Invoices, rather than wait until Due Date? Cashflow is all about managing when you pay Vs when your Customers pay you.

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5 months ago
Andy Adams
From my perspective, computer and cloud systems create huge benefits for small and medium businesses and organizations, in enabling them to be mobile, flexible and cost effective in the competitive world today. As a Not for Profit a move in this direction allows us to release our staff to work with people and not paper.. Compliance is easier as it is built in to the systems..

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8 months ago
Lyn M
My perceptive as a volunteer for small rural not for profit and sport groups it would cost valuable funds to change systems to meet these proposals. Quick & easy to do as we have been at no increased cost.

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8 months ago
Preston Epplett
This just looks like a scheme to improve the government's cashflow under the guise of tax simplification. I cannot see the time or cost saving . Potentially more cost as paye will have to be paid earlier, more transactions via bank account and more time if the return is in-house reviewed before sending. Why not just have the process of sending info direct to IRD from payroll software at month end. That would save a small amount of time.

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8 months ago
David H
I can't agree with this. If payroll is to be approved - as it should be, then deductions can also be approved at the same time. Payment to IRD is just another payment on the payroll. In some cases from deductions and in other as an additional expense (KS tax). Payment at the same time admittedly does help IRD cash flow, but it also saves businesses time wasted on reconciliations. In a computerised accounting program, this makes management control easier and more immediate.

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8 months ago
Donna Streeton
For a business where the payroll does not change from week to week and where the employees are paid via AP, having to then go and do a PAYE payment every week would be a huge increase in administration and therefore cost to the business.

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8 months ago
Jen H
The online payment to IRD is no problem but the unwieldy IRD PAYE website for filing returns and unnecessary taxes on taxes creates the additional time factor, room for error and therefore costs for small business

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7 months ago
Software training contractor
It would be helpful having it at the same time as long as I was only doing one pay per month. Having the option would be good, as long as the submitter is able to correct mistakes.

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8 months ago
Don
We currently use a third party to pay our employees and file PAYE returns with IRD. We find this a convenient and cost effective way of handling our staff payments and would not see any advantage in the proposed changes.

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8 months ago
Joyce Glennie
I agree with Don. We use a third party as well. I submit the monthly PAYE spreadsheet, and feel secure knowing that our accountant checks everything and sends in the payments for us. I don't want the worry or time of having to do this myself.

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8 months ago
David H
By using a third party, there is automatic compliance with the proposal. It then becomes the responsibility of the third party (the payroll provider) to comply with IRD, as payroll costs are made gross and not held till 20th following. The benefits of cash flow referred to elsewhere are currently the third party's cost offset - if they are required to comply, then an increase in their charges is foreseeable.

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8 months ago
Peter Graham
We do not object to organisations with commercial software being able to do this as long as it is not mandatory for everyone. We are a very small organisation and use our own software and being required to purchase and learn new software would be a HUGE compliance burden for us. The monthly on--line system is working well and is reasonably easy to do (although correcting entry mistakes in the on-line form is non-intuitive and can be very difficult).

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8 months ago
Craihg
there is an assumption that all companies have a payroll software this may not be the case where an entity only has <5 employees where the employee monthly schedule is a perfect way of doing this. Maybe there needs to be an exemption for those kind of entities.

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8 months ago
Fiona Cargill
In my view it would increase compliance costs as I'd need to check the information on a weekly basis rather than a monthly basis. It also doesn't help those you don't have payroll software.

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8 months ago
Gary Newth
Absolutely and about time we should link the reports from payroll to IRD. We need to use technology to save administration time so that we can focus on other tasks.

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8 months ago
Amber
I have had clients who have made errors in the payroll processing and so have had to roll back the payroll and re-do it. Would this common error be accounted for?

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8 months ago
Maryellen Bezzant
No. The payroll software should be used to benefit the employer. The employer should be the one to notify IRD. The IRD website is so user unfriendly already, why make it even more so. Surely it would be simpler to have the IR 345 and the IR 348 forms downloadable, filled out and returned rather then the nonsense I have to go through now.

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8 months ago
Maryellen Bezzant
I pay monthly so doing the PAYE returns monthly is not a problem but uploading the information into the IR website through my IR is a frustrating exercise. Please simplify this process. My software already has an easy to understand and report process but has to be duplicated through this system.

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8 months ago
Pepper
It would be about time to make it easier and not more complicated. 1. reduce to just one form (EMS, EDF/IR345) 2. drastically reduce the tax codes 3. make kiwi saver bindend for everybody and one rate only 4. no ESCT tax 5. no Payroll giving donations 6. no ESCT tax rate, this should be automatically in the tax code This would be a real improvement, but it maybe shock some of the IRD role makers.

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8 months ago
Lyn
I think this would increase costs. And, if the PAYE was paid each payday this would increase the IRD revenue on a regular basis, but deplete our bank accounts with the money being paid out 2-4 times a month instead of just once a month at the end of the month. Choice is always a good thing. Computers can make mistakes. Albeit by the wrong information entered. I say keep things as they are. I would NOT like to pay PAYE on a more regular basis.

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8 months ago
Bruce humphris
I dont have a problem with the way things are run now. I have no intention of moving to on line accounting software. While I do think the IRD online PAYE could be improved, overall it works well.

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8 months ago
Helen Barr
I do not have payroll software, only a small business, trying to keep overheads down, I like the present system, use MYOB for invoicing & gst

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8 months ago
Gail Tait
Yes I would love to see the process of filing with IRD as the payroll is processed. I work in 2 offices. One pays weekly and the other fortnightly. I have had to make it very clear to one of the businesses that PAYE is not something that they carry over until they can 'afford' to pay it, but is actually the income (& thereafter tax) paid on behalf of an employee...to IRD. It would be very easy to make processing with IRD on each pay run, but it will take just a little more of payrolls time, but in the long run, it should make for smoother processing and in the case I face, also remind the Employer, that it is in fact not their money to pay a leisure (it is after all part of the expense to be faced each pay day). The pay system I use allows monthly upload to IRD. I find nothing wrong with the current system. The bank payment is excellent too, with a special selection for IRD payments, altering IRD # and payment amount and date accordingly. Paying PAYE as it is 'earned' will reduce penalties and IRD expenses and be much simpler in the long wrong.

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8 months ago
Debbie
I agree with the proposed changes and think compliance costs would be reduced if PAYE and GST were automatically sent from the accounting programmes. I also like the idea of paying PAYE every payday as it would be easier to spread the cashflow that way in an SME.

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8 months ago
Lyn M
So instead of 1 x payment to IRD a month for weekly employers there will be 4 - not an improvement unless Banks agree to stop charging so much for transaction fees.

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8 months ago
Noel Reid
I'm with you Lyn Debbie, if you REALLY think it's a good idea to "pay when you file"; why stop with PAYE?; why don't you suggest adding GST as well....??

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5 months ago
Denis Avison
As a small employer having to buy a software/payroll system is a cost that I cant justify.

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8 months ago
Tanya Cameron
I think it is a good idea to send the information direct from the payroll program, monthly. It saves having to log into several programs/websites to process PAYE, Process to IRD then Pay IRD.

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8 months ago
Judy
I do not agree. As a small - very mobile -business I do not have payroll software, as I have found they do not cover all my payroll needs & are very expensive.. I am often in areas that do not have good internet coverage, so changing to the online filing has occasionally become a problem, & the option to file manually was taken away. I find the current online filing system simple & quick, & having to process things weekly would involve a lot more time. My accountant already deals with my GST, which is filed automatically from their software. If it ain't broke, don't fix it!!!

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8 months ago
Liz Dibben
I have just uploaded PAYE information from Xero accounting system which was really easy. But I find the PAYE filing less friendly that GST filing. It did not show immediately or should I say clearly that the "send" had worked - maybe if the screen had completely changed it would have been clearer (but I think it worked)

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8 months ago
Sonia Hepi-Treanor
I am currently happy with the payroll system I am using for PAYE deductions, which is currently being sent to IRD directly, and currently use banklink for GST payments which works well for us for now. I don't really see any advantage to us for changing the system right now.

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8 months ago
Sarah C
We do not use payroll software however we do file our PAYE information electronically each month. We find this system works perfectly well for us. Changing and implementing to a new system would not be viable for us.

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8 months ago
Delwyn Shaw
It would be good to be able to file returns directly from our payroll software but I wouldn't support a change to that happening every payday. Monthly returns work well for us and our clients. To make filing of returns happen more frequently would be costly in terms of the time involved.

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8 months ago
John Howie
We employ 2 part-time workers who are paid weekly, using a payroll programme. This programme quickly and efficiently prepares the necessary information for the IRD at the end of the month. The problem is the complex system that the IRD website has to actually load the information. I recently loaded the information (or so I thought) in good time and made payment of the required amount on the 20th of the month by internet banking. However, for some reason the files had not gone though. I saw "read" against them in the Workspace and thought that this meant the same as "received". Lo and behold, a late filing charge of $250 then appeared! This was eventually reversed, but took up quite a bit of time to get done. Automatic filing at time of wage payment would be a very good thing to avoid this in future.

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8 months ago
Brian Flowers
It would make sense to do it at the same time as you paid your employee’s. It would benefit the IRD with the cash flow admittedly, but it would save unnecessary re-work on a monthly basis for the employer. The problem as far as I can see is correcting mistakes. Unless I’m wrong you cannot upload a file which contains negative values. This would be a mandatory requirement, of course it would most likely mean the IRD would need to refund a payment to the employer if the net result was negative.

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8 months ago
michele hunt
A payroll system doesn't really make sense for an organisation with few employees or like us shareholder employees. The my IR system is easy to use and doing it monthly is not onerous so I don't see the need to change it. Maybe for larger organisations it makes sense to link it to a payroll system.

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8 months ago
Orange Mechanical
I certainly don't support having to buy additional software to implement any changes. I find that being a small business the systems for PAYE and GST that are in place at the moment are more than adequate and work very easily for me.

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8 months ago
Jennifer Holloway
This would increase compliance costs as employees are paid weekly or fortnightly. Even payroll software costs would increase.

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8 months ago
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