Employee Changing from "Casual" to "Permanent" (or vice versa).

Changing from Casual to Permanent

How you handle this will depend on the employment contract you have with your employee. If you are not sure what to do, please contact the Department of Labour (now called "Ministry of Business, Innovation and Employment" or MBIE).

Option 1 - new start date - so create a new record

For example, the contract might say that you are starting a new contract with holiday pay anniversary dates based on the new contract date. As an example - employee started 7 June 2010 as a casual employee, and was paid holiday pay on a pay-as-you-go basis. The employee therefore has a zero holiday pay balance as this has been paid out each pay. On 3 May 2011, the employee becomes permanent and it is agreed that this new date 3 May 2011 is to be taken as the start date for the new contract, and that the holiday pay anniversary date will be 3 May each year (ie the employee becomes entitled to their 4 weeks holidays on 3 May each year). As per the Holidays Act the employee would therefore not become entitled to any holidays until completing their first full year at 3 May 2012.

In this case, the best idea would be to create a new record for the employee using the date they change over as their new start date. The new start date will then be used as the basis for the employees holiday pay and sick leave anniversary dates in their new contract. You will need to use a different "Alpha Key" for the new record. For example if the old alpha key was "GREEN" then new one could be "GREEN2". In the old record the holiday pay method will probably be "% of gross only", but ensure that in the new record you have the days (or hours) method selected. In the new record this allows you to set up the entitlement of 4 weeks and so on.

In the old record they should be made non-active and a termination date entered. It is most likely that they were on a pay-as-you-go holiday pay basis under the old record if they were casual, so there should not be any holiday pay owing, meaning a "final pay" should not need to be processed for the old record - just enter the termination date manually under "Add & Edit Employees" and make them non active.

However, if the employee still has holiday pay owing (for example they were not set up with "pay-as-you-go" holiday pay), you should not manually enter the termination date, but instead should run a final pay for them under their old record for to pay out the remaining holiday pay. This can be done with the next normal pay run so a "one off pay" does not have to be processed for this.

Having the employee finish under one record and start under another record means they will appear twice on the Monthly Schedule for that month. This is OK, but when filing your IRD returns online, the IRDs website may give you a message letting you know the employee is on the schedule twice (from the same IRD number). This might look like an error message but is just an information message.

Old Record Example:
Name: A B Green
Alpha Key: GREEN
Employee Number: 10
Start Date: 7 June 2010
Termination Date: 3 May 2011
Next Holiday Pay Anniversary Date: would have been 7 Jun 2011
Holiday Pay Method: Percentage of Gross - Pay as you go.
Holiday Pay Balance: zero dollars.
Pay History - will have pays from 7 June 2010 up to 3 May 2011

New Record Example
Name: A B Green
Alpha Key: GREEN2
Employee Number: 12
Start Date: 3 May 2011
Termination Date: (none - still employed)
Next Holiday Pay Anniversary Date: 3 May 2012
Holiday Pay Method: Days/Hours method - 4 weeks per year (20 days per year).
Holiday Pay Balance: zero days until next anniversary, when 20 days will be added.
Pay History - will have no pays before 3 May 2011

Option 2 - continue on and leave the start date as it was

It might be agreed that the employee is to switch over to the "permanent" contract, leaving the start date as it was, and so the employee becomes entitled to their 4 weeks holidays based on the original start date.

In this case, you would need to ensure you change their holiday pay method if required, and set up their holiday pay entitlements based on the new contract.

For example, the employee started 7 June 2010 as a casual employee, and was paid holiday pay on a pay-as-you-go basis. The employee therefore has a zero holiday pay balance as this has been paid out each pay. On 3 May 2011, the employee becomes permanent and it is agreed that the employee will just carry on and the holiday pay anniversary date will remain based on the start date of 7 June.

Important - if the employee has been paid holiday pay, you will need to agree with your employee on how to handle this. For example, when the employee reaches the next anniversary and becomes entitled to 4 weeks, will you be reducing the entitlement to account for what was paid out when the employee was casual.

Example - before the change:
Name: A B Green
Alpha Key: GREEN
Employee Number: 10
Start Date: 7 June 2010
Termination Date: (none - still employed)
Next Holiday Pay Anniversary Date: 7 Jun 2011
Holiday Pay Method: Percentage of Gross - Pay as you go.
Holiday Pay Balance: zero dollars.

After the change
Name: A B Green (Same as before)
Alpha Key: GREEN (Same as before)
Employee Number: 10 (Same as before)
Start Date: 7 June 2010 (Same as before)
Termination Date: (none - still employed) (Same as before)
Next Holiday Pay Anniversary Date: 7 Jun 2011 (Same as before)
Holiday Pay Method: Days/Hours method - 4 weeks per year (20 days per year).
Holiday Pay Balance: zero days until next anniversary, when 20 days will be added.

Changing from Permanent to Casual

If an employees contract changes from permanent to casual, you should create a new record for them using the date they change over as their new start date. You will need to use a different "Alpha Key" for the new record. For example if the old alpha key was "GREEN" then new one could be "GREEN2".

The employee will quite likely have some holiday pay owing, so you should run a final pay for them to pay out the remaining holiday pay. This can be done with the next normal pay run so a "one off pay" does not have to be processed for this. Processing the "Final Pay" will put a termination date into their old record and will make it non-active. The details will still correctly show up on the monthly schedule for the month even if they are non active.

Old Record Example:
Name: A B Green
Alpha Key: GREEN
Employee Number: 10
Start Date: 7 June 2010
Termination Date: 3 May 2011
Next Holiday Pay Anniversary Date: would have been 7 Jun 2011
Holiday Pay Method: Days/Hours method - 4 weeks per year (20 days per year).
Holiday Pay Balance: 0 days (any balance would have been paid out as a final pay).
Pay History - will have pays from 7 June 2010 up to 3 May 2011

New Record Example
Name: A B Green
Alpha Key: GREEN2
Employee Number: 12
Start Date: 3 May 2011
Termination Date: (none - still employed)
Next Holiday Pay Anniversary Date: 3 May 2012
Holiday Pay Method: Percentage of Gross - Pay as you go.
Holiday Pay Balance: zero dollars to start with, then paid each pay.
Pay History - will have no pays before 3 May 2011