Salary Sacrifice Pay Element
A Salary Sacrifice deduction can be set up to allow you deduct from an employee's pay before any tax calculations are made. Using this type of deduction will reduce a person's PAYE, Student Loan and Kiwisaver calculations and you should seek legal /taxation advice before using this option.
Any deductions from a person's pay can only be made with their written permission and you must consider exceptional circumstances (eg if they leave your employment before that balance is paid, leave without pay and any legislative deductions that may take priority over this deduction, such as Child Support).
Leave continues to be paid at the same rate before the salary sacrifice has been applied.
If the deduction is for an indefinite amount of time (eg Salary exchange for Private Use of Vehicle), do not select the Reducing Balance Deduction or Recover on Final Pay options.
Once the balance has been paid, the deduction will be removed from the Timesheet Template.
It has the effect of reducing a person's PAYE, Student loan and KiwiSaver contributions and you should seek legal /taxation advice before using this option.
For more information here IRD KiwiSaver
For more information here IRD Child Support and protected net earnings
For more information here Salary exchange for Private Use of Vehicle
For more information here WorkRide Tax Ruling
For more information here Land Transport NZ Employer e-bike
Setting up a new Pay Element Deduction - Reducing Balance
- Setup > Pay Elements > Deductions
- + Add
- Payment Code* > SAL-SACR
- Description* > Salary Sacrifice - Reducing Balance
- Edit Payslip Description - if you need to
- Multiplier is 1
- Calculation Rule* > "Rate Amount" from Payment Details
- Rate Amount* 0.0000
- Priority is 395
- Payment Details > where you want the deduction to go to -
- Select > Cheque Schedule if the money stays with you OR
- Select > Bank Schedule if the money is paid into another bank account > use the Payee Particulars, Reference and Code for the bank statement
- Costing Details (if you have enabled costing) > where you want the deduction to go to in your accounting system
- Deduction Type > Other > Pre-Tax Deduction
- Select > Allow Partial Deduction - will still deduct an amount even if there is not sufficient funds to deduct the full amount for the pay period
- Select > Reducing Balance Deduction - will calculation the balance after each pay
- Select > Recover on Final Pay - outstanding balance will be deducted automatically when Final Pay is selected
- Save
- Add this to the Person's Timesheet Template to activate a regular deduction from their pay.
Add it to the Timesheet Template - before you open the pay
- People > View People
- Select > Person's name
- In the Timesheet Template
- Qty > enter 1
- Select > SAL-SACR - Salary Sacrifice - Reducing Balance from the drop down
- Cost Centre (if enabled) > will autofill when you select Add
- Rate > Enter the amount to be deducted each pay
- + Add
Timesheet Template Entry
- Balance* > enter the total amount to be deducted from the person.
- If Payment Method is Cheque add a Payee Reference - such as agreement number or name
- If Payment Method is Bank edit Payee Reference etc - such as agreement number or name to appear on the bank statement
- Notes - Add information if required (original amount - this will be displayed on Person's payslip
- Save
- Open your pay
Review the Timesheet and payslip
- Payroll > 2. Enter
- Select > Person's name
- In the Timesheet Entry
- Select > Payslip
- Review the details and the display - outstanding balance will have been reduced by deduction in current pay
- Select > Compare Payslips to check the difference to take home pay, PAYE, Student Loan and KiwiSaver calculations
Setup > Pay Elements > Deduction screenshot
Timesheet Template Entry screenshot
Timesheet Entry - PAYE and KiwiSaver have been reduced screenshot
Timesheet Template Details - PAYE and KiwiSaver before Salary Sacrifice Deduction screenshot
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