Setting up Deductions

1. Log in to Employment Hero Payroll.
2. Click on Business (suitcase icon) on the left-hand side navigation menu.
3. Go to Payroll Settings.
4. Click on Deduction Categories.
5. You'll notice there are a number of default deduction categories that exist when creating a new business. Most settings within these default categories are not editable. 
   NB: The following system default categories will be available in businesses created after 18/2/2021:
   • Workplace giving (pre-tax)
   • Workplace giving (post-tax)
   • Union or professional association fees
   • Child support deduction
   • Child support garnishee.
6. To edit a deduction category you can click on the name of the category (fields highlighted grey are not editable

Helpful Hint

You'll notice there are a number of default deduction categories that exist when creating a new business. Most settings within these default categories are not editable. 
NB: The following system default categories will be available in businesses created after 18/2/2021:

• Workplace giving (pre-tax)
• Workplace giving (post-tax)
• Union or professional association fees
• Child support deduction
• Child support garnishee.

To edit a deduction category you can click on the name of the category (fields highlighted grey are not editable);

7. To add a new deduction category, click the Add button in the top right corner, and enter a name for the deduction category. Select whether it will be a pre or post-tax deduction and use the other settings there if required before clicking save.
8. External Id: If an external id is used that has been used before you won't be able to save it if the Unique External ID setting is switched on. This setting is located on the Payroll settings > Advanced settings page. See here for more information.
   
   

Once you have set up your deduction categories they will now be available to be assigned to employees.

When setting up or editing a pre-tax deduction category, the Impact on SG calculations field controls how the deduction affects both superannuation and Qualifying Earnings (QE) reporting. There are three options:

• No impact The deduction has no effect on superable earnings or QE. Super Guarantee (SG) is calculated on the full (pre-deduction) earnings, and the deduction amount is included in Qualifying Earnings for STP reporting.
  Reduces ordinary time earnings/qualifying earnings The deduction reduces the employee's qualifying earnings (QE) in the pay run. This means SG is calculated on the reduced qualifying earnings amount, and the deduction amount is excluded from QE reporting via STP — consistent with the established method for OTE-based super calculations.
  Reduces Qualifying Earnings (remains superable) This option is for clients who want to keep paying SG on the pre-deduction amount, even though the deduction itself should not be reported as QE. When this option is selected:

SG is calculated as if the deduction had not been applied — the employee's superable earnings are not reduced by the deduction amount.

The deduction amount is still correctly excluded from Qualifying Earnings for STP reporting.

This allows a client to capture and pay the additional super they want, while still reporting QE accurately.

When a deduction is included in a pay run — either via a recurring deduction set up on the employee record, or added directly via the Actions button within the employee pay run — a new Excl. QE checkbox will appear against that deduction line.

Important Date Restriction: The Excl. QE checkbox only applies to pay runs with a Date Paid of 1/7/26 or later. If used in a pay run with an earlier paid date, the checkbox will have no effect, and the deduction will apply strictly based on the underlying deduction category settings.

How the checkbox behaves by default:

• If the deduction category is set to No impact, the checkbox is unticked by default.

• If the deduction category is set to Reduces ordinary time earnings/qualifying earnings, the checkbox is ticked by default.

• If the deduction category is set to Reduces Qualifying Earnings (remains superable), the checkbox is ticked and greyed out / disabled — it cannot be toggled in the pay run. This is by design: because this option always excludes QE while keeping the deduction superable, allowing it to be toggled could cause SG and QE to fall out of sync for that pay run.

Overriding the default in the pay run (applies to the first two options only): Users can manually toggle the Excl. QE checkbox on or off directly within the pay run, regardless of the deduction category default:

• Ticking the checkbox excludes the deduction amount from qualifying earnings, reducing SG for that pay run.

• Unticking the checkbox includes the deduction amount in qualifying earnings, and SG is calculated accordingly.

This gives users an additional control to ensure qualifying earnings and super guarantee are reported accurately for each pay run — noting that this control is not available when the deduction category is set to Reduces Qualifying Earnings (remains superable), since the QE/SG treatment for that option is fixed.
How the checkbox behaves by default:

• If the underlying deduction category is set to Reduces ordinary time earnings / qualifying earnings, the Exclude QE checkbox will be ticked by default, indicating that the deduction is excluding the employee's qualifying earnings (and therefore reducing the super guarantee accordingly).
• If the deduction category is not set to reduce ordinary time earnings / qualifying earnings, the Excl. QE checkbox will be unticked by default.

Overriding the default in the pay run:

Users have the flexibility to manually toggle the Exclude QE checkbox on or off directly within the pay run, regardless of the default set on the deduction category. This allows you to adjust qualifying earnings reporting on a pay run-by-pay run basis where circumstances require it.

• Ticking the checkbox will exclude the deduction amount from qualifying earnings, reducing the SG for that pay run.
• Unticking the checkbox will include the deduction amount in qualifying earnings, and SG will be calculated accordingly.

This gives users an additional control to ensure qualifying earnings and super guarantee are reported accurately for each pay run.

If you are needing to set up a deduction that recurs indefinitely:

1. Go to the employee record for the employee that you want to create the recurring deduction for and under the 'Pay run settings' section click 'Pay run inclusions'
2. You will then be taken to the following screen: 
   
3. Click on 'Add' on the right side of 'Deductions' and complete the required details. More information on different deductions are found below.

1. Click on 'Add'.
2. Select the 'Salary sacrifice super' deduction category from the drop down list.
3. Enter the deduction amount to be applied per pay run. It can be a Fixed amount, a Percentage of Gross earnings or Percentage of OTE.
4. This deduction will automatically point the payments directly to a super fund, so you'll just need to select the correct super fund from the drop down list.
5. Select whether you want to apply preserved earnings to this deduction. Refer below on detailed information relating to preserved earnings.
6. Enter any notes if you want the employee to see them on their pay slip.
7. Enter the date this inclusion is to commence.
8. Choose when this inclusion should cease (a specific end date, never or once a particular dollar amount has been reached).
9. Click on 'Save'.

NB - More information on deductions relating to salary sacrifice can be found here.

1. Click on 'Add'.
2. Select the appropriate deduction category from the drop down list.
3. Enter the deduction amount to be applied per pay run. It can be a Fixed amount, a Percentage of Gross earnings or Percentage of OTE.
4. Select whether the deduction should be paid manually, to a super fund, a bank account or via a BPAY account. To pay this deduction directly into another bank account, via the ABA file from the pay run, you'll need to have first set up the bank account on the employee's record / bank accounts page (set the amount to pay as Fixed and $0) so you can choose this bank account from the drop down list and you can add a 'reference' in the Payment Reference field. Additionally, to pay the deduction via a BPAY account, you'll need to have first set up the BPAY account on the employee's bank accounts page (set the amount to pay as Fixed and $0) so you can choose this BPAY account from the drop down list.
   N.B. In regards to journal mapping, if you set up a deduction to be paid direct to a bank account, it is not considered a liability (because it's already been paid over) so it will go to payroll clearing. If you want the journal entry to be a debit not a credit use an Expense account in the chart of accounts.
    
5. Select whether you want to apply preserved earnings to this deduction. Refer below on detailed information relating to preserved earnings.
6. Enter any notes if you want the employee to see them on their pay slip.
7. Enter the date this inclusion is to commence.
8. Choose when this inclusion should cease (a specific end date, never or once a particular dollar amount has been reached).
9. Click Save

More information on setting up child support deductions and STP reporting can be found here.

1. Click on 'Add'.
2. Select the appropriate deduction category from the drop down list. For STP reporting purposes you will need to ensure that the deduction category being used has the correct workplace giving / union or professional fees classification in the deduction set up (for new businesses created on or after 18 February 2021 you will find that we have added the system deduction for you. For businesses created before the 18 February 2021 you will need to set up a deduction or use one you had previously set up).
3. Enter the deduction amount to be applied per pay run. It can be a Fixed amount, a Percentage of Gross earnings or Percentage of OTE.
4. Select whether the deduction should be paid manually or to a bank account. To pay this deduction directly into another bank account, via the ABA file from the pay run, you'll need to have first set up the bank account on the employee's record / bank accounts page (set the amount to pay as Fixed and $0) so you can choose this bank account from the drop down list and you can add a 'reference' in the Payment Reference field.
    
5. Select whether you want to apply preserved earnings to this deduction. Refer below on detailed information relating to preserved earnings.
6. Enter any notes if you want the employee to see them on their pay slip.
7. Enter the date this inclusion is to commence.
8. Choose when this inclusion should cease (a specific end date, never or once a particular dollar amount has been reached).
9. Click Save

Now, the next time you process pay run that includes this employee, the deduction will automatically appear:
 

Preserved earnings is defined as the minimum net earnings an employee MUST be paid before a deduction amount can be applied in the pay run. For example, an employee could have a garnishee order but part of the order includes that the employee's net pay cannot be reduced to less than $300 per week as a result of the garnishee order. To set this up of example, you would:

(a) Preserved earnings: select 'Once a minimum net earnings limit has been reached';

(b) Preserved earnings amount: enter 350;

(c) If the amount is not reached: here you can choose to have none or only part of the deduction amount processed in the pay run;

(d) Carry forward unpaid deduction amounts: here you can choose whether or not you want any unpaid deduction amounts to be carried over to following pay runs. For example, say an employee's recurring deduction amount was fixed at $100 per pay run but only $50 was deducted in the pay run. If you choose to carry forward the unpaid deduction amount, the unpaid $50 will be carried over and a total of $150 will be deducted in the following pay run. If you choose not to carry it over, the unpaid $50 deduction amount will be disregarded and in the following pay run only the recurring $100 will be deducted.

(e) Carry forward unused preserved earnings: here you can choose whether or not you want any preserved earnings that are paid below the preserved earnings carried forward. For example, an employee has preserved earnings set at $300. In one pay run the employee is only paid $200 in net earnings. If this setting is ticked, the difference of $100 will be carried over so that the preserved earnings for the next pay run will be $400.

An example of a Deduction paid to a super fund that includes preserved earnings is as follows:

 

An example of a Deduction paid to a bank account without preserved earnings is as follows:

 

You can quickly see the status of expiring deductions by coming back to the employee Pay Run Inclusions screen.

 

Once you've setup your deductions, a summary of the deductions will be displayed which will include:

• The amount or date at which the deduction will expire
• The start date of the deductions
• Whether or not the deduction has actually expired
• For amount based deductions, the current amount that has been paid
• The payment type setup for this deduction

N.B. A deduction expiry date means "will not be included in pay runs where the pay period starts after this date" and NOT the date paid.

If you need to restore a deduction that you've previously deleted, you can do this by going to the Payroll settings > Restored deleted items page, and selecting 'Deduction category' from the drop down list. A list of all deleted deductions will appear and you can click the 'Restore' option against the deduction that you are wanting to reinstate.