Handling Bonus Season: Frustrated Employees, Nervous Managers

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There are two types of bonuses: Regular bonuses Ones that are paid periodically and should be included in the employee's gross earnings. These must be set up as Gross Earnings pay codes.

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All amounts paid to employees as part of their agreements or paid periodically must be included in their Annual Leave and Holiday Pay calculations. These bonuses need to be set up as a Taxable Allowance pay code. To pay bonuses to your employees, create a new pay code then add the new pay code to the employee's pay.

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For more information on the tax implications of bonus payments, refer to your accounting advisor or the IRD. Go to the Maintenance command centre and click Maintain Pay Codes.

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Depending on the type of bonus select either: Gross Earnings for a bonus that is paid periodically, OR Taxable Allowance for a "one bonuses in dealing centers bonus. Click OK.

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Click the General tab. Select the Allow the rate to be modified option.

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The code probably won't be based on any particular rate so it's recommended you choose to allow the rate to be modified so it is easy to use in the future. Go to the Prepare Pays command centre and click Enter Pays. The Enter Pays window is displayed.

Handling Bonus Season: Frustrated Employees, Nervous Managers

Double-click the applicable employee. The Enter Pay Details window is displayed.

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Add the newly created Bonus pay code to the employee's pay: Click Add Default as shown below. The Set new Pay Default details window is displayed.

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Enter the bonus amount against the Bonus pay code in the Rate column, and enter 1. For dealing with tax on regular bonuses, refer to the IRD website.

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Click Tax Override. Enter the bonus amount in the Extra Pay Amount box.

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See the thresholds below. If you require more information, visit the IRD website.

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The tax code will depend on the employee's expected annual income bonuses in dealing centers the year. Using the PAYE Calculator Occasionally, you may have the requirement to pay out an Extra Emolument amount perhaps a bonus where you are given the net amounts only.

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In this case the manual calculation of tax is difficult. To overcome this problem, your software has a PAYE Calculator where you can enter a net amount to calculate the gross amount. When using this tool, make sure you use the correct tax code as shown above.

Select the applicable TAX Code - refer above for guidance.

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Enter the net amount you wish to pay in the Net Pay field. Click outside the Net Pay field or press the Tab key.

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What about student loans and KiwiSaver calculations? Student loan and KiwiSaver deductions are calculated on the employee's total gross wages - which includes bonuses.