There are a number of possible Bonus Payments which can be handled by PayHero. It's important to process bonus payments correctly for your employees as each one will have a different effect on holiday pay accrual and annual leave rate calculations, as well as tax calculations.
The three types of bonus are as follows:
Regular Bonus - The employee accrues holiday pay on the bonus, with both the Ordinary and Average pay rates increasing.
One-off Bonus - The employee accrues holiday pay, but the bonus will only increase the Average pay rate. Used for bonuses that occur less frequently than monthly such as quarterly or annually.
Discretionary Bonus - The employee does not accrue holiday pay on the payment and the rates remain unaffected. A Christmas bonus is an example of this. For full details on which payments qualify as a discretionary payment, see the "What 'discretionary payments' means" section at the bottom of this article from MBIE.
Which Bonus Should I Use?
To ensure that the holiday pay and tax calculations on bonuses are correct, it's important to use Pay Items that are set up to correctly reflect the terms of the bonus.
The following chart can help you decide which pay item needs to be used and whether any special settings will be required for the pay item you use:
Pay Items
The first step is to ensure your pay items are set up correctly in Manage > Pay Items under the Earnings tab. To help with this, there are three Bonus pay items set up by default in PayHero. You can also create new Regular or Discretionary Bonus pay items as needed.
If you require additional One Off Bonus pay items please contact PayHero at support@payhero.co.nz
Spans Multiple Pay Periods
A key consideration when paying bonuses is how the the tax will be calculated. When a bonus is included in every regular pay (for example a monthly salaried employee paid a monthly bonus in each pay) then the default regular bonus pay item set up will do the trick.
However, if the bonus is paid on a different cycle to your regular pays then you need to create a Bonus pay item and record how many months the bonus covers in the Span Multiple Pay Periods option.
In this example the bonus is quarterly, paid every three months. Another example would be a monthly bonus for employees who are usually paid weekly or fortnightly, in which case the months field should be set to '1'.
You should also select the Spans Multiple Pay Periods checkbox if the bonus is paid on a different cycle to the standard pay, for example, if an employee paid monthly on the 1st of the month, receives a monthly bonus paid on the 15th of the month. In this case the months field should also be set to '1'.
Running the Pay
Once the Bonus pay item has been set up appropriately, Run the Pay Cycle for your employees and add the bonus to the employee's normal pay. To do so, simply select the correct employee, click the 
button under Earnings and apply the appropriate bonus.
Running a Separate Bonus Pay Cycle
It's generally recommended that you include a bonus payment in the employee's normal pay. The Spans Multiple Pay Periods settings on the pay item will ensure that it's treated appropriately, even if it's earned over a longer period than the pay cycle.
However, if you'd like to pay the bonus separately from the usual pay cycle, you can create a one-off pay solely for the bonus payment. Set the pay date to the date that you'll be paying the employees and set the Start Date and Pay Frequency to be the same as the last regular pay for this employee. Doing so will ensure that the bonus is taxed correctly and that it won't affect the tax calculation in the next wages pay.
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