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

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

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.