This will be a short article, but I just needed to highlight why it is dangerous to use ChatGPT for interpreting legislation or law (for payroll tax and employment law), as I am now seeing this crop up again and again. The use of AI should be seen as a good thing for payroll, as long as it is used as a tool to aid payroll rather than replace it. I reference ChatGPT throughout this article, but the principles apply to any AI tool, including Copilot.

We are now receiving questions through the NZPPA PayTech Adviceline that are based on information provided by ChatGPT. This is not a trusted source because it depends on where it gets its information. Yes, you can refine your questioning to narrow where it looks and what references it uses, but this can still yield the wrong results. The problem here is that the user treats the results as correct and bases payroll decisions on them. This is dangerous because, as a critical business system, payroll can have far-reaching consequences in terms of money, employee impact, and the time required to resolve non-compliance issues created by using ChatGPT’s decisions.

One of the worst areas we see ChatGPT used is with the Holidays Act, which is overly complex (one of the reasons it is in the process of being replaced, wait two+ years for that). Now, payroll practitioners honestly need intermediate to advanced knowledge and understanding (the Act has been in place for over 20 years) to apply it to their workplace requirements and payroll systems to ensure compliance. So, payroll should know the fundamentals, but using ChatGPT for decision-making in that regard creates a substantial risk that should not be present in payroll.

Just to show you I am not an anti-AI payroll dinosaur (I admit to being a payroll dinosaur and am proud of it), I used ChatGPT to give me, in bullet-point form, the reasons why it should not be used to interpret legislation and law in payroll decision-making. So yes, the following bullet points are from ChatGPT, but I then went through and removed some that were just not relevant (to payroll) or were plain wrong. I then refined and changed some of the others. The useful part is that it gave a good range of reasons, and this is where ChatGPT can be particularly helpful for payroll, but again, only as a tool, not as a decision-maker.

Reasons ChatGPT should not be used in the interpretation of legislation or law for payroll decision-making:

• ChatGPT is not a source of New Zealand law and cannot provide authoritative interpretations of New Zealand legislation, regulations, Employment Relations Authority decisions, or court judgments.
• New Zealand payroll legislation is complex and interconnected, often requiring consideration of multiple laws, including the Employment Relations Act 2000, Holidays Act 2003, KiwiSaver Act 2006, and tax legislation administered by the Inland Revenue.
• Legislation and official guidance change regularly, and ChatGPT may not reflect the most recent amendments, government guidance, case law, or payroll rulings.
• Many payroll questions require legal interpretation rather than simple rule application, particularly where legislation is unclear or subject to differing interpretations.
• Payroll compliance often depends on specific facts and circumstances, such as employment agreements, workplace policies, collective agreements, roster arrangements, and historical employment practices that ChatGPT cannot fully assess.
• ChatGPT can produce incorrect or fabricated information, including references to legislation, legal principles, or case law that do not exist or are inaccurately described.
• New Zealand payroll law contains areas of significant complexity, particularly holiday pay, relevant daily pay, average daily pay, leave entitlements, and remediation calculations.
• Errors in interpreting legislation can lead to substantial financial consequences, including employee underpayments, remediation costs, penalties, interest, and reputational damage.
• Employers remain legally responsible for payroll compliance, regardless of whether decisions were influenced by AI-generated advice.
• Only the courts, the Employment Relations Authority, and relevant government agencies can provide authoritative interpretations of legislation.
• Official guidance from government agencies should take precedence over AI-generated responses, particularly guidance issued by Inland Revenue and the Ministry of Business, Innovation and Employment.
• ChatGPT may be useful for research, drafting, and identifying issues, but all legislative interpretations should be verified against the legislation itself, official government guidance, and qualified legal or payroll professionals.

(Source: ChatGPT)

The payroll professional who holds the payroll function together should have been trained, as part of their professional development, to develop a core understanding of how legislation and law are interpreted and applied in their payroll environment. In turn, having this level of skill allows them to use AI more fully in payroll. The bottom line is that the liability sits with payroll (the employer); you cannot pass the buck to ChatGPT!

In conclusion, ChatGPT and other AI tools may be used to assist with payroll research, drafting, and information gathering. They must not be relied upon for the interpretation of legislation, employment law, tax law, or regulatory requirements. Any legislative interpretation or compliance decision-making must be verified against the relevant legislation, official government guidance, and other qualified verified sources.