Overview of ACC entitlements

When an employee in New Zealand is hurt or injured, they may be eligible for cover with ACC (Accident Compensation Corporation).

If you’re not familiar with ACC and how the coverage process works, we recommend you start with the guidance available from ACC. A good starting point is available here on ACC website.

Here’s a quick overview of the main things you need to know, and then we’ll cover these a bit more step by step throughout the article.

First week

ACC does not start any coverage of payments to employees for lost wages until after the first week.
For work-related injuries, the employer is responsible for paying the employee 80% of their usual income during the first week.
For non-work-related injuries, the employee would need to use sick leave (if they have any available) or could request annual leave by agreement.

Ongoing coverage

If your employee is on ACC for longer than one week, after the first week payment has been made then they will typically be on unpaid leave with you while ACC is making payments to them.
Time off on ACC is covered in the Holidays Act as being considered continuous employment, so the employee’s entitlement to leave is unaffected: their annual leave continues to accrue and become entitled as usual, and so does their sick leave.
ACC will pay your employee 80% of their typical earnings. If the employee wishes to use some leave to ‘top up’ for the missing 20% then this is possible, but with some caveats which we cover in more detail below.

First week payment

ACC send notifications for new claims where the injury happened at work. These are treated on a case-by-case basis, however if you are certain that it is a workplace injury, then the first week compensation can be paid before receiving notification. If you are not certain, we recommend you wait until you receive notification from ACC.

Work related injury

You’re obligated to pay the employee 80% of what they would normally be paid for the week. This can’t be taken from a leave balance.

To calculate the first week payment, take what the employee earned in the 7 days prior to Date of First Incapacity (DOFI), and what the employee would have earned in the following week if it weren't for the injury (including planned overtime etc). If the amounts are the same, pay 80% of this figure. If the work pattern during the first week following DOFI was scheduled as something different (to earn greater or lesser income), pay 80% of that figure.

Apply the first week payment to your employee in the pay run

In Run a Pay, click onto the employee’s name on the pay card.
Select Payments.
Click the + on the right, select and populate the fields as below. Make sure to check the box Apply changes to this pay run only on the bottom left.
- The rule is ‘Fixed amount’.
- Give the payment a title to show that it is a first week ACC payment - the name of the payment will appear on the payslip.
- The payment is taxable.
- The frequency is one off.
- Enter the value you calculated previously in the amount field.
- Click the white Ok and then the blue Ok.
Reduce the normal pay (salary or standard hours/wages) by adding Leave without pay. This is so the employee on standard hours does not get paid twice for the same period, i.e., ordinary time and the 80% payment.
Click on the ‘leave’ icon for the employee in the top right hand corner of the pay card. It is the first of the three icons.
Add an entry for ‘Leave without Pay’ for the appropriate date range as needed.

In this example, the employee has worked one week in the fortnight and was on ACC for the second week.

Non-work related injury

Your employee should use sick leave to cover this week if they wish, or another leave type by arrangement. Follow the usual processes for recording sick or other leave types.

After the first week

If your employee is on ACC for longer than one week, ACC will start paying them from the start of the second week. While your employee is on ACC, you should record them as being on Leave Without Pay in each pay run. This correctly records their period of time away from work while ensuring that their leave entitlements are correctly managed in accordance with legislation.

Topping up

The employee can request to use their sick or annual leave entitlements to ‘top up’ their pay to bring earnings from 80% up to 100% of usual income, with no effect on their compensation from ACC. Some employers choose to do this as a payment from the company (i.e. not using the employee’s leave balances).

It is important for you and your employee to know that if they opt to take some leave or receive another payment of 20% to top them up, they are considered as having two sources of income by IRD (one from ACC and one from the business). This means they need to be taxed as a secondary source of income. They should choose an appropriate secondary tax code. Employers should not select a tax code for their employees, the employee must nominate this by following the guidance on the IR330 form.

Check out our article on changing an employee's tax code.

To make the top up payment in PaySauce, you will have two entries in the pay run:

Leave Without Pay for 80% of the pay (e.g. 4 days out of 5)
Sick or annual leave for 20% of the pay (e.g. 1 day out of 5)

Casual employees

Casual employees receiving 8% holiday pay each period will not need a leave without pay entry for each of the subsequent weeks on ACC. Paying the first week at 80% would be the same as described above.