This article will discuss best practice for setting up Wage Subsidy and Leave Payment schemes ("the schemes") in the payroll system. Detailed information on the schemes themselves, including eligibility and how to apply can be accessed here.
Relationship between the schemes and gross earnings
Any amounts paid to employees as part of the schemes will form part of the employee’s gross taxable earnings. This means that PAYE is to be deducted on these amounts along with all other deductions, such as student loans, kiwisaver, child support, etc.
Examples of how the earnings for these schemes are taxed can be found here.
Should i set up a new pay category for these schemes?
Short answer is yes. Best practice is that you have a record of all payments made to employees under these schemes and the best way to do this would be to use a unique pay category for each scheme. You can then easily report on these schemes using a various number of payroll reports.
Instructions on how to create a pay category can be found here. Ensure that when creating the pay category for both the Wage Subsidy and Leave Payment that you DO NOT tick the following checkboxes:
- PAYE Exempt;
- ACC Levy Exempt;
- Exclude From Average Weekly Earnings;
- Exclude From Ordinary Weekly Pay; and
- KiwiSaver Exempt.
An employee is eligible for payment under these schemes. How do I ensure they get paid in the pay run?
To set up a recurring payment for an employee in the pay run, go to the employee's Pay Rates screen and then scroll down to the Additional Earnings Line section. Click on "Add" and select the relevant pay category created for these schemes. Then complete the details as required. Take note of the options for "This earnings line should be included in" - if there is an expiry date or amount for the subsidy, you can configure this via the dropdown options in this field so that the additional earnings expire after a certain $ amount has been reached or after a certain date (ie period of time) has lapsed.
When creating a pay run thereafter, the additional earnings will appear automatically for the employee.