Elevate CA Blog

 

Employers have until 1 July 2011 to bring personnel files up to date for each employee. 

The majority of employers already maintain personnel files for each employee – but many do not meet the new standard under the recent amendments to the Employment Relations Act 2000.  Many personnel files that I have seen contain little more than the original job application and CV and a copy of the signed employment agreement.

 

But from 1 July, here’s what must be contained in each personnel file: 

• Signed copies of employment agreements;
• Copies of intended employment agreements that have been provided to employees – even if they have not ultimately been agreed;
• Copies of any policies, handbooks, terms or conditions that apply to the employee.

 

In theory Labour Inspectors are charged with ensuring compliance with these new requirements.  But it doesn’t seem very likely that they’ll come knocking on the door.  More likely, non-compliance would come to light if there was an employment relations problem that found its way to mediation or to the employment relations authority.   In those circumstances, non-compliance is not a great look.  And on that note, maximum penalties for non-compliance have increased to $20,000.

We recommend that employers go further than the new minimum requirements and include the following documents in each employee’s personnel file – and that these documents are also scanned and saved electronically.

 

Recruitment

• The job advertisement
• Intended position description
• Job application and CV
• Interview notes
• References and reference check notes
• Any skills testing you may have conducted pre job offer
• Any intended employment agreements provided to the employee.  Be mindful that under the recent amendments to the ERA, an employer who provides an employee with a defective employment agreement is liable for a penalty
• Any correspondence or notes in relation to negotiating amendments to the intended agreement
• A signed copy of the final letter of offer and employment agreement along with any signed variations over time
• Copies of any policies, handbooks, terms or conditions that apply to the employee
• Employee contact details, emergency contact details
• Signed IR330 form
• Copy of the KiwiSaver information provided along with any covering letter
• Any correspondence in relation to KiwiSaver – including any opt-out form

 

Induction

• Copy of the induction programme followed
• Any induction material provided to the employee

 

Performance Reviews

• If a trial period applies, copies and notes from the 30, 60 and 90 day reviews
• Copies and notes from periodic performance reviews
• A record of any career development plans agreed
• A log of any training undertaken

 

Salary

• Notes of any salary reviews
• Notes from any meetings or discussions around salary
• Any correspondence relating to salary or salary increases

 

Disciplinary

• A record of any disciplinary correspondence, interview notes,  investigations, warnings or mediation records
• Any grievance forms, records of meetings and correspondence in relation to any grievances

 

Termination

• Letter of resignation
• Termination notice if applicable
• Notes from any exit interview
• Reference provided

 

 

And of course, proper leave and pay records must be also maintained.  Remember also that the contents of a personnel file must be made available to your employee on their request.

 

 

 

As usual on budget day, it’s all ears on the live stream at Elevate CA. Here are our first impressions and some initial comment as Bill English reads Budget 2011 …

 

2:05pm

Bill English is explaining the theme of Budget 2011. This will be all about building savings and investment because as a country we need to save more, spend less and reduce our reliance on foreign debt.

 

Sounds sensible so far.  But a big ask in the context of last year’s big tax cuts and the underwhelming growth since then. Especially at a time when the country is also screaming out for investment in schools, faster broadband, better transport infrastructure and an improved national grid.  And of course rebuilding our second largest city.

 

2:12pm

John Key and Bill English are masters of public relations. Remember how the case was made for massive changes to the tax system ahead of last year’s budget?  It needed to be done, but who else could have increased GST to 15% with barely a whimper of protest?

 

This year the pre-budget rhetoric has been around the need to balance the books and get back to surplus. As we listen to the live stream, this point is coming through loud and clear. But the point I’m not hearing is that perhaps those big deficits wouldn’t be as severe if not for the generous reduction in the top personal tax rates in last year’s budget? 

 

2:15pm

KiwiSaver.  Bill English is now getting onto the much anticipated KiwiSaver announcements. 

 

Personally, I’m no fan of KiwiSaver.  To me it’s a meal ticket for the funds management industry. I’d rather see KiwiSaver funds invested as guaranteed loans to the NZ Government – receiving the same rate of interest earned by the foreign lenders to the government. What better way to reduce the country’s reliance on overseas debt than for the government to borrow $8 billion (the amount already in KiwiSaver) from individual Kiwis rather than from foreign lenders?

And what better way to retain in NZ some of the massive interest payments that flow out of the country? Government guaranteed, no fees – and I’ll bet the investment would outperform the average of KiwiSaver funds after fees too!

 

But of course that is NOT what we’re hearing right now in the live feed.

What we ARE hearing is that the $1,000 kick start KiwiSaver contribution will remain. But the annual $1,043 KiwiSaver tax credit is to be halved to $521. In addition, both the minimum employer and the minimum employee contributions will increase from 2% to 3%.  And as an unexpected detail, the employer contribution will no longer be tax free. 

 

The idea is that the mix of contributions to KiwiSaver accounts will change with less coming from the tax credit and more coming from both individuals and employers. The rationale is that there is no benefit in the government borrowing $1 billion per year offshore only to deposit that amount to individual’s KiwiSaver accounts. That is no different from you or I borrowing $1,043 from BNZ and depositing it at Westpac then kidding ourselves that we’re saving.

 

This does seem sensible, but just a thought: Surely for KiwiSaver to be sustainable it ought to stack up on its own merit without the government and employers having to incentivise savers with cash?

 

2:19pm

Working for Families (WFF). The definition of income will be further widened to include more fringe benefits provided to employees when calculating WFF tax credits. Also the threshold for reduction in entitlement will drop from $36,827 to $35,000 so families with incomes above this threshold will receive fewer tax credits. However families below that income threshold will apparently be better off by around $7 a week. Changes will be staggered in over four steps from 1 April 2012 affecting around 387,000 families.

 

The idea is that WFF should be better targeted to lower-income families who have a greater need for assistance.  But it will be less generous to families higher up the scale. This seems reasonable in tough times. But I wonder if a steeper abatement of WFF entitlement might create a disincentive for families to increase their income?

 

2:23pm

Student Loans. There will be restrictions on student loans for those over 55 and some additional measures to manage those with overdue payments. 

 

I can see the need to cut back on making student loans that aren’t ultimately recovered – but I wonder about the wisdom of targeting students over 55. After all, as a country we’re asking people to work longer – and as the population ages we’ll desperately need older people to be part of the workforce. But with many older workers unable to continue in physical jobs into old age, shouldn’t we be actively encouraging those people to retrain so they can continue to contribute positively for another decade or more?

 

2:25pm

Unlike last year’s budget, there are no major changes to the tax system that will affect small to medium Kiwi businesses. But there are some less radical changes being announced:

 

Foreign Banks.  Bill English is announcing changes to thin capitalisation rules for foreign-owned banks increasing the equity they must have in their businesses.

 

This reduces the scope for these banks to channel their profits offshore and out of the NZ tax net which has got to be a good thing for the rest of us.  I doubt any votes will be lost over this change!

 

High value mixed use assets.  The tax treatment of mixed-use assets used for both private and business purposes will be reviewed. The ability of taxpayers to claim tax deductions on high-value assets such as yachts and holiday homes that are both rented out and used privately will be reviewed – although the exact details are yet to come.

 

Livestock rules for Farmers

Under current rules, farmers usually value their livestock for tax purposes under one of two valuation methods which can result in quite different values. At the moment, it is possible for a farmer to switch back and forth between the two methods resulting in increases in market valuations going untaxed while tax deductions are possible for decreases in value. Some yet to be announced changes are in the wind.

 

2:35pm

Our wrap up

All in all, this budget shows good leadership. When was the last time an election year budget faced down sacred cows like KiwiSaver, Working for Families and Student Loan entitlements?  Regardless of political persuasion, I think many people will at least respect the fact that these changes have been announced before the election rather than shortly afterwards.  

The idea that as a country we need to live within our means is one whose time has come.  Like last year’s budget, this one has been preceded by some skilled PR making the case for potentially unpopular but prudent changes. 

None of the changes we have just heard will affect people pre-election.  Kiwis will make their own choices to accept or reject this budget in the polling booths on 26 November.

 

 

 

Many people have asked how Hayley is getting on – and whether her baby has arrived safely.  Well now we can answer that question.  Maia Lucy Lenihan was born on 7 April weighing in at a whopping 7 pounds 15 ounces.  Mother and baby are happy and well.

Most accountants have the date 7 April etched into their memory as terminal tax day – but from now on this will be a big day for Hayley for more important reasons!

Hayley will be returning to Elevate CA from the beginning of July – and we’re looking forward to having her back amongst the crew.

Check out Hayley’s full profile here >>>.

 

 

 

 

 

Business owners will be aware that from 1 April, the 90 day trial provisions have been extended to cover all workplaces.  Previously this provision was available only in workplaces with fewer than 20 employees.

But many business owners may not be aware of this potential snag:

If you wish to include a 90 day trial period in your employment agreement, you must ensure the employment agreement is signed before your new employee steps foot on your premises to start work.

 

Consider the recent Employment Court case Smith v Stokes Valley Pharmacy (2009) Limited. Heather Smith was provided with a draft employment agreement by her prospective employer on 29 September which included a 90 day trial period.  She accepted the position on the basis of the draft employment agreement, and started work on 1 October.  But she did not actually sign her employment agreement until the next day – 2 October.

 

If everyone had lived happily at Stokes Valley Pharmacy for at least 90 days, we would have no cause to discuss the nitty gritty of Heather Smith’s employment on this page.  But all did not go well – and Heather Smith was dismissed on 8 December under the 90 day trial provision in her employment agreement.

Stokes Valley Pharmacy relied on the 90 day trial period for comfort that Heather Smith would not be able to bring a personal grievance in respect of the dismissal.  But after her dismissal, she did attempt to lodge a personal grievance.  And despite the fact that Heather Smith and Stokes Valley Pharmacy had a signed employment agreement with a 90 day trial period, the Employment Court ruled that she was entitled to bring a personal grievance. 

The Court stated that under the Employment Relations Act, trial periods only apply to “an employee who has not been previously employed by the employer”.  Because Heather Smith had worked for one day before signing her employment agreement, she was an existing employee at the time she signed up for the 90 day trial period.  And therefore Stokes Valley Pharmacy could not rely on the trial provisions.

There were some other complicating issues in the Heather Smith case, but the one point from the case I want to make is this:

Regardless of whether you include a trial period, always ensure you have a signed employment agreement with a new team member before they step foot on your premises to start work for the first time. 

And if your new team member has worked even for one day before signing onto the 90 day trial period – or if a past employee applies for a job in your business – then the 90 day trial provision cannot be used.

As best practice, we would suggest you go one step further and make it very clear at the time a job offer is made that it will be subject to a 90 day trial period.  Remember that the 90 day trial period provisions do not apply by default – a trial period must be explicitly agreed up front and clearly stated in the employment agreement.

 

 

 

 

For most of our clients, 31 March is the end of the financial year – and time to start organising your records for the year.  Here is the process for getting your financial statements compiled this year: 

Traditionally, accountants send annual questionnaires around this time as a guide to help their clients compile complete financial records.  Last year we trialled on-line electronic questionnaires which tailored themselves to your specific business by only asking you questions that were relevant based on your answers to earlier questions.  For example if yours is a service business, you’re not going to be asked about closing stock. 

This trial was largely successful and most clients reported that it made the process simpler.  And we have made some changes to the system in response to some of the issues that arose during the trial.  So the on-line questionnaires are part of the new normal this year.  But if you’re using a dial-up internet connection, this process might be frustrating – so let us know and we’ll send you a paper based document instead. 

Once you have completed your on-line questionnaire – and we have received any supporting files and information, we’ll be in a position to start working on your end of year financial statements.  Here’s how it works at our end:

Our aim is to meet your particular deadline.  If you’d like your annual work completed within a certain timeframe or in a certain month, just let us know.  We can meet your deadline within reason whether you are thinking of selling, admitting a shareholder, if the bank needs your accounts, if you need an immediate accurate picture of your tax going forward – or if you just can’t sleep until your year end is sorted.

 

We don’t start work unless we have all the information and records needed to finish the job.  Picking up and putting down work is inefficient – and it opens up the possibility for errors.   

 

Once we have started a job, we aim to have it finished quickly and efficiently – almost certainly within the month it was started.

 

Once we have prepared draft financial statements and a draft tax position, we will typically email you a copy of the drafts and make a time to meet with you to run through the results before they are finalised.  This meeting is often where the real value is added. 

We’re looking forward to working with you in preparation of your 2011 financial statements – and of course on all the other projects that continue regardless of the annual compliance season.