Pay Categories are used to define the rates that employees are paid. Setting up your pay categories will help simplify the management of employee pay rates by:
- Automatically calculating linked rates through loading and penalty rate multipliers;
- Defining what is exempt from KiwiSaver, PAYE and ACC Levy;
- Configuring leave accrual;
- Excluding certain pay components from being calculated as part of Average Weekly Earnings.
To access the pay categories page, go to 'Payroll settings > Pay categories'. The default set up for a new business includes several already configured Pay Categories. You will also notice that pay categories labelled 'SYSTEM' cannot be edited at all:
This is intentional to ensure the system calculates the pay categories and associated components in a specific manner.
All other default pay categories can be either deleted or edited to match your business needs.
Creating a Pay Category
You can create a pay category by following these steps:
- Click on the 'Add' button, located on the top right hand side of the screen;
- Enter the pay category name and click on 'Save';
- The new pay category will appear in expanded format so you can review and edit the settings. A few notes on some of the settings:
- Units - If the pay category is processed on a per hour basis, select "Hourly". If the pay category is to be used as a primary pay category for employees earning an annual salary, select "Annually". If the pay category is for a per unit payment, for example a vehicle allowance or bonus, select "Fixed". You will also notice when a pay category is set as "Fixed", you will not be able to select the "Accrues Leave" setting.
- Exclude from Average Earnings - Ticking this checkbox means that any earnings paid under the pay category will not be calculated towards the employee's Average Weekly Earnings or Ordinary Weekly Pay, as part of annual holiday calculations.
- PAYE Exempt - Tick this checkbox if the earnings are tax free.
- External Id: A value is only required here if you are using an external system to capture timesheets or earnings lines and so need to map the code used from such external system.
- Accrues Leave - If employees are accruing any type of leave based on the "hours per hour worked" accrual method, this setting will determine whether any leave hours will accrue when the employee is paid against the pay category in a pay run. If the checkbox is NOT ticked, employees will not accrue leave on an hours worked/paid using this pay category.
- Rate Precision - Option to set rate at between 0 and 6 decimal places. If adding additional earnings lines for an employee (configured in the employee's Pay Rates screen), the rate can be specified up to 6 decimal places regardless of the pay category setting. Please note however in the pay run, rates will only calculate up to a maximum of 5 decimal places.
- Rate loading - If you want to pay an all uploading for an employee on the base rate of pay, you can configure that in this setting. For example, if agreement has been reached that an employee will work a certain number of overtime hours and will be paid an additional 10% on their agreed base rate for all hours worked against that pay category, you can enter "10" in that field.
- Once all settings are complete, click on "Save".
Linked Pay Categories
In addition to the base value pay category, you are able to create linked categories. The benefit of this function is to automate pay rate calculation where employees earn a percentage loading on top of their base rate of pay. For example, where an employee does shift work, they are paid a 15% penalty of their base rate of pay. To set this up, click on the base pay category to expand the settings and then click on "Add Linked Category". Complete the pay category settings and enter "15" in the "Penalty Loading" field, then click on "Save".
When reviewing an employee's Pay Rates page, you will notice that linked pay categories are automatically calculated. In fact, they cannot be overridden by a user. If an employee's pay rate increased the rates attached to linked pay categories will also automatically calculate, eliminating and manual data entry or calculation of any penalty rates. Note: If the base pay category already has a rate loading configured, the penalty loading will be calculated on top of the base rate AND the rate loading.
Editing Pay Categories
To edit a pay category, click on the pay category name to expand the settings. Make the necessary changes and then click on "Save".
Note: If a pay category has been used in a pay run, you are NOT able to change the PAYE setting. Rather, you will need to create a new pay category and apply the updated PAYE setting in that new category.
Additionally, as stated previously no "SYSTEM" configured pay categories can be edited.
Deleting Pay Categories
To delete a pay category, hover your mouse over the pay category name where you will then see a red cross icon on the right hand side of the pay category.
Click on the "x" icon where a confirm popup dialog will then appear. If you click on "Delete" the pay category will be removed from the platform.
Note: If a pay category has been used in a pay run, you are NOT able to delete it. Additionally, no "SYSTEM" configured pay categories can be deleted.
If you have any feedback or questions please contact us via firstname.lastname@example.org.