Risk and Reward


    Employment Law Changes - 1 April 2011
    Changes to both the Holidays Act and the Employment Relations Act came into force on 1 April 2011.  These changes are intended to reduce compliance costs, increase business confidence in recruiting new staff as well as speed up the resolution of workplace disputes.  The main changes include:

    *  Employees will be able to cash in one week of their four weeks’ leave
    *  Employees who have irregular working hours and pay now have their holiday, sick and
        bereavement leave calculated on an average daily pay basis
    *  Employers and employees are able to agree to transfer taking a public holiday to another
        working day
    *  The minimum wage increased from $12.75 to $13.00 from 1 April, while the training and new
        entrants’ minimum wage will raise from $10.20 to $10.40, effective as of the same date
    *  The 90-day trial period is being extended to all employers (currently limited to those with less than
        20 employees).  From 1 April employers and employees can enter into an employment agreement
        which provides for a trial period of 90 days or less.  During the trial period the employer can dismiss
        the employee without risking a personal grievance
    *  Employers will have to keep detailed personal files for each employee.  These files must contain
        signed copies of employment agreements, other terms and conditions, handbooks, as well as any
        intended agreements (even where these have not been agreed to by the employee).  These
        documents must be available to employees on request.  Employers have until 1 July to get their files
        up to the new standard.  We estimate that a good number of our clients will have some work to do
    *  Union representatives will need an employer’s permission to enter the workplace
    *  Employers will be able to communicate with  employees during collective bargaining
    *  Minimum requirements establishing a fair and reasonable dismissal process will be set out in the
        Act and employers will have a much clearer process to follow.  This is great news for our employer
        clients, who can be fearful of dismissal processes being scrutinised for minor defects
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    ACC Levies, No Claims Discounts and Experience Rating  

    Government is introducing experience rating into the ACC levy system on 1 April 2011.  Here’s how it is likely to work:


    *  Small employers (paying less than $10,000 per year in work related levies) will be entitled to a no-
        claims discount
    *  Larger employers (paying more than or equal to $10,000 per year) will be part of an experience
        rating programme.  This programme will reflect both the employer’s and its industry’s performance
        in preventing injuries and claims and could create an increase or reduction in levies of up to 50%!

    Clearly Government is trying to provide employers with a financial incentive to prevent injuries as well as make levies fairer by ensuring low-risk employers aren’t paying for high-risk ones.  Having said that, is a no claims discount or loading of minus or plus 10% (the majority of employers will fall into the ‘small employer’ category) really going to incentivise employers to get serious about workplace safety?
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    Minimising Shareholder Employee ACC Levies

    Changes were made last year enabling shareholder employees to be classified under their individual occupation rather than the business activity of their employer company.  This change can make quite a difference to the levies you pay.  For example, the levy rate for an office manager is much lower than that of a factory supervisor.


    We provide an ongoing ACC administration and advisory service to our clients on an agreed annual fee basis.  Let us review your cover structure and premiums, to ensure your cover is appropriate and levies are minimised. 
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    Company Tax Rates Dropping
    The company tax rate reduced from 30% to 28% from the 2011/2012 income year (for most companies, 1 April 2011).

    Building Depreciation Gone
    Depreciation deductions on buildings with an estimated useful life of 50 years or more disappear from the start of the 2011/2012 year (for most of you 1 April 2011).  New rules have been introduced to ensure the fit-out of commercial and industrial buildings continues to be depreciable.

    At Last - Some GST Simplification - Sales Of Land Now Zero Rated
    In the past, whether GST should be added or not to the sale of land, has sometimes been a complex matter.  From 1 April 2011 these transactions will be zero rated, as long as the following apply:

    *  The purchaser declares in writing that the property is to be used for a GST activity, and
    *  The purchaser is GST registered.

    Private Use Adjustments On Cars
    As of 1 April, the rules for calculating private use adjsutments on vehicles for sole traders and partnerships have been simplified ... sort of.

    By way of example, if you expect business usage to be 80%, then you simply cliam 80% of the GST on the cost of the car and any running expenses.  Sounds logical, some would say obvious (accountants have been suggesting this to Government for years).

    That was the simple bit.  If you underestimate your private usage by 10% or more, or if any GST over-claimed due to such underestimating comes to more that $1,000, an adjustment (not so simple) has to be made.

    But wait ... there's more.  There's a wash-up calculation when you sell the car and it's complicated.  In fact, we won't bore you with the detials in this newsletter.  To talk through your situation, give us a call.
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    Mileage Rates 

    The IRD recently announced an amendment to the mileage rate for both petrol and diesel fuel vehicles.  This has now been increased to 74 cents per kilometre.  This rate applies to the 2011 income year (for persons with a standard balance date, this will be from 1 April 2010 to 31 March 2011). If you have a non-standard balance date the rate applies from the beginning of your 2011 income year.

    You can use this rate for up to a maximum of 5,000 km of work-related travel per year.  For distances greater than 5,000 km, you must keep a record of actual vehicle expenses.

    As the Commissioner’s mileage rate may not reflect the true cost of running a vehicle you may prefer to use the true cost or logbook method for claiming vehicle expenses.  A further alternative is the AA mileage rates.


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    Bentley's House of Coffee and Tea, Tucson, AZ   

    Redundancy Tax Credit

    If you have been made redundant, you may be entitled to some financial support.  The redundancy tax credit (RTC) was introduced to make it fairer for people who are pushed into a higher tax bracket when they receive a lump sum redundancy payment.  The redundancy tax credit, which was to have ended on 31 March 2011, has now been extended to 1 October 2011.  If you would like to apply for the redundancy tax credit please do not hesitate to contact us.  Alternatively, you can lodge a Redundancy Tax Credits (IR 524) form with the IRD and provide documentation which clearly shows the amount of the redundancy payment you received. 


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    Revolution Books, New York

    Employment Matters 

    The penalty for not being able to produce complete wage records was previously $10,000.  But in future, it could well be that that is increased to $20,000.

    To get an idea of the types of information that are required, you would need to refer to Section 81 of the Holidays Act 2003. 

    However, from a practical viewpoint, these were items highlighted by a labour inspector and were in addition to the employment contract:

    *  Exact start (and, if appropriate, finish) date(s) of employment
    *  Accurate and complete records of the following:

    Wages - Hourly wage rate(s) throughout employment period:

    *  Specific days and hours worked
    *  A breakdown of hours into ordinary and overtime
    *  Gross Pay / PAYE
    *  Net Pay
    *  Allowances paid, taxable and non-taxable
    *  Any deduction(s) made, and the reason(s) for same

    Holidays - Public

    *  Specific dates and hours worked (if any)
    *  Dates not worked
    *  Gross pay
    *  PAYE
    *  Net pay
    *  Allowances paid, taxable and non-taxable

    Alternative holidays taken - Alternative holidays paid out, if any, including amounts and dates paid Annual:

    *  Dates holidays taken
    *  Gross pay for holidays taken
    *  PAYE
    *  Net pay for leave taken
    *  When holiday pay payment(s) were made
    *  Cumulative running total record of entitlements and leave taken

    Sick leave and Bereavement leave

    *  Dates leave taken
    *  Gross pay for leave taken
    *  PAYE
    *  Net pay for leave taken
    *  When sick leave and bereavement payment(s) were made
    *  Cumulative running total record or entitlements and leave taken

    Redundancy provisions (if any), including method of assessment

    *  Dates/times/amounts of funds disbursed to date
    *  Proposed payment plan for any sum outstanding

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