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Calculate a Net Bonus Amount

We want to pay an employee a one-off bonus of $1000 after tax. How can we do this in FlexiTime and should the payment be included in a normal weekly pay or be done as a separate pay?

Robert Owen Answered

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FlexiTime doesn't have the facility to specify a payment as net after tax. To make a lump sum payment to an employee, add the Bonus pay code to the employee pay and select the Extra Pay option.

Lump sum payments include annual or special bonuses, cashed-in annual leave, retiring or redundancy payments, payments for accepting restrictive covenants, exit inducement payments, gratuities, or back pay. These are also called "extra pays". Overtime or any regular payments are not lump sum payments.

The tax on an extra pay bonus is calculated based on the last 4 weeks earnings and includes the bonus amount in the grossed up annual amount. If you know roughly what the annual earnings are for the employee you can calculate the gross bonus to get $1000 net payment.

Tax rates (August 2012) for lump sum payments are -

| $14,000 or less
| 12.20 cents in the dollar.
|
| from $14,001 to $48,000
| 19.20 cents in the dollar.
|
| from $48,001 to $70,000
| 31.70 cents in the dollar.
|
|

greater than $70,000

but less than the ACC earners' levy maximum threshold of $113,768

(for the 2013 tax year)

| 34.70 cents in the dollar.
|

 

The amounts include the ACC earner's levy.

As an example if the annual earnings is $40,000 use 19.20 cents in the dollar. To get $1000 net amount you divide $1000 by (1 - 0.192).

E.g. $1000 / 0.808 = $1237.62.

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