Set up a contractor in Payroll

Add a contractor to your payroll and pay them in your scheduled pay runs.

Before you set up a contractor, check you have a pay item with Withholding Income selected as the Earnings Category. This will guarantee holiday pay or annual leave aren't accrued.

Set up pay items

Set up contractors like other employees except for their wage and tax information.

Employee Details

  1. Go to Payroll, then click Employees.
  2. Click Add Employee.
  3. Enter basic information for the contractor.
  4. Click Save.

Employment Details

  1. Click the Employment tab.
  2. Select the contractor's start date and a pay calendar from the Pay Calendar list.
  3. Click New Salary & Wages.
  4. Enter 0 as the Days per Week, Hours per Day and Hourly Amount.
  5. Click Add then Save.

Tax Details

  1. Click the Taxes tab.
  2. Enter the contractor's IRD Number.
  3. Select WT as the Tax Code and enter the Tax Rate %.
  4. Click Save.

Leave Details

  1. Click the Leave tab.
  2. Enter 0 into the Holiday Pay Opening balance and all the Annual Leave and Sick Leave fields.
  3. Click Save.

Opening Balances

  1. Click the Opening Balances tab.

    If you see a message in Xero advising that the opening balances are not needed, you don't need to complete this section and can go straight to the Taxes tab.

  2. Click Estimate opening balances.
  3. Delete all rows except one, and enter 0 into all fields.
  4. Click Save.

If the contractor is registered for GST you will need to account for this in a manual journal.

Reallocate GST for a contractor paid through payroll

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