PAYE and payroll
Every employer in New Zealand is required to make pay as you earn (PAYE) deductions from their employees’ salary or wages and record payroll activities for Inland Revenue.
The most convenient and secure way to do this is to use Inland Revenue’s ir-File online service which lets you complete the two key documents you need to file – your Employer monthly schedule (EMS – IR348) and Employer deductions (IR345) forms – online.
However, Inland Revenue will post you the forms as well so you can manually file them.
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If you’re a first-time employer, it can be difficult getting to grips with this new responsibility. To make sure you stay on top of your payroll responsibilities, remember to follow these three basic steps:
- Understand the minimum pay entitlements for all employees.
- Ensure the correct calculation of wages.
- Keep accurate records.
- Pay Inland Revenue.
TIP: Paying a fair wage to employees makes good business sense – it ensures fairness in the workplace, encourages efficiency and helps avoid future employment relationship issues that could prove costly and damaging to your business.
Find out more about pay with these Department of Labour guides on pay for employers or read more about your tax obligations and registrations for new businesses.
When and how you file your EMS and Employer deductions forms, and when you pay PAYE to Inland Revenue, depends on how much PAYE you paid in the last financial year.
A number of businesses, for example, use Inland Revenue’s online ir-File system to manage their files and payments on the Internet, but businesses paying in excess of $100,000 in PAYE and ESCT (Employer Superannuation Contribution Tax) every year must use it. Even if you don’t have to use ir-File you should do because it’s more secure and streamlines the filing process for you.
Find out more about ESCT with overview of tax & levies.
ir-File is Inland Revenue’s recommended service for filing your payroll and returns because of the enhanced security and automation features this online service offers.
It requires no additional software to use and can be accessed by any business with an Internet connection and tax obligations in New Zealand.
- Enhanced security and accuracy of filing.
- Quicker EMS filing times.
- Online screen-specific help and an online interactive demonstration.
- Easy interaction with and support by payroll software packages.
- Enables filing of both your KiwiSaver employee details (KS1) form and the KiwiSaver new employee opt out request (KS10) electronically.
Find out more with these ir-File demonstrations from Inland Revenue.
Any business can register for ir-File, but Inland Revenue requires that only the business owner or a payroll supervisor register for the business.
Once registered, you can grant access to other people in the business.
Find out more about managing account access demonstration from Inland Revenue.
If you use ir-File to file and pay PAYE, your business can also offer its employees payroll giving –where they can donate money from their pay towards an organisation approved by Inland Revenue.
Find out more about payroll giving with Inland Revenue.
Making corrections to your EMS
If you need to correct a mistake in an Employer monthly schedule you’ve already filed, you can either file an Employer monthly schedule amendments (IR344) form or, if only a small number of amendments are needed, call Inland Revenue on 0800 377 772 to have corrections made over the phone.
A subsidy is available to all businesses paying less than $500,000 a year in PAYE and Employer Superannuation Contribution Tax (ESCT) to outsource their payroll services.
This is to encourage small businesses to focus more on growing their businesses and improving the economy than on paperwork that could be processed more quickly by a payroll professional.
The subsidy is worth $2.00 per payday, per payroll employee, and is paid directly to the payroll intermediary. The maximum subsidy is for five payroll employees.
In practice, many small businesses use payroll intermediaries rather than administer their own payroll.