How to Pay Lump Sums

The following instructions apply to Extra Pay for Annual or Special Bonuses, Gratuities (free money) or Back Pay:

1. From the Maintenance menu choose Allowances to open the Allowances Maintenance window.

2. Using the first free allowance code, add an allowance with your allowance name.

3. Select the Taxable option.

4. Set the Calculation Method to "Fixed Dollar Amount".

5. Leave the Amount at zero.

6. Tick the following options:

   • Add to Gross for Holiday Pay

   • Add Earner Levy

7. Set the allowance Type to "Extra Pay".

8. Set the Extra Pay Rate field to 17.5%. Exo Payroll will automatically determine the correct rate at the time of payment, by summing the last four weeks (28 days) of gross taxable pay, including the extra pay amount, and grossing this up to a year - if this figure falls between certain thresholds the higher tax rates may be used.

   The rate specified here may not be the rate that is ultimately applied to the Extra Pay. When the Extra Pay is paid to an employee, the system grosses up the last month/four weeks paid in order to project the annual earnings, and determine what the tax rate will be:

   • If Annual Gross-up + Extra Pay amount <= $14,000, Tax rate in pay = 10.5%

   • If Annual Gross-up + Extra Pay amount  > $14,000 and <= $48,000, Tax rate in pay = 17.5%

   • If Annual Gross-up + Extra Pay amount  > $48,000 and <= $70,000, Tax rate in pay = 30%

   • If Annual Gross-up + Extra Pay amount  > $70,000, Tax rate in pay = 33%

   If the employee has nominated a rate that is higher than the one determined by the Annual Gross-up, set the Override Tax Rate field to the chosen rate. In this case, the payroll will not perform a four-weekly gross-up, it will simply use the higher rate.

9. Click Save or press F10 to save the allowance and return to the main menu.

10. Open the Current Pay and select the employee you want to pay.

11. Click the Allowances button to open the Allowances window.

12. Click Add or press F4 to add a new allowance, then type in the allowance code number you created in step 2.

13. Enter the dollar amount you want to pay.

14. Click Save or press F10 on all screens to save.

Extra Pays and the STC Tax Code

Extra Pays are taxed differently when the employee is using the STC tax code; the rate of taxation differs if the Extra Pay is classified as a bonus or a retirement/redundancy payment. To allow for these cases, three special use Allowances are installed with Exo Payroll:

• STC Bonus Excl HP - Use this allowance when paying a bonus that is not liable for Holiday Pay to an employee who is using the STC tax code.
• STC Bonus Incl HP - Use this allowance when paying a bonus that is liable for Holiday Pay to an employee who is using the STC tax code.
• STC Redun/Retire Pay - Use this allowance when paying redundancy or retirement pay to an employee who is using the STC tax code.

In the process above, ignore steps 1 - 9, as there is no need to create a new Allowance; instead, at step 12, select the correct STC Allowance, depending on whether the Extra Pay is a bonus or a retirement/redundancy payment.

Holiday Pay Lump Sums

The Commissioner of the IRD has issued an operational position stating that from April 2016, in some scenarios, annual accrued holiday entitlement paid should be treated as Extra Pay, and PAYE should be deducted using the rates for Extra Pay. These scenarios include:

• Holiday Pay lump sums that are paid before the holiday is taken.
• Holiday Pay lump sums that are paid on the termination of an employee's employment.