Pay Categories are used to define the rates that employees are paid. Setting up your pay categories will help simplify the management of employee pay rates by:
- Automatically calculating linked rates through loading and penalty rate multipliers;
- Defining what is exempt from KiwiSaver, PAYE, GST and ACC Levy;
- Configuring leave accrual;
- Excluding certain pay components from being calculated as part of Average Weekly Earnings and Ordinary Weekly Pay.
To access the pay categories page, go to 'Management > Payroll > Payroll Settings > Pay categories'. The default set-up for a new business includes several already configured Pay Categories. You will also notice that pay categories labelled 'SYSTEM' cannot be edited at all:
This is intentional to ensure the system calculates the pay categories and associated components in a specific manner.
All other default pay categories can be either deleted or edited to match your business needs.
Creating a Pay Category
You can create a pay category by following these steps:
- Click on the 'Add' button, located on the top right hand side of the screen;
- Enter the pay category name and click on 'Save';The new pay category will appear in expanded format so you can review and edit the settings. A few notes on some of the settings:
- The new pay category will appear in expanded format so you can review and edit the settings. A few notes on some of the settings:
- Units - If the pay category is processed on a per hour basis, select "Hourly". If the pay category is to be used as a primary pay category for employees earning an annual salary, select "Annually". If the pay category is for a per unit payment, for example a vehicle allowance or bonus, select "Fixed". You will also notice when a pay category is set as "Fixed", you will not be able to select the "Accrues Leave" setting.
- Exclude from Average Weekly Earnings - Ticking this checkbox means that any earnings paid under the pay category will not be calculated towards the employee's Average Weekly Earnings, as part of annual holiday calculations.
- Exclude from Ordinary Weekly Pay - Ticking this checkbox means that any earnings paid under the pay category will not be calculated towards the employee's Ordinary Weekly Pay, as part of annual holiday calculations.
- PAYE Exempt - Tick this checkbox if the earnings are tax free.
- KiwiSaver Exempt - Tick this checkbox if the earnings are KiwiSaver exempt.
- GST Exempt (option only available if contractor management function enabled) -Tick this checkbox if the earnings are GST exempt. Only applicable for independent contractors who have registered for GST.
- ACC Levy Exempt - Tick this checkbox if the earnings are ACC levy exempt.
- Accrues Leave - If employees are accruing any type of leave based on the "hours per hour worked" accrual method, this setting will determine whether any leave hours will accrue when the employee is paid against the pay category in a pay run. If the checkbox is NOT ticked, employees will not accrue leave on an hours worked/paid using this pay category.
- Rate Precision - Option to set rate at between 0 and 6 decimal places. If adding additional earnings lines for an employee (configured in the employee's Pay Rates screen), the rate can be specified up to 6 decimal places regardless of the pay category setting. Please note however in the pay run, rates will only calculate up to a maximum of 5 decimal places.
- Rate Loading - If you want to pay an all uploading for an employee on the base rate of pay, you can configure that in this setting. For example, if an agreement has been reached that an employee will work a certain number of overtime hours and will be paid an additional 10% on their agreed base rate for all hours worked against that pay category, you can enter "10" in that field.
- Hide units on pay slip - When paying employees, there may be pay categories where you do not require the number of units and rate per unit to be displayed on the pay slip. Examples include paying a commission or bonus, or the primary pay category for salaried staff. Even though the units will still be displayed in the pay run, ticking this checkbox means they won't appear on the pay slip. For eg, if you have ticked the setting for the 'Salary' pay category, the pay run will still appear as follows:
The employee's pay slip, however, will appear as follows:
4. Once all settings are complete, click on 'Save'
Linked Pay Categories
In addition to the base value pay category, you are able to create linked categories:
When reviewing an employee's Pay Rates page, you will notice that linked pay categories are automatically calculated. In fact, they cannot be overridden by a user. If an employee's pay rate increased the rates attached to linked pay categories will also automatically calculate, eliminating and manual data entry or calculation of any penalty rates.
Editing Pay Categories
To edit a pay category, click on the pay category name to expand the settings. Make the necessary changes and then click on "Save".
Note: If a pay category has been used in a pay run, you are NOT able to change the PAYE setting. Rather, you will need to create a new pay category and apply the updated PAYE setting in that new category.
Additionally, as stated previously no "SYSTEM" configured pay categories can be edited.
Deleting Pay Categories
To delete a pay category, hover your mouse over the pay category name where you will then see a red cross icon on the right hand side of the pay category.
Click on the "x" icon where a confirm popup dialog will then appear. If you click on "Delete" the pay category will be removed from the platform.
Note: If a pay category has been used in a pay run, you are NOT able to delete it. Additionally, no "SYSTEM" configured pay categories can be deleted.
Restoring a pay category
You are able to restore a pay category by going to Payroll settings > Restore deleted items, and selecting 'Pay category' from the drop down box. A list of all deleted pay categories will appear and you can click the 'Restore' option against the pay category that you are wanting to reinstate.