Edit Payslip Tax Settings
As a Payroll Admin you can edit the tax settings on an employee payslip so that it correctly calculates the tax. This includes lump sum amounts such as final pays, bonuses, or pay runs that need to be taxed at a different rate or over a different time period to the normal pay.
- In the Payroll menu, select Pay Runs.
- Select or create the draft pay run.
- Click the name of the employee to open their payslip.
Click Edit tax settings on the employee's payslip.
- Edit the tax settings.
- Payslip period - change the number of days the pay is taxed over
- Payslip tax code - select the rate of PAYE or tax to deduct including any student loan repayments.
- Lump Sum amount and tax code - enter an amount that is taxed separately from the rest of the payslip and select at a different tax code.
- Click Apply to save these settings and recalculate the payslip.
When would you need to change the tax settings?
An employee, paid weekly, is terminated and has 3 weeks annual leave balance left to be paid out in their final pay
Change the Payslip Period to 4 weeks to include the normal weekly pay plus the 3 weeks’ final pay. Enter the annual leave balance paid in the lump sum amount and apply the tax settings can be applied.
An employee receives a retiring or redundancy payment
Redundancy, retirement allowances or employee share scheme allocations are best paid out in an unscheduled pay run separate from other earnings. As these do not have the ACC earner levy deducted, use the WT Payslip Tax Code and enter the appropriate rate.
Taxing redundancy and retiring payments (Inland Revenue website)
An employee receives a bonus (lump sum) payment
Choose the Lump sum tax code that matches the appropriate PAYE rate, including the ACC earner levy:
|Lump Sum tax code||SB||S||SH||ST|
|PAYE rate||11.89 %||18.89 %||31.39 %||34.39 %|
Enter the Lump sum amount and the tax settings can be applied. The earnings excluding the lump sum are taxed normally, and added to the tax on the lump sum amount to give the total PAYE for the pay.
Taxing lump sum payments (Inland Revenue website)