It is often necessary to add allowances to an employee's pay. Allowances are payments that are not based on the employee's hourly rate, or are in addition to their usual salary or wages.
Most allowances are taxable, but there are some exceptions. You can find out more on IRD's website.
Allowances can be set up using either an Other Earnings pay item, for taxable allowances; or a Reimbursement pay item, for non-taxable allowances.
Taxable allowances will be included in the employee's Holiday Pay and leave rates. Taxable allowances, with the exception of Accommodation Allowances, will be included in the employee's KiwiSaver deductions and employer contributions. Please get in touch with PayHero Support at support@payhero.co.nz if the allowance should be excluded from these calculations.
Accommodation Allowances are slightly different to other allowances, as these are automatically excluded from the employee's KiwiSaver calculation.
Allowances can be set up as a fixed amount, or can be units-based, or adjusted in the employee's draft pay.
If the allowance is paid regularly, it can be added to the employee's Draft Pay tab so it's included in every pay.
If the allowance is paid infrequently, the payroll administrator can add it to the employee's draft pay.
Employees can also enter allowances as time entries.
Taxable Allowance
Taxable allowances can be added as Other Earnings Pay Items by going to Manage > Pay Items, select the Earnings tab, click and select 'Other Earnings'.
Set Units to $ if the payroll administrator will add the $amount on the employee's Default Pay tab or in their draft pay.
Set Units to 'Other' if you'd like the employee to enter allowances as time entries (e.g. meal allowances).
Set Rate Type to Fixed and enter a Fixed Rate for a fixed allowance amount
Set Rate Type to Variable if the payroll administrator needs to adjust the allowance amount on the employee's Default Pay tab or in their draft pay.
Non-Taxable Allowances
Non-taxable allowances can be added as Reimbursement Pay Items by going to Manage > Pay Items, selecting the Reimbursements tab, and clicking .
Set Units to $ if the payroll administrator will add the $amount on the employee's Default Pay tab or in their draft pay.
Set Units to 'Other' if you'd like the employee to enter allowances as time entries (e.g. meal allowances).
Set Rate Type to Fixed and enter a Fixed Rate for a fixed allowance amount
Set Rate Type to Variable if the payroll administrator needs to adjust the allowance amount on the employee's Default Pay tab or in their draft pay.
Set Rate Type to Per Hour Worked to automatically calculate the allowance based on the hours in the pay. There's more information about this option here: Reimbursements
Adding a regular Allowance to an Employee
Including an ongoing allowance in an employee's pays can be done through the Default Pay tab found under People > Employees. Select the relevant employee, go to their Default Pay tab and click the icon under Earnings to include the taxable allowance pay item.
If the allowance is non-taxable, click the icon under Reimbursements to include the reimbursement pay item.
The applied allowance will be automatically added to any pay the employee is included in. Alternatively, you can include the pay item directly into a draft pay to apply it as a one-off allowance.
Adding a One-Off Allowance to an employee's draft pay
To add a one-off allowance to an employee's pay, you can add the allowance pay item directly into the Draft pay for the employee.
Adding Allowances as time entries
Taxable allowances can be linked to Work, so the employee can enter these in their time entries.
You can learn more here: Piecemeal Work
Non-taxable allowances can be entered as expense claims. Learn more about Expenses here: Expenses