Extra Pays (formerly called: extra emoluments and lump sum payments) include annual or special bonuses, cashed-in annual leave, retiring or redundancy payments, payments for accepting restrictive covenants, exit inducement payments, gratuities, discretionary payments or back pay. Please note, overtime or any regular payments are not lump sum payments.
As you are aware, Extra Pays are calculated differently, for more information, refer to the IRD website.
Pay Categories for Extra Pay
Firstly we will look at the the pay categories for Extra Pay. Within Payroll Settings > Pay Categories, you will notice there are three system default pay categories set up which are relevant to Extra Pay.
The difference between the three pay categories are:
- Extra Pay (Discretionary Payment - excl. AWE) - amounts are excluded from average weekly earnings and ordinary weekly earnings.
- Extra Pay (incl. AWE) - amounts are included in the average weekly earnings.
- Extra Pay (KiwiSaver Exempt) - amounts are KiwiSaver exempt, and are excluded from both average weekly earnings and ordinary weekly earnings.
Apply Extra Pay (lump sum payments) in a Pay Run.
To ensure that the extra pay PAYE is deducted accordingly and then reported to the IRD correctly, follow the below simple steps.
Create a new pay run, find the employee to apply extra pay - click on their name to expand the pay run record.
Now you will need to insert an earnings line to pay the employee. Using the "Actions" button again, select "Add Lump Sum Payment", (see image below).
You will see that an "Other Earnings" line has been created. You will then need to select one of the 'Extra Pay' pay categories (as mentioned above). Then, insert the number of pay periods you want this payment to be spread over, and click on save.
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