Planning For The Holiday Season
About the Author:
Paul Wilton (editor)
CA with degrees in commerce, accounting and information technology. Paul worked overseas in the “Big 4” accounting firms and served as a director at Audit New Zealand before setting up his own consultancy. Author of A-Z of New Zealand Business Law, Paul has over 20 years of experience as a business owner and consultant. He joined FBA in 2004 and is totally committed to providing excellence in quality and value to our subscribers.
Earlier this year, it was revealed that thousands of government employees had been receiving less holiday pay than their entitlement. So, you guessed it, a task force was set up to look at simplifying the system with change anticipated next year. In the meantime, we remind you, as always, about your obligations for the Holiday Season. Refer also to the 2018 tax change on Page 17 under From the IRD in Brief.
Statutory Holiday Dates
Christmas and Boxing Day: Tuesday 25th and Wednesday 26th December 2018.
New Year’s Day and the day after: Tuesday 1st and Wednesday 2nd January 2019.
As the above all fall during the week, there is no "Mondayisation" this season. However, employers and employees may agree in writing to transfer the observance of a public holiday to another working day to meet the needs of the business or the employee.
Anniversary Days by region
(Dates actually observed and not the official dates):
November and December 2018
Canterbury
The Chatham Islands
Westland
2019
Auckland
Canterbury
Chatham Islands
Hawkes Bay
Marlborough
Nelson
Otago
South Canterbury
Southland
Taranaki
Wellington
Westland
Friday, 16 November, 2018
Monday, 3 December, 2018
Monday, 3 December, 2018
Monday, 28 January, 2019
Friday, 15 November 2019
Monday, 2 December, 2019
Friday, 25 October, 2019
Monday, 4 November 2019
Monday, 4 February, 2019
Monday, 25 March, 2019
Monday, 23 September, 2019
Tuesday, 23 April, 2019
Monday, 11 March, 2019
Monday, 21 January, 2019
Monday, 2 December, 2019
An employee can be required to work on a public holiday only if the individual would otherwise have worked on that day and if the employment agreement requires the person to work on public holidays. In all other circumstances, employees need only work on a public holiday if they agree to do so and this should be recorded in writing.
Public Holiday Pay
An employee must be paid for a day off on a public holiday if it falls on a day that the employee would otherwise have worked.
If there is a public holiday when employees are on annual leave, they get paid for the public holiday if they would normally have worked on that day, and do not lose an annual leave day.
Employees who work on a Public Holiday are entitled to 1.5 times ordinary pay for that day (or more, if so agreed). If they would normally work on that day, they must also receive a ‘Day in Lieu’. This means that they can take another day as a holiday and be paid for it.
You cannot contract out of this requirement, even if you offer to pay double or triple pay for working on a Public Holiday.
Part-time worker example: Jack works five hours each day on Tuesday and Friday every week. He works on Christmas Day and January 2, but not on any of the other statutory holiday. He is therefore entitled to:
5 hour's pay x 1.5, as well as 5 hours leave on a future working day (a day in lieu) for working on Christmas Day (Tuesday);
5 hour’s pay in advance for Tuesday, 1 January, that he takes as a public holiday; and
5 hour's pay x 1.5, but no day off in lieu, for working on Wednesday, 2 January, as he would not normally have worked on that day.
He is not entitled to any payment for Boxing Day as he does not normally work on a Wednesday. Days in lieu that have not been taken within 12 months of the days being “earned” may be “cashed up” if mutually acceptable to the employer and employee.
Annual Holiday Pay
Employees are entitled to a minimum of 4 weeks pay for every 12 months of service. A week's Holiday Pay for annual leave is the greater of:
The average weekly gross earnings i.e. everything that the employer was required to pay for that employee over the year (including all overtime, but excluding payments made for acc compensation, cashed out minimum- entitlement holidays and voluntary military service); and
The current ordinary weekly pay at the time the leave is taken. This includes all regular payments. It excludes irregular overtime, one- off or intermittent payments, discretionary (not required to pay) payments and employer contributions to superannuation schemes.
Reimbursements for expenses are excluded unless otherwise stated in the employee agreement.
Holiday Pay must be paid to the employee before they take leave, unless the employer and employee agree in writing that the normal pay cycle will continue undisturbed during the holiday. In either case, the holiday pay calculation must be done as at the start of the annual holiday as average gross weekly pay, for example, can change while the employee is on leave.
Cashing up Annual Leave
An employee may request in writing to be paid in cash for up to one week’s annual leave per year and this may be granted by the employer. The request must be considered within a reasonable time and may be declined. The employee must be advised of the decision in writing and no reason is required to be given. If granted, the payment must be at least the same as if the employee had taken the holidays and must be paid as soon as practical – usually the next pay day. An employer cannot pressure an employee into cashing up holidays.
Casual Staff
Casual employees are not entitled to annual leave. Instead, they receive 8% over and above their gross earnings for every 12 month's continuous service. If they agreed to be paid the 8% on a pay as you go basis on each pay day, then they are not entitled to extra holiday pay after 12 months or in the event of a business close down. If they have not been paid on a pay as you go basis, and the business has a close-down period, then they are entitled to 8% of their gross earnings, less any payments already made from that amount.
For public holidays, if it is clear that a casual employee would have worked on that day (had it not been a public holiday), then they are entitled to be paid for that public holiday just like any other employee.
With casual staff, it is crucial to keep an eye on their hours. If a regular pattern has formed, then they could lose their status as a casual employee and become either a full- or part-time employee.
Entertainment Tax?
The entertainment tax provisions operate to only allow a 50% tax deduction for specified types of entertainment expenditure. The main category of expenditure relevant to Christmas entertainment is food and beverages. There are numerous exemptions from the entertainment tax provisions but these are unlikely to apply to most cases of Christmas entertainment.
One exemption that may be relevant is for entertainment that is subject to FBT. The FBT provisions will apply to any entertainment benefit that is consumed or enjoyed outside of the employment duties, and either:
• The employee can choose when to consume or enjoy the benefit; or
• The entertainment is consumed or enjoyed outside New Zealand.
Staff Christmas Party
The cost of the food and drink for a staff party, as well as incidental expenditure relating to such matters as waiting staff, hiring of crockery, glassware or utensils, and music or other entertainment, will be 50% deductible for income tax purposes. This applies whether the party is held on the business premises or off site.
Gifts of Food and Wine to Staff
In most cases, employees will be able to choose when to consume the food and wine, therefore the gifts will constitute fringe benefits. However, the $300 per employee per quarter FBT exemption may apply. The exemption is non-cumulative and only applies where the total value of such benefits for all employees does not exceed $22,500 per annum. The cost of gifting food and wine to staff will be fully deductible for tax purposes, where FBT applies. If the gift does not fall under FBT, the cost will be 50% non-deductible.
Other Gifts to Staff
Generally, the cost of gifts (other than food and beverages) to staff will not fall within the entertainment tax provisions and will be fully deductible. However, in the majority of cases, the gifts will constitute fringe benefits. The $300 per employee per quarter FBT exemption may apply.
Cash Bonuses for Staff
Cash bonuses are taxable to the employees. The employer is required to deduct PAYE at the extra emolument rate.
Christmas Lunch/Dinner for Colleagues
The cost of taking colleagues out for an end-of-year lunch or dinner will generally be 50% deductible.
Gifts of Food and Wine to Colleagues
The cost of gifting food and wine to colleagues will generally be 50% deductible for tax purposes.
Other Gifts to Colleagues
The cost of gifts (other than food and beverages) to colleagues will generally be fully deductible for tax purposes.
Gifts of Christmas Hampers to Clients
The IRD has clarified that it will allow a 50% deduction for food and drink items, while other items in the hamper will be fully deductable for tax purposes.
Security and Other Issues
For businesses that close, other commonsense considerations over Christmas are:
Ensuring that mail is collected and cheques are banked (or held until your return);
Security for your premises – notify your monitoring agency;
Diverting your telephones to a message service;
Advising your clients when you will be available and leaving emergency contact numbers for customers, staff and the security company.
Wishing you all the best for the Holiday Season and may 2019 be a year of health and prosperity for you and yours.
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