We're very confident that FlexiTime's tax calculation is extremely accurate. If you are comparing the results that you get with FlexiTime to another system, e.g. the IRD PAYE Calculator or another payroll system, and you see some differences there are a few simple things that you can check.
Are you comparing apples with apples?
The main three factors that determine how PAYE is calculated are:
- the gross earnings
- the tax code
- the pay period
The first step is checking that these are the same in both systems. You can usually work out the cause of any differences in PAYE by comparing the information entered. The most common reason for tax calculation variations that we see in support requests is differences in pay period - comparing the tax on the same earnings but where one is, say, a weekly pay and the other fortnightly.
There may also be additional one-off elements in a pay which affect the PAYE calculation, particularly bonus payments, extra pays or final pays.
Extra pays, (including back pay), some Bonus payments, and final pays require the employee's pay history to calculate the tax. IRD's PAYE calculator does not have this information available, so usually can't be relied upon to correctly calculate the PAYE in these cases.
Rounding and accuracy - a common question for Withholding Tax.
NZ tax calculations are done on truncated whole dollars of gross earnings. A common question we have around employee on a flat withholding tax percentage is why the tax isn't the exact percentage of the total earnings. The answer is that the cents need to be taken off before the percentage is applied. So 20% withholding tax on $100.90 is $20, not $20.18.
FlexiTime will calculate tax accurately down to the nearest cent, to match the IRD. Note that when comparing FlexiTime's calculations with manual calculations using the IRD's paper tax tables, you may find a difference due to the improved accuracy in our calculation.
If you think there should be a student loan deduction, but none is showing in FlexiTime, firstly check that the employee has a student loan tax code - one ending in SL. If so, but the student loan repayment in the pay is set to zero, then the most common reason is that they have not reached the minimum earnings threshold. This is currently $367 per week. Any earnings less than that do not have student loan repayments deducted. The IRD website has more information on student loan thresholds.
If you would like FlexiTime Support to investigate this for you, please include the following information in your support request:
- The gross earnings of the pay
- Tax Code
- Pay Date
- Tax Period
- Pay Frequency (e.g. weekly, monthly, variably)
- Details of any bonus amounts included in the pay.
- Is this an extra pay or a final pay?
- The employee's gross earnings over the previous four weeks
- Details of what you entered and the results you got from the other payroll system or IRD calculator. Please include screen shots if possible.