image

Period End or Actual Payment Dates

This article describes the differences between using period end and actual payment dates in Ace Payroll.

A very brief summary of the problem is

  • The IRD use the actual date payment is made to determine the period in which returns are required.
  • All other payroll functions logically require a period end date. These include leave accruals, accountants costing information, the determination of tax deductions when there is a tax change, and employee, union and government department enquiries about wage payments.

Ever since its release in the mid 1980's, Ace Payroll stores all wage data based on the period end date.

In the mid 1990's the IRD introduced bi monthly PAYE payments for larger employers, requiring them to pay their PAYE for the second half of each month by the 5th of the following month, and in 1999 they required those same employers to lodge their electronic monthly schedule through the internet by the same date. Interestingly those smaller employers who choose to file electronically have until the 20th to lodge their returns.

In determining which payments are to be included in returns, the IRD rule that the actual date of payment decides the month's return in which the wages are included.

To accomodate this ruling and give them a little more time in which to lodge returns, some employers change the period end date in Ace Payroll to show the actual payment date. Other employers do the same thing to quite legally delay the payment of one periods PAYE for a month.

Whilst achieving the above objectives, this then causes other problems. The pay is not correctly described on payslips, their wage records do not clearly reflect the correct pay periods, some leave entitlements are incorrect, and for pay periods around the 31st March the tax is sometimes calculated incorrectly.

Solutions

Our developers put considerable time into analysing this issue, and implemented three quite different solutions.

Continue using the period end date
This is by far the best solution for employers that file with the IRD on the 20th of the month, and for whom it is not important to delay the payment of some PAYE for a month.

This is the system we use ourselves for wage records at Ace Payroll.

Use the actual payment date and change the wording on the payslip
This is the solution adopted by most of our competitors. Simply set the pay period to the actual payment date, and change the wording on your payslips. Then all IRD reports use the pay date to determine the relevant period.

Ace Payroll contains user definable wording on the payslips to accommodate this system. This feature is described in an associated FAQ.

Whilst a satisfactory short term quick fix, be aware of the following

  • Leave entitlements will be incorrect if a leave anniversary falls between the period ending date and the actual payment date.
  • Tax deductions will be incorrect under some circumstances spanning the end of the financial year. For example, if a period ends on the 30th March, but the payment date is set to 3rd April, tax will be calculated at the rate for 3rd April rather than 30th March.
  • If costing your wages under an accrual accounting system the results are misleading as the expenditure is not recorded in the period in which it is incurred.

Account for both dates in your payroll records
Ace Payroll has an additional module that stores the actual pay date as well as the period end date.

All wages continue to be calculated using the period end date, but the relevant IRD returns use the actual pay date.

The only problem with this solution is you effectively end up running two sets of wage records, which causes major problems reconciling the employer monthly schedule to other reports.

This feature is not included in our standard Ace Payroll because of the confusion it introduces. Do not hesitate to call if you need the module.

Link to some very confusing legislation on this subject.

More on Pay Calculation

Pay Rate Setup
You can have a maximum of 20 pay rates loaded in Ace Payroll more..
Regular Payroll Procedures
The seven operations performed each pay period are listed in the order performed more..
Child Support Variation Codes
A child support variation code is used if the amount deducted is different from the usual deduction more..
Overwriting PAYE Deductions
How to overwrite PAYE with your own value more..
Public Holiday Worked
Use this method for an employee who works at any time on a public holiday more..
Checking Previous Period Is Filed
When I go to calculate my regular payroll it shows last weeks pay date. What is wrong? more..
One Off Payments
How to make a one off payment for paying bonuses, holiday pay and other payments outside the normal cycle more..
Cash Rounding Activation
Control whether to round an employee's nett pay for coin split rounding purposes more..
Extra Pays
Extra Pays are lump sum payments include bonuses, commissions, backpay, retiring or redundancy payments more..
Recording Hours Worked Each Day
How to define a pay rate to represent each day of the week more..
Pay Rate Change Mid Period
There are times you need to pay an employee two different rates for the same period more..
Minimum Wage
From 1st April 2016 the minimum adult rate is $15.25 an hour, and applies to all workers 18 years and over more..
Alphabetical Index
The Ace Payroll alphabetical index provides links to all documentation more..
Ace Payroll FAQ Contents
All the most common Ace Payroll questions grouped by categories in a short table of key words more..
Ace Payroll Frequently Asked Questions
All the most common questions we are asked at Ace Payroll listed in a question format and grouped by category more..

More on Pay Frequencies

Bi Monthly Date Calculation
A bi monthly pay frequency means there are 24 pay periods a year - two a month more..
Period End or Actual Payment Dates
The differences between using period end and actual payment dates in Ace Payroll more..
Changing All Pay Frequencies
How to change all employee pay frequencies from say weekly to fortnightly more..
Multiple Pay Frequencies
You can use multiple pay frequencies. Each of the frequencies are processed as different pay runs more..
Alphabetical Index
The Ace Payroll alphabetical index provides links to all documentation more..
Ace Payroll FAQ Contents
All the most common Ace Payroll questions grouped by categories in a short table of key words more..