You are able to process Lump Sum payments direct from the Pay Run. We have included a feature within our "Actions" button within the employee's pay run details. NOTE: Lump Sum payments are calculated according to the Method A calculation, detailed in this ATO article.
The below steps allow the tax to be aggregated across a select number of pay periods. For paying "leave in advance" please look further down the article for instructions on how to do this.
If you are processing a bonus and don't need to aggregate the tax please scroll down further and read the 'Processing a Bonus' section.
After creating a new pay run and an employee is owed a lump sum payment in the form of a commission, back pay or similar payment, you can now do this from within the employee's earnings details by following these steps:
- Select the "Actions" button in the bottom right hand corner of the employee's earning details, see below:
- Select "Add Lump Sum Payments" from the pop up menu. An "Other Earnings" line will be added, see below. You then need to select the pay category you are wanting to pay the lump sum against;
- If you hover the cursor over the blue "Lump sum payment" indicator, it will give you direction on how to treat a lump sum payment, see below;
- In this example, see below, 228 hours are owing as a lump sum, and it is spread out over a 6 weekly period. You just need to fill in how many weeks the PAYG will be spread over and the amount of hours owing. The rate will be determined by the pay category selected. However, the rate can be overridden. Then hit the save button that appears.
- The pay will now include the lump sum payment and with the right PAYG calculated.
Paying Leave "in advance" using Lump Sum Payments
Use this if you are wanting to pay leave in advance but not "slug" your employee for extra tax. For example, say you want to pay your employee for last week's wages but they've taken this week and next week off on annual leave, and want to be paid up front, ie. you'll be paying them for 3 weeks: last week (when they worked) and this and next week's leave. Follow these steps:
- Pay the "ordinary" earnings as usual then use the 'Add Lump Sum Payment' option on the 'Actions' button within the employee record in the pay run, select the 'Leave Taken' pay category and add the total leave hours to be paid.
- Remember - you want to aggregate the tax on this payment so enter the appropriate number of pay periods (in this example enter 2).
- Paying leave this way does NOT reduce the employee's leave balance so you'll need to use the Adjust leave option from the Actions button within the employee record, select the type of leave and enter a negative adjustment to reduce the leave balance by the number of hours being taken (be careful NOT to apply any earnings rules).
- Paying leave this way does NOT accrue leave on the leave hours taken so you'll also have to adjust the leave accrual rate in the pay run - click on the little pencil next to the accrual figure and overtype with the correct amount of leave that should accrue.
- Lastly, paying leave in advance this way will not automatically add the leave loading (if applicable). To include leave loading you will first need to create a new pay category (call it 'Leave Loading' and make it a Fixed unit of payment). Then, in the pay run click the 'Actions' -> 'Add Earnings' button, select the 'Leave Loading' category and enter the details as required.
NB. the tax calculation will use the other earnings in the pay run to average out the tax so if
- there are no "ordinary" earnings in this pay run
- you don't think the tax calculation is correct
please perform your own calculations and adjust the tax yourself, using the 'Adjust PAYG' option from the 'Actions' button - enter a negative adjustment to decrease the amount of tax calculated, or a positive one to increase it.
Processing a Bonus
If you are wanting to pay a bonus without needing to aggregate the tax simply follow these steps:
- Create a new pay run and use the 'Add Earnings' option on the 'Actions' button within the employee record in the pay run and select the 'Bonus' pay category to pay it.
- Remember - If you want to aggregate the tax on this bonus use the Add Lump Sum payment instead and enter the appropriate number of pay periods.
NB. the tax calculation will use the other earnings in the pay run to average out the tax so if you don't think the tax calculation is correct you can adjust the tax yourself - use the 'Adjust PAYG' option from the 'Actions' button, enter a negative adjustment to decrease the amount of tax calculated, or a positive one to increase it.
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