Payroll advisory: Opportunity for accountants despite complex legislation
Due to the complexity of the Holidays Act and changes in the way the Government is enforcing compliance, payroll advisory has become a huge opportunity for accountants if they can overcome a few barriers to entry, writes Quentin McKie from Ainger Tomlin Chartered Accountants.
While the Holidays Act hasn’t changed significantly since 2003, the Ardern Government is taking a firm hand in enforcing it.
This change has arrived in the way the Ministry of Business, Innovation and Employment interprets the Act, and that’s resulted in an increased number of businesses having their payroll processes scrutinised.
For accountants and other firms seeking to specialise in payroll advisory, this increased attention on compliance represents an opportunity.
That’s because New Zealand business owners are becoming more aware of their need to follow the letter of the law, while at the same time the legislation itself remains as challenging to navigate as ever.
To understand why payroll advisory has become so sought after, you only need to look at the risks business owners currently face should they get things wrong.
While there is currently a six-year limitation in place on arrears claims, non-compliance cases within that timeframe will have to repay arrears to employees. In addition, non-compliant organisations face penalties up to $20,000 per breach, while non-compliant individuals face penalties of $10,000 per breach.
Understanding the Holidays Act is no small feat
With such a high level of risk, there’s no wonder payroll advisory is being touted as a huge opportunity for accountants. Unfortunately, this requires a thorough working knowledge of a very complicated piece of legislation.
Here are just a few examples of the complexity involved in the Holidays Act:
- The Act only refers to four weeks of leave (not days or hours) for full-time employees, and the employer must prove how this leave was allocated and paid.
- There are multiple types of leave, as well as various rates of pay according to different events
- An employee who is on unpaid leave for greater than one week may have their annual entitlement to leave reduced. If the employer does nothing, their annual leave rate may be underpaid. This can also apply to public holiday leave.
Employers and their payroll advisors must also navigate how to determine public holidays entitlements, what payments should be included under ‘gross earnings’, and figure out which averaging formula to use (such as for relevant daily pay, average daily pay, average weekly earnings or ordinary weekly pay).
And that’s before considering how to provide the correct entitlements when an employee’s work pattern changes.
Keeping up with the Joneses: Knowledge is power in payroll advisory
The knotty nature of the Holidays Act means employers are willing to pay extra to receive regular payroll compliance checks and receive timely advice from their advisors, but that doesn’t mean accounting firms should all be jumping head first into offering these services.
The hard truth is that the education challenge faced by business owners is increased for payroll service providers, who, like Ainger Tomlin, must invest significant resources in regular training in the form of educational webinars and in-person courses.
For those considering the journey towards payroll advisory, there are good learning opportunities available with the Chartered Accountants Australia & New Zealand network, including webinars on running payroll and understanding the relevant holidays legislation.
You might also consider attending courses through Industry Training Organisations, as well as some law firms that offer specialised training courses.
We estimate that a firm seeking to offer these services would be likely to add around $5,000-$6,000 per advisor to their training costs – putting a serious dent into any estimated opportunity costs represented by payroll advisory.
While the numbers stack up for Ainger Tomlin, that doesn’t mean they will in every case, and so a thorough appraisal of the opportunity should be your main priority.
On the other hand, there may be ways for some accountants to add value to their services without going the distance in spending big on payroll advisory-related training.
One option would be to seek partnerships with organisations currently offering payroll services. In this case, either a cost-sharing or fee-for-referral model is a likely outcome.
Whichever approach you take with payroll services and advisory, we recommend you consider the needs of your clients first and foremost to make sure you are adding real value to the relationship before considering how it might bring in more revenue.