Deduction Pay Items will trigger a post-tax deduction of the employees take home pay. There are a number of different reasons for deducting money from an employee’s pay which include Student Loan Repayments, KiwiSaver, Child Support, IRD Arrears, Court Fines or repaying a debt owed to the employer. Custom deductions can be set up as required by clicking on the button.
There are a number of ready-made deduction pay items already in PayHero for common deductions e.g. Tax, Student Loan Repayment, KiwiSaver etc. A padlock next to the pay item will indicate a permanent pay item which cannot be edited or deleted as these are set up with the correct bank account numbers and payment details.
Default Pay Deductions: Any pre-made deduction pay items are only available to assign directly to an employee’s Default Pay tab. From this tab you can enter the deductions to be made from each pay and specify the amount/rate to be deducted per pay.
One-off Deductions: Any custom deductions you've created will be available to include as a simple one-off deduction directly from a draft pay as well as attached to an employee's Default Pay tab.
Creating a Deduction Pay Item
A regular deduction could be used for repayment of debts to the employer, such as the purchase of equipment or advances on wages.
There are several different options for Rate Types which are available across all deduction types:
Fixed - A set amount to be deducted each time the pay item is applied.
Variable - The amount can be adjusted as needed when adding into a draft pay.
Percentage of Earnings - After designating a set percentage, that amount will be deducted from the employee's take home pay after tax deductions have been made.
Per Hour Worked - You can set a per hour rate to be deducted for each recorded hour worked.
Track Balance - Selecting this checkbox will allow you to track the amount deducted and set an opening balance for an employee, if desired, to prevent the deduction from applying once the balance is reduced to 0. Learn more here: Track Balance
Third Party Deduction
Third party deductions work much the same way as a regular deduction except you can specify a third party bank account for the deducted amount to be automatically paid into if you're using PayHero's Bank Batch File payment option.
Important: When creating a custom deduction pay item using the Recipient Name 'Inland Revenue' will cause any amounts associated with the Pay Item to be included in Bank Batch File payments to Inland Revenue. In order to process these separately use a recipient name of 'IRD'.
This deduction type is used for Payroll Giving and enables you to set up a different donation pay item for each donee organisation. Additional information is available in our support article on Payroll Giving.