Reducing Balance Deductions

You can set up reducing balance deductions in employees' pays for cases like staff loans, where a fixed amount to repay is set, and regular deductions are made each pay run until the full amount has been repaid.

Setting up a reducing balance deduction

Like all deductions, a reducing balance deduction is set up as a pay item on the Pay Items (MP.PP.22.10) form. For a reducing balance deduction, the pay item's Type should be "DEDUCTION"—this enables the Deductions section on the Additional Info tab.

To mark a pay item as a reducing balance deduction, select the Reducing Balance Calculation checkbox on the Additional Info tab. When a pay item is marked as a reducing balance deduction, the Change Limit and Change Threshold options in the Actions dropdown are disabled – the pay item's amount to repay is effectively a limit, so being able to set another limit manually could cause conflicts.
Note:
If a limit and/or threshold had already been set for the pay item before the Reducing Balance Calculation option was ticked, these will be deleted once the pay item is saved.
Configure the rest of the pay item's settings as necessary, then save it.
Note:
For a staff loan, the Deduction Category should be set to "Net Pay Disbursement"—this indicates an internal payment that generates GL transactions but no payment batches.

Adding a reducing balance deduction to an employee's standard pay

You add a reducing balance deduction to an employee's pay in mostly the same way as any other pay item.

  1. Go to the Standard Pay tab of the Pay Details (MP.PP.23.10) form.
  2. Click the Add Row button and select the reducing balance deduction pay item to add it to the pay.
  3. In the table footer, click Add/Clear Amount.
  4. In the window that pops up, enter the total amount to recover and an effective date, then click OK.
    Note:
    If you set the effective date in the future, the reducing balance will not be deducted from any pays with a period end before the effective date. The reducing balance deduction for those pays is $0. Use a future date when you want to set up the amount now but have deductions start in a later pay cycle.
  5. Back on the main Pay Details form, save your changes.

Topping up the amount to recover

You can top up a reducing balance when the employee needs to repay more (for example, a further staff loan) and you want to keep the repayment history so far.

  1. Go to the Standard Pay tab of the Pay Details (MP.PP.23.10) form.
  2. Open the reducing balance deduction pay item.
  3. In the table footer, click Add/Clear Amount.
  4. In the window that pops up, select Additional Amount to Recover.
  5. Enter the extra amount in the Add Amount to Recover field and click OK.
  6. Back on the main Pay Details form, save your changes. The Amount to Recover increases by the amount you entered. Recovered to Date and First Amount Entered / Last Cleared Date stay as they were. Last Added Amount to Recover shows the amount you just entered. Later pays use the updated outstanding balance.

Clearing a reducing balance deduction

If an employee has not fully repaid a reducing balance or if you have recovered the amount another way, you can still clear their amount owed to zero.

After clearing the balance, any amount you add for that standard pay item will be treated as a new amount to recover instead of being treated as a top-up.

  1. Go to the Standard Pay tab of the Pay Details (MP.PP.23.10) form.
  2. Open the reducing balance deduction pay item.
  3. In the table footer, click Add/Clear Amount.
  4. In the window that pops up, select Clear Amount to Recover to zero and click OK.
  5. Back on the main Pay Details form, save your changes. The Amount to Recover, Recovered to Date and Balance Owed fields are set to $0.00.

Running a pay with a reducing balance deduction

Once a reducing balance deduction has been added to an employee's Standard Pay, it will appear in their Current Pay alongside all of their other pay items. A reducing balance deduction cannot be added to a Current Pay manually unless it already exists in at least one of the employee's Standard Pays (remember that employees can have multiple Standard Pays set up for multiple pay groups).
Note:
You cannot add or clear a reducing balance amount on the Pay Details form while a pay run is open or processing.

On the Employee's Current Pay (MP.PP.31.30) form, select the pay item to see the balance for that pay. Recovered to Date includes the amount that will be repaid in this pay run once it's completed.

When the pay is completed, the reducing balance deduction will appear in the Deductions section of the employee's payslip. The remaining balance is displayed next to the deduction's name.

Figure 1. Reducing balance deduction on a payslip


You can also review reducing balance amounts on these inquiries:

  • Standard Pay Data (MPPP4082 NZ / MPPP4083 AU) shows the current balances that match the amounts on the Pay Details (MP.PP.23.10) form.
  • Deduction Transaction Data (MPPP4069 NZ / MPPP4070 AU) shows the historical balance as at each pay run, not the current totals.

When the balance is repaid

Once a reducing balance deduction has been added to an employee's Standard Pay, the deduction amount will be taken from each pay run until the Balance Owed reaches zero. If the final payment is less than the usual deduction amount, a partial payment will be made.

For example, if the amount to recover is $500 and the deduction amount each pay run is $40, then after twelve pay runs, $480 will have been paid, so the remaining balance will be $20. For the thirteenth pay run, only $20 will be deducted.

Once the full amount has been repaid, further reducing balance deductions stop automatically in subsequent pays.