HR Practice For Payroll Practitioners

HR Practice for Payroll Practitioners

Long term sickness (Incapacity)

In this situation, the employee can no longer perform their position's work because of prolonged illness or injury.

The discussion of terminating based on incapacity concerns the impact the employee’s absence is having on the business, not their illness or injury, as that would be discrimination. The aim of the process is to determine when the employee can return to work to meet the requirements of their employment agreement. If they can’t and there are no other options, then the decision will be made to terminate the employee’s employment. The process for incapacity would need to cover off each of the following points: 1. The present state of the employee's health. 2. The future prognosis. 3. The estimated period of time for which the employee will be absent from the date of their interview. 4. The employer's position with respect to the need to replace and, if necessary, an indication from the employer that if the employee is unable to return to work within say a four-week period, either: a) The situation will be reviewed again at which time the possibility of finding a replacement will be considered. b) The employer will not be able to keep the position open any longer and will have to terminate the contract. It is quite common for an employer to offer an employee who, for no fault of their own, cannot continue to work because of a sickness or injury. This is an agreed term and is not a legislative requirement. The common name used for this type of payment is medical retirement. This type of payment is an extra pay and could be seen as a discretionary payment and not part of the 8% on termination but would still be part of KiwiSaver. Once a decision to terminate has been passed to payroll for action, this is another situation in which the employee’s final pay is still processed as standard pay. Additional payment

© New Zealand Payroll Practitioners Association, Sep 2024, Ver 12

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