The IRD may send you a notice requiring you to make deductions from an employee’s wages to pay any outstanding Inland Revenue Arrears. The notice should explain how to calculate the required deductions.
To apply this deduction in PayHero, the IRD Arrears pay item needs to be added into an employee's Default Pay tab, under Manage > Employees. Click the green + icon in the 'Deductions' section of their Default Pay, and select the IRD Arrears option from the drop-down.
Once added to the Default Pay, you'll be able to fill in the following fields:
Original Default Amount - The original total arrears value, when the deduction notice was first issued. This should be shown on the IRD notice as "Amount".
Current Balance - Enter the remaining arrears amount. This will be reduced by PayHero as payments are deducted from the employee’s pay. Usually this amount will initially be the same as the Original Default Amount, and will be reduced every time you send a pay for the employee which includes an IRD Arrears deduction.
The arrears deduction will be made at the lesser of the following:
- 10% of the Original Default Amount per week of pay
- 20% of the gross earnings in the pay
If the employee's net pay is less than $100 per week, the amount deducted will be set to a flat rate of $10 per week.
Payment to IRD
IRD Arrears payments are usually paid to IRD at the same time as you pay your employees. If you use one of PayHero's built-in payment options to pay your employees, this payment to IRD will be included in your payment processing.
If you pay your employees manually, make sure you pay the IRD Arrears amount as well, as it won't be included in the summary of details in the Tax tab.