Compulsory Employee Deductions

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Compulsory deductions should be defined for an employee on the Employee's Pay Deductions tab.

Compulsory deductions are

  • KiwiSaver
  • IRD arrears
  • Child Support
  • Court fines
  • Work and Income (WINZ) arrears
  • Student Loan special rate or compulsory deductions

It is important to note that these deductions automatically add the relevant pay codes to the employee's Default Pay tab.   These pay codes should not be deleted, edited or manually added on the Default Pay tab or the employee's pay.   You should always use the Pay Deductions tab to manage these deductions. 

For other types of employee pay deductions,  please see this article.

Go to Setup > Employees,  select the employee and click edit, then select the Pay Deductions tab. 

 

KiwiSaver

If the employee is an existing employee being set up in FlexiTime and does not contribute to KiwiSaver, leave all fields blank.

If the employee is a new hire and already a KiwiSaver member, tick the Pre-Existing Member box.

If the employee has joined KiwiSaver whilst in your employ, either through automatic enrolment of a new hire or an existing employee choosing to join, enter the KiwiSaver Enrolment Date.

New employees are automatically enrolled in KiwiSaver. If the employment start date is within the last month the enrolment date will default to the employment start date. If the new employee chooses to opt out of KiwiSaver, enter the KiwiSaver Opt Out Date. An employee can choose to opt out after two weeks of employment but before their ninth week starts. Employees can opt out online here or can download the KS10 form from the IRD website.

Select the employee’s KiwiSaver Contribution Rate, either 3% (default), 4% or 8%. This is the amount of gross pay that the employee has chosen to contribute to KiwiSaver each pay. An appropriate pay code will be automatically added to the employee record, depending on the Contribution Rate selected.   Selecting 3% will add the KIWI3 pay code,  selecting 4% will add KIWI4 and selecting 8% will add KIWI8 to the employee's Default Pay tab.  The KSR (Employer contribution) pay code will also be added.  It is important that these pay codes are not edited or deleted, with the exception of increasing the Employer's contribution, or when changing the employee's contribution rate (see below).  If you wish to increase the employer's contribution,  select the KSR pay code and change the Default Quantity to the percentage that you require. 

If an employee requests a change to their contribution rate (by letter or by completing a KiwiSaver deduction form (KS2)),   you will need to change their Pay Deductions tab to select the new rate,  then change their Default Pay tab to remove the old Kiwisaver rate and add the new rate.   For example,   if an employee wants to change from 3% to 4%,   select 4% on Pay Deductions > Kiwisaver,  and then remove the KIWI3 pay code and add the KIWI4 pay code to Default Pay. 

An employee can suspend their KiwiSaver contributions by taking a Contribution Holiday. The employee must have been contributing to KiwiSaver for at least one year before they are eligible for a contribution holiday. Tick the Contribution Holiday box to suspend the employee’s KiwiSaver contributions. Clear the box when the employee is ready to resume their contributions.

For more information about KiwiSaver, refer to the Inland Revenue Department’s website.

 

Inland Revenue Arrears

Inland Revenue may send you a notice requiring you to deduct payments from an employee’s wage to pay income tax arrears. The notice should explain how to calculate the required deductions.

 

Original Default Sum

The original amount in arrears.  This is shown on the IRD notice as "Amount:" in the top part of the letter.

Balance Owing

Enter the outstanding arrears amount. This will be reduced by FlexiTime as payments are deducted from the employee’s pay.  

Usually this amount will be initially be the same as the Original Default Sum and will be reduced every time you finalise a pay for the employee which includes an IRD Arrears deduction. 

Tax Type

The tax type for the arrears payment. This will be included on the Employers’ Monthly Schedule (IR 348).  

The Tax Type is shown on the IRD Arrears notice as the "Code" part of the bank line,  usually it is "ARR".

Tax Period

The tax period that the arrears are related to, as notified by IRD.

IRD don't seem to be specifying a Tax Period in the Arrears notice anymore,   so you can leave this blank unless IRD advise otherwise. 

The IRD Arrears pay code will be automatically added to the employee's Default Pay tab.  

The Arrears deductions will be made at the lesser of:

  • 10% of the Original Default Sum per week of pay,  or
  • 20% of the gross earnings in the pay

If the employee's net pay is less than $100 per week,  the deduction amount will be $10 per week.

If the employee requests that you deduct a higher amount than the calculated figure, you should update the Default Rate of the IRD Arrears pay code on the employee's Default Pay. 

 

Child Support

 

CS503 Regular
Deduction Amount

Enter the Child Support amount to be deducted from the employee’s net pay.

An employee is allowed to keep 60% of their net pay, after child support is deducted. The maximum child support payment is 40% of the employee’s net pay.

 

Courts

The Ministry of Justice may send you a notice requiring you to deduct payments from an employee’s wage to pay Department of Courts fines arrears. The terminology on these letters can sometimes change. The notice should provide the information below.

Fines in Default

A balance must be entered here before FlexiTime will make any deductions.

Fines Number

Also referred to as PPN and/or Payee Code.

CID Number

If this is not present then use the Payment Particulars, often the employee's name.

Regular Deduction Amount

The amount that will be deducted from each pay.

Court fines are included in the Banking Employee Batch and Banking Payments Batch files to ensure that you can make the payment to the court on the same day that you pay your employees.   They will also show on the Payment Summary section of the Pay Summary report. 

 

Work and Income 

Inland Revenue may send you a notice requiring you to deduct payments from an employee’s wage to repay money owing to Department of Work and Income.

DWI Customer Reference

This is used for the direct credit Payee Reference.

Regular Deduction Amount

The amount to be deducted from the employee’s pay.

 

Student Loan

Ministry of Social Development (Work and Income) may advise that an employee is required to make compulsory repayments in addition to their standard student loan repayments; or your employee may choose to increase the amount of their student loan repayment.    

Special Deduction Rate

Student Loan repayments are usually 12% of the employee’s gross pay (above the student loan repayment threshold), however the employee can arrange to repay at a different rate. If you have received a letter from the IRD instructing that a special student loan rate should be used, enter the rate here. Special SL rate should be entered as a percentage, e.g. 15.00 for 15%. 

See the Inland Revenue website more information about Student Loan repayments. 

 

Student Loan Additional Deductions

Enter the Outstanding Amount and the Extra Deduction Rate from the IRD letter.  This will then be automatically calculated and deducted from the employee's pay using the pay code SLCIR. The payments will stop when the outstanding amount has been repaid, or a final deduction date can be entered.

 

Student Loan Voluntary Deductions

Add the SLBOR (Student Loan Voluntary Repayment) to the employee's default pay codes,  and enter the additional amount to be repaid in the rate.    This amount will be automatically deducted from each pay for the employee.

For more information see this article

 

 

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