Preparing for Christmas payroll – what you need to know

27 October 2021

Payroll can get a bit more complex during the silly season, so we’re sharing some special tips for you.


We discuss common payroll pain points and things you should be aware of leading up to the summer break. We’ll touch on points on how to get through and how to run your Christmas pay and key things to remember.


Our Top Tips are:

  1. Getting it sorted early
  2. Closedown periods – what are the rules
  3. Running your Christmas pay — key things to consider
  4. Working out how much annual leave a team member will accrue by Christmas
  5. Bonuses and paying out leave
  6. Working on a public holiday
  7. When are banks open to process payments?


Now it’s time to get into the detail and make sure you and your payroll team are ready this Christmas.


Get Sorted Early

Leading up to Christmas is often a busy period and the last thing you want to worry about on Christmas Eve is paying your people! Communicate with your team early and get your Christmas break roster locked in. This way you can organise pay cycles and annual leave. Remember, keep it simple!


You’ll want to ask yourself some of the following questions to help prepare:

  • Are we closing down during Christmas and New Years?
  • Who’s taking leave? What type of leave are they taking? (e.g. annual leave or leave without pay)
  • If you’re open, who’s working and when?
  • When are the public holidays? Will anyone be working on those days?
  • Do I need to run multiple pays in advance of Christmas?


Once you’ve covered off all these questions, and worked out a plan, then it’s important to let your team know, especially if there’s any changes to the norm.


What are the rules in Closedown periods?


Closedown periods are common in a lot of workplaces, and differ between industries and organisations. Some organisations opt to closedown, others decide to stay open. What’s important to remember is that if your business has an annual closedown, you need give your people at least 14 days written notice. This is so the appropriate leave arrangements can be put in place and payroll can be submitted and ticked off.


When you closedown, employees will need to do the following:

  • take annual leave while your business is closed down, and
  • take leave in advance or leave without pay (agreed) if they don’t have enough annual leave available to cover the closedown period.
  • This is only applicable for employees who are entitled to annual leave. Under the Holidays Act, employees not entitled to annual leave at the time of the closedown must be paid 8% of their gross earnings as at the start of the closedown date and their anniversary date for annual leave reset.


Closedown periods often include public holidays. Remember to pay your team if the public holiday falls on a day they’d usually work. Employment NZ has more useful information and tips about closedown periods and annual leave.


Key things to consider when running your Christmas pay


  • There’s a few things you’ll want to consider when running your Christmas pay:
  • Make sure you’re running a regular pay cycle and don’t mix things up. Set it up in advance so you can manage different periods of leave appropriately.
  • Ensure the pay period matches the dates your team member is being paid for.
  • It’s common to be considering paying your team leave in advance or leave without pay during the Christmas period. Make sure you and your team are aware of the different types of leave available and how they can use them. Things like Leave Without Pay can add extra steps to your payroll.
  • If it all lines up, then you’re good to go. Hit go!


Working out how much annual leave a team member will accrue by Christmas


Everyone wants to know how much leave they’ll have by Christmas. Thankfully, we’ve got a friendly formula for you and your team to use if they’re on standard hours each week. This way you can work out their leave.


For team members on the same standard hours each week (e.g. 37.5 hours)


Here’s a formula to help you work out the amount the employee will accrue between now and Christmas.


[standard work hours] x [number of weeks until Christmas] = [sub-total hours]

[sub-total hours] x 4 = [total hours]

([total hours] ÷ 260) x 5 = [hours of annual leave accrued before Christmas]


For example, with a scenario:

Janet will accrue 14.4 hours of annual leave by the time she reaches Christmas. She’ll have 60 hours (8 days) of leave available to use over the Christmas and New Year’s period.


Note: Your leave balance in hours/days is an approximation only, it’s the leave balance in weeks that will always add to four weeks for every 12 months of consecutive employment. You can read more about leave in weeks here.


Bonuses and paying out leave

Christmas is a common time for businesses to pay out a bonus or cash up annual leave, generally as a lump sum (annual or special bonus). These are considered one off payments and you’ll want to make sure the correct tax is deducted. Most payroll systems should do this automatically for you. If not, here’s a basic guide:


Work out your employees income bracket (e.g. $48,001 to $70,000) and apply the tax rate for that income bracket to the bonus.


To do this:

  • Work out what your staff member has earned, before PAYE, over the last 4 weeks.
  • Multiply this figure by 13 (or 12 if they are paid monthly).
  • Add the bonus (lump sum) amount to the outcome above.
  • See what tax bracket this figure sits in (Inland Revenue).
  • Deduct the appropriate PAYE amount from the bonus.


Inland Revenue has detailed information about how to get this right, along with information about PAYE tax brackets and secondary taxes.


Tip: In some payroll software, you can reduce the Kiwisaver contribution rate for a specific pay, it could include a lump sum payment. The employee may request this one-off change and then revert back, as long as you agree. For example, if the employee is contributing at 8%, they could drop their contribution rate to 3% for this pay period.


It’s also the time of year for employees to request to cash up annual leave, also considered a lump sum payment. You can follow the same process as above.


A maximum of one week (of an employee’s four-week entitlement) can be cashed out every 12-months of continuous employment. Cashing up annual leave needs to be requested by the employee in writing, and agreed by both parties. The employer may say no. Employment NZ has some useful information about cashing up annual leave.


Working on a public holiday

To determine how your team should be paid when they work on a Public Holiday, you need to check if they usually work on this particular day.


  • If the public holiday is their normal working day, the employee should be paid time and a half for the hours worked plus they are also entitled to earn an alternative public holiday (day in lieu).
  • If it’s not their normal work day, the employee is only entitled to be paid time and a half for the hours worked.
  • An employee doesn’t need to work a public holiday unless they would normally work on this day and it’s stated in their employment agreement. Employment NZ have put together five employment tips for Christmas where they dive into public holidays and other common questions.


When are banks open to process payments?

Payments between banks aren’t processed on public holidays, for example Christmas and Boxing Day. The best way to manage this is to set up payments to go through early and avoid any doubt.


Outgoing and incoming payments:


For example, outgoing payments that normally happen on a Monday (Christmas Day and Boxing Day are observed on Monday and Tuesday 2021) won’t be processed until the next business day, Wednesday.


For incoming payments, you may see money coming through to your account earlier as organisations often setup payments to go through earlier during the Christmas period.

The art of delegation

11 August 2025
How often do you get to the end of a working day and wonder where the time went? Perhaps you never got to item 3 (or even item 1!!) on your to-do list. How can you solve this problem without working longer hours? The answer is very simple, but the art in the solution is where the gold is. The answer to free up time is to delegate more – either to existing team members, new people you recruit, or externally to outside contractors. However, if delegation were that easy, everyone would be doing it now, right? So, what is the art of delegation? We say art, because delegation is not an exact science; different approaches are needed depending on who the ‘delegate’ is. Time and effort are required to effectively pass on tasks to others. Often, the time the delegator needs to put in initially is greater than if they did the work themselves – that’s why so many people don’t delegate. The view that ‘it’s quicker for you to do it yourself’ holds you trapped and unable to be more productive and effective yourself. It also stops others from developing better ways to do things than you already know, i.e. if you teach them your way, then they can master that AND add their own value – two minds being better than one. Here are some essential principles to apply to help you to delegate (as opposed to abdicate!): Delegation Assess the task, issue to the right person and support - helps build trust and respect Be specific and crystal clear for greater communication Request they repeat back instructions, so you know you were understood, enabling higher productivity Set a time frame and request clarification that the task has been achieved, ensuring jobs are completed on time and are profitable Both parties to review - opens the door for future work Abdication Issue tasks to anyone and forget about it - shows distrust and a lack of respect Giving unclear and little information results in poor communication Don’t ask if you were understood - results in low productivity Don’t set a time frame – it can mean jobs are delayed and over budget Different expectations can result in disgruntled clients No review results in no future work Delegation is a skill to be learned; applying these principles consistently will ensure long-term success. “No person will make a great business who wants to do it all himself or get all the credit” – Andrew Carnagie Action list: Which tasks am I currently doing that I could delegate to others? What can I do with the time I free up? Who are the best people for me to delegate these to? (Make sure they want to do these as part of their career development). What is the best way to document what is expected and how it should be done? What support and review process is needed to ensure success?

Work vehicles? Stay on top of tax with logbooks

11 August 2025
Logbooks are useful records of business expenses relating to work vehicles and this is important when calculating what tax deductions you can claim. Depending on your business entity type, different tax rules apply when you use motor vehicles to earn income, and you might use a logbook to track expenses in different ways. Sole traders and partnerships can claim income tax deductions for motor vehicle expenses if the vehicle is used to help earn income for the business. If you don’t use the vehicle exclusively for business, you can’t claim 100% of vehicle expenses. You need to work out the business use of the motor vehicle to calculate what deduction you can claim. You can do this either by using a logbook to track actual costs or using a logbook over a test period to establish the average business usage. Companies are a bit different. Where company vehicles are used partly to earn income and partly for private use, vehicle costs associated with private use are liable for FBT. Companies can use logbooks to keep track of work-related costs and show either that the vehicles are work-related vehicles which don’t attract FBT where used for work purposes only, or that FBT is accounted for correctly where there is some private use of other vehicles. The logbook becomes a record of work-related use and of private use subject to FBT. Where a company restricts private use of the vehicle, a logbook is used as evidence that employees have complied with the restriction. Whatever type of business structure you have, we can advise you on keeping good records and understanding what you can claim.

Changes to KiwiSaver: How to get your business ready

11 August 2025
Major changes to KiwiSaver were announced in Budget 2025. The KiwiSaver voluntary savings scheme is aimed at helping New Zealand workers save for retirement or buy a first house. But with the rising cost of living, action was needed to make KiwiSaver fit for purpose and more fiscally sustainable as a savings scheme. How will these changes affect your employees and your small business? Let’s take a look at the details of these KiwiSaver changes. Changes affecting your employees First off, let’s outline how the initial changes announced in Budget 2025 will affect your employees and other Kiwi workers: Since 1 July 2025: Younger workers will qualify for government contributions: People aged 16 and 17 will qualify for government contributions, so long as they meet other eligibility requirements. Prior to 1 July 2025, members must be 18 or older to qualify. Government contributions to halve: The government KiwiSaver contribution will halve, reducing the maximum government contribution from $521.43 to $260.72 each year. High earners to lose government contributions: People who earn more than $180,000 of taxable income in a year will no longer qualify for government contributions. No change to 2025 government contributions: There’ll be no change to government contributions for the year ending 30 June 2025. These will be paid in July and August at the current government contribution rate. Changes affecting your small business Next, let’s lay out the KiwiSaver changes that will directly affect your business: From 1 April 2026: Employer contributions will rise to 3.5%: From April 2026, the default KiwiSaver contribution rates for both employers and employees will rise to 3.5% – up from 3%. Employees can choose to remain contributing at 3%: Employees who are members of the KiwiSaver scheme will be able keep their contributions at the current rate. They can apply for a temporary rate reduction from 1 February 2026, if they want to continue contributing at 3% from 1 April 2026. Employers can match the rate reduction: As an employer, you’ll be able to match your employee’s temporary rate reduction. Once your employee moves to a higher contribution rate, you’ll need to increase your employer contributions to the default 3.5% rate. Inland Revenue will notify you of this change. Younger workers will qualify for KiwiSaver contributions: People aged 16 and 17 will qualify for employer contributions. If they contribute to KiwiSaver from their wages, you will need to start making employer contributions. From 1 April 2028, the default contribution rates for employers and employees will rise again to 4% (up from 3.5%). Getting ready for the KiwiSaver changes These amendments to KiwiSaver could have a significant impact for your small business. Increased employer contributions will increase your payroll costs and stretch your cashflow, as will making contributions for younger workers in the 16 to 17-year-old age bracket. You'll also need to update your payroll software and processes, to ensure you’re making the correct contributions for the right people, at the right rates. 
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