Updated – Employee Movements – What Payroll Needs to Know

Author: David Jenkins, NZPPA CEO

At various times, an employee will move within the business, leave the business, or even leave the country. This could be with the same company, an associated company, or a new business.

NZPPA frequently gets questions on this, so here is an overview covering the main movements payroll will see and need to act on.

Type of move What does payroll need to do?
Within the business

Employees get promoted, move sideways, reduce hours or increase them; it’s just part of the employee lifecycle:

The key to an employee that is moving within a business is they are still in an employment relationship with the same employer, just the terms of that agreement may have changed (variation to agreement).

What payroll may need to check when the employee has moved within the business (has there been a change to the employee’s terms and conditions?):

  • Changes in agreed payments (base hourly rate, salary, allowances, bonus/commission, or incentives payments).
  • Changes to the employee’s week, work pattern, shifts, etc., so a new leave profile may need to be created.
  • Converting leave entitlement earned prior to the new agreed week if the week has changed to reflect the new agreed week.
One business to another

If an employee moves from one business entity to another, it will mean they will have a new employer and will be provided with a new employment agreement, so they are a new employee.

What should happen in payroll:

If no relationship between the old and new business (as an employer of the employee)

  • The business the employee left from MUST do a termination pay, paying any outstanding minimum entitlement (Holidays Act) and payments that have been agreed upon. No action is needed by the new employer other than treating the employee as a new employee.

Existing relationships between the businesses

  • As they are still two different legal entities and there is nothing in legislation allowing an employee to transfer leave entitlements earned under the Holidays Act from one employer to another, so payroll would still need to do a termination pay (to pay any minimum entitlements owed by law). If there are any agreed terms that the business is happy to have transferred, this could be an option, such as recognition of service, long service leave, additional annual holiday, or sick leave (of course in consultation and agreement with the employee).

One business purchases another business.

In this situation, two variations may be seen:

  1. One business buys another business, and the business that has been purchased will continue as the same entity and the employees will still be employed with them, so no change for payroll. But this is where they may want to centralize payroll for both companies in one payroll (but that’s a whole different activity to think about and get right for payroll).
  2. One business buys another business. Employees from the purchased company would need to be paid a termination pay (redundancy). The business that has purchased the company may offer some if not all of the employee’s new jobs in their business so in payroll would be treated as a new employee. If their new employer wants to offer additional terms because of the previous experience, this would be an agreed term.
From one country to another

There is nothing in legislation (employment law) that allows leave entitlement etc. to be moved from country to country when an employee leaves. So, if an employee moves from one country to another (if leaving from NZ) there must be a termination pay completed. Any extra provided (above minimum) would be agreed upon.

Employee resigns and then comes back

If an employee resigns and payroll does a termination pay and then a short time later the employee asks for their job back and the employer agrees. There is nothing in law that requires their employment to be reinstated from when they left (such as within a month of resigning). If the employer wanted to do this, then that would be an agreed term.

The only situation when an employee leaves and comes back and it is counted as continuous employment is when the employer dismisses the employee and rehires the employee within a month Section 85 of the Holidays Act.

*These examples have not covered the situation for specified categories of employees under Part 6A of the ERA.

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