This article documents the procedure (and pitfalls) of changing to a common anniversary date:
- The company (or the part of the company the employee works in) must close down completely (otherwise it is not permitted to change the employee's anniversary date)
- The employee must have been employed for no more than 52 weeks (you can only do it once, and it must be in the first year of employment)
- You must create an allowance code for "Common anniversary payout" to be used only once during the employee's first year of service
- the allowance must be set up using the "Bonus and Commission" category (which is used for this type of lump sum payment, and ensures the amount is taxed using Extra Pay rules and is NOT flagged as non-accruing
- NOTE: a large lump sum payment can significantly affect the value of subsequent Holidays Act calculations)
- You must manually calculate 8% of the employee's liable earnings paid prior to the the common anniversary date
- Do NOT rely the employee's termination value from their Leave Balances if they have consumed any annual leave already. Instead, you should obtain total earnings since they started until the period ending on or before the anniversary date - use the Termination Pay calculation tool (right-click menu), or print their history since start date, then calculate 8%
- Deduct the value of any annual leave already paid out
Paying out the 8%
- The Act and MBIE are silent as to the tax treatment - IRD advise it should be paid as an Extra Pay allowance (similar to a cash-up, but using the "Bonus and Commission" category) - see above for setup details
- Add the "Common anniversary payout" allowance entry for the value calculated above to their pay covering the closedown period (e.g. in the final pay before closedown)
- Note that the amount paid could well exceed the actual value of the time the employee is on leave
- You must not override the number of pay periods or days paid to account for the "estimated" length of time covered by the "Common anniversary payout", but you should take into account if multiple periods are covered due to the addition of Public Holidays or any additional annual leave being taken in advance.
- Ref p51 of this guide: https://www.employment.govt.nz/assets/Uploads/d53229842c/holidays-act-2003-guidance-holidays-leave-.pdf
- change the employee's anniversary date to the agreed common anniversary date (it must be a date AFTER the period end date that the 8% was calculated to).
- set the employee's annual leave balance to zero (if it's not already) and annotate with a comment that identifies why the adjustment has been made (this should only occur if the employee has already consumed leave in the first year of service).