Money Paid is a standard system that many payroll providers use. Money paid systems calculate your earnings as of the day you get paid, and it is much easier and simpler to manage. These systems usually ‘close off’ a payroll period after a pay run is complete, effectively sealing it from modification. Any back pay, missed pay or other remediation is either run in a ‘one-off’ pay period or included with another period’s pay.
Money Earned is the system we use at AMS, and it is more complex but far more fair and accurate in its calculations.
In a money earned system, the employee is paid what they are due for the hours worked in a pay period. A payroll period is never ‘closed’. Any adjustments (or remediation) due are considered and paid in the period where the money was ‘earned’. This adjustment is then worked forward through successive pay periods, making all necessary corrections. Tax is recalculated for the period as the difference between what was paid and what should have been paid in that period.
To show a working example, let’s say that employee A missed three hours of overtime in their pay three weeks ago. They went on leave for two weeks following the pay period and reported the underpayment on their return. To further complicate matters, these three additional hours put employee A into a new award rates category for overtime, so two hours of that payment should be at a higher rate.
In a money paid system, they might be paid the additional three hours of overtime within the following pay period or as a one-off payment. The payroll officer might pick up the nuance of the two hours being due at a higher rate and manually adjust it, or they might not.
In a money earned system, the additional three hours would be added to the correct pay period. The system would not only automatically calculate the variance in rates. It would also automatically calculate the additional money due for annual leave, as the extra pay would bump up the four-week/52-week/12-month average that employee A’s annual leave was calculated over. Each of these pay periods would then be reassessed for tax to ensure the deduction was accurate, and no tax bill would be due from the employee at the end of the financial year.
A Money Earned system and compliance with the Holidays Act
A money earned payroll system is a more accurate, and therefore fair, approach to calculating earnings. Whilst both money paid and money earned systems can be compliant with the Holidays Act, the outcome of adjusting pay in a money paid system is that the payroll records do not accurately reflect what an employee earned in a four-week, 52-week or 12-month period and differ from what would be recorded had the employee been paid the correct amount, at the right time in the right pay period.
Not only does recording the earnings in a money paid system affect gross earnings for Holidays Act rate calculations, but it also means that there is not an accurate time and wage record in the payroll system. Staying compliant with the Holidays Act really does require ease of access to wage and time records, and a money paid system does not truly fulfil this requirement. For example, determining an otherwise working day (OWD) for public holiday payments and what an employee’s length of day or week is relies on payroll information being absolutely accurate and correct for every payroll period. This information being housed outside the payroll system means a greater compliance management burden. It opens the door to human error during calculations, as payroll officers must check wage and time records (rosters, timesheets, etc.) for accurate information.
Why is the AMS Pulse Roster to Pay, Money Earned System the Best Solution?
For organisations that take advantage of the AMS Pulse roster-to-pay solution, accurate remuneration and Holidays Act compliance are far more easily managed, even for complex workforce environments. Our product is a market-leading Money Earned payroll system. It handles payroll from conception, at the rostering stage, to completion, once the payroll is processed for a complete, end-to-end automated outcome.
AMS Pulse comprises the AMS payroll system, AMS rostering, timesheeting and award interpretation engine and our self-service portal. These components work together to deliver a seamless, compliant, reliable user experience in every part of the roster-to-pay environment.
AMS rostering is built around an intelligent rostering engine making it easier to plan and implement rosters across organisations. It includes electronic timesheets where employees see and verifies their work hours. Managers use the same portal to review, change and approve the shifts worked by their staff. Upon approval, the information flows to the Award Interpreter for evaluation.
AMS Timesheet Award Interpreter is a proven, versatile, and user-configurable business rules engine that can deliver 100% automated award interpretation. The engine is specifically designed to interpret the most complex Employment Agreements and Awards and apply the rules to employee worked hours.
The AMS self-service portal is our interactive, simple-to-use portal available anywhere. It allows employees to change their profiles, submit timesheets, apply for leave, and many other functionalities. The portal also allows employees to check their rosters and managers to approve changes or requests remotely.
Why not join our ranks of satisfied customers who have trusted AMS as their payroll provider within New Zealand for decades? Contact us today and see how we simplify complexity at AMS.