EMPLOYMENT NEWS, JUNE 2011

Employment Relations Amendment Act 2010

In the December 2010 issue of Hesketh Henry’s Employment News we set out the extensive changes to the Employment Relations Act 2000 and Holidays Act 2003. Most of the changes came into force on 1 April 2011 but from 1 July 2011 a further change takes effect.

From 1 July 2011, an employer must:

• Retain a signed copy of an employee’s individual employment agreement, or the employee’s current conditions of employment (i.e. if there is no written employment agreement);

• Also retain copies of any intended agreement provided to the employee (even if the employee has not signed or agreed to it); and

• Provide a copy of the individual employment agreement or intended agreement to the employee if requested.

A breach of these requirements may result in a penalty. Penalties have doubled to $10,000 for individuals and $20,000 for companies.

We note that prior to 2 October 2000 there was no obligation to provide individual employees with agreements in writing, unless the employee requested one. Employers must ensure that there is a record of current terms and conditions on file for those employees. However from 2 October 2000 all employees not covered by a collective agreement must have been provided with their own individual employment agreement in writing. Employers need to ensure that a copy is on the file, signed or not. From 1 July 2011 all employment agreements must be signed and a copy kept.

Redundancy Tax Credits

Where an employee receives a lump sum redundancy payment, it may push his or her earnings to a higher tax bracket. To neutralise this, a redundancy tax credit was introduced and applied to redundancy payments received between 1 December 2006 and 31 March 2011.

The Minister of Revenue recently announced an extension to the redundancy tax credit to cover redundancy payments received on or after 1 April 2011. The law has not yet been amended to allow this extension, which means the IRD cannot yet pay out these tax credits, but eligible people may now apply.

KiwiSaver

The 2011 Government Budget announced several changes to the KiwiSaver scheme with the aim of reducing Government subsidies and replacing them with increased private contributions.

The Taxation (Annual Rates and Budget Measures) Bill, including these changes, was introduced to Parliament on 19 May 2011 and received royal assent shortly after on 24 May 2011.

The changes to KiwiSaver include the following:

• Member tax credits (paid in June each year) will reduce from a current maximum of $20 a week (up to $1042 per annum) to $10 a week (up to $521 per annum). The reduction will apply to contributions made on or after 1 July 2011;

• From 1 April 2012 the tax-free status of employer contributions to KiwiSaver and other complying superannuation funds will end. Instead, these contributions will be subject to Employer Superannuation Contribution Tax (ESCT) and will be taxed at the employee’s marginal tax rate;

• From 1 April 2013 the minimum employee contribution rate will rise from 2% to 3% (for existing and new members). Members will also retain the option to contribute at a higher rate of 4% or 8%; and

• From 1 April 2013 the compulsory employer contribution rate will rise to 3%.

In effect, the Government is removing its indirect contribution by removing the ESCT exemption on compulsory employer contributions and lowering its direct contribution through the reduced Member Tax Credit rate. Its aim is to decrease public contributions to KiwiSaver accounts and increase private saving.

Increase in Parental Leave Payments

On 1 July 2011, the Parental Leave and Employment Protection (Rate of Parental Leave Payment) Regulations 2011 will take effect, amending the Parental Leave and Employment Protect Act 1987 and increasing the parental leave payment by $17.20 per week, to the lesser of:

• $458.82 per week; or

• The greater of 100% of the employee’s ordinary weekly pay before the commencement of the parental leave and 100% of the employee’s average weekly earnings.

Increasing Choice in Workplace Accident Compensation

The Department of Labour has released a discussion document which seeks feedback and
comment on proposals for:

• Extending the Accredited Employers programme and offering other risk-sharing options; and

• Introducing choice in the ACC Work Account.

The discussion document can be found on the Department of Labour website at www.dol.govt.nz together with information on how to make submissions or provide your feedback. Submissions must be received by 5 pm, 15 July 2011.