FlexiTime can be used for paying self employed contractors as well as regular employees.
When adding the contractor, specify their tax code to be WT. The exception is if they have provided you with a Special Tax Rate Certificate specifying a rate of 0%, in which case you should set the tax code to STC.
Once the employee has been added there are a couple of changes to make on their employment details:
- Edit the employee and on the Personal tab tick Self Employed. If they operate through a company you can enter the Trading Name. You can also enter a GST Number, however this is only required if it differs from their IRD Number.
- If they are paying withholding tax, set this rate on the Employment tab.
- Go to the Default Pay tab and, if registered for GST, add a GST line to their default pay. If no Withholding Tax is to be deducted then you can remove the Tax line.
- On the Leave tab you should set the Holiday % to zero and the Annual Sick Leave Entitlement to zero.
The contractor can then be included in a pay run along with other employees.
If the contractor does require withholding tax to be deducted from their pay, enter the WT % on the employee's Employment tab. Ensure that the Tax pay code is included on the contractor's Default Pays. This means that the employee will be included on the IRD returns.
If you are going to be paying the contractor a daily rate, rather than an hourly rate, please see this article.
A great feature of FlexiTime is 'buyer-created' invoices. All this means is that GST registered contractors can print their payslips from FlexiTime in the format of an invoice. If the contractor is using FlexiTime to record their hours and you are paying them based on those hours, having the contractors re-entering their time into a different system to generate their invoice to you has little point.
With FlexiTime, they can log in and under Tools > My Account > Pay Records they can view their pays. When viewing a pay, if they choose to Print, the payslip will be downloaded as an invoice pdf file. Please note that the employee must have the GST pay code on their default pay tab in order for their payslips to print as a buyer-created invoice.
Administrators can also print invoices for their contractors. Under Payroll > Reports > Pay Reports there is a Contractor Invoices report.
Please note that officially the buyer creation of invoices requires IRD approval.