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Should payroll software provide information about new employees to Inland Revenue when the information is entered into the payroll system?

The Government proposes that where an employer uses a payroll system which connects to Inland Revenue's system, information about new employees could be provided when the relevant employee details were first entered into that payroll system.

That would mean the employer could be provided with confirmation of the employee’s IRD number and tax code, and advised of the employee’s KiwiSaver status and deduction rate, and of any additional deductions (for example for child support) required, before the first time the employee was paid. This would eliminate at source errors which now take time to correct, and remove the need for a separate KiwiSaver form.

The payroll system could also be used to advise Inland Revenue of updates to employees’ details, such as changes to their contact details or ceasing employment. This information would also be passed from Inland Revenue to the employee, so they could correct any errors.

Questions

1.  Do you agree with the proposal that employers should be able to use their payroll software to provide relevant employee details to Inland Revenue at the time the employee’s details are entered, changed in, or removed from the payroll system?

2.  Would using payroll software to provide IR with details of new employees before they are first paid and being notified of deductions as set out above, reduce or increase compliance costs? If you can quantify the effect please do so.

3.  Do you support the proposal that Inland Revenue should continue to communicate any change of employee obligations or details to the employee?

Comments

Software trainign contractor
1. After the new employee has had a chance to verify to the employer in a check step that the details have been entered correctly, sure. 2. If employers are using up-to-date software there should be a reduction in compliance costs as long as the details are correct. 3. Yes. Surely that is a no-brainer.

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8 months ago
Maree
1. Yes 2. Not sure, but probably not. However. IRD would need to instantly provide details on request, as a few days or a week MAY delay payment to new staff.

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8 months ago
Tom
This may cause a MAJOR amount of work for Temping agencies, and employees that use a high number of event staff for one off jobs where a worker may work for a few days then leave. I understand the IRD wants to capture its money weeks quicker but the burden of cost is pushed onto the employer.

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8 months ago
Commonsense 2
In response to the issues as numbered: 1. Yes, but limited to those employers who can afford to use such software. This requirement should not be hoisted on employers as a requirement but a voluntary basis. We don't all have endless pockets. 2. If made mandatory it would impact on most employers in terms of increased compliance costs. Time in sending, time in dealing with any response, time in implementing any change required by IRD, software costs or increased software costs for doing all of this. 3. Yes.

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7 months ago
Megan B
It would be good to have the correct KiwiSaver details confirmed instantly but a concern is how slow the IRD is when processing the last of the student loan payments. If an employee has completed paying this off and the IRD hasn't yet processed it, who has the final say for the tax code? The payroll person will be caught in the middle and incurring the wrath of both sides.

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6 months ago
Martin Etherington
My preference, assuming earnings & tax information is filed each pay, is that each filing would include details of new employees, and finish dates of ceased employees. I'm not keen on having a separate process when setting up each new employee. I struggle to see how Inland Revenue can accurately confirm the employee's tax code. e.g. IR may not yet know the employee has finished working for one employer (e.g. the final pay hasn't yet been paid), when the employee is set up with a new employer (e.g. before they actually start the new job). The employee is the one that knows about changes in their own circumstances, not IR. (I don't have a problem with IR subsequently advising employers if M is being used for more than one employer but a little time needs to pass before jumping to conclusions. The same goes for the employee's KiwiSaver deduction rate. As an employee with more than one job, I may want a higher rate for second job than the first job. How would IR know this? I can see the advantage of confirming Kiwisaver status and receiving any IR arrears or child support information ahead of time, but there would be no effect on compliance costs compared to receiving the information after the first pay. In most cases (for small businesses) the employees are set up at the same time their first pay is processed, so there would have to be a very fast turnaround, from submitting the new employee details, to receiving the feedback. I'd like to see the IR330, KS2 and KS10 combined into one form. Due to the hassles of processing Kiwisaver refunds after an employee opts out, most employers, if they receive an opt out notice prior to the employee's first pay, will action the opt out immediately. i.e. they ignore the 2 week rule. So I recommend officially allowing opt outs from day 1 to reduce compliance costs. (Ideally the option to opt out should be totally removed given that the majority of eligible employee's are already in KiwiSaver. i.e. KiwiSaver becomes compulsory). 3. Yes

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5 months ago
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