Giving employees a bonus is a common payroll activity but can be a complex one. This is because often payments are referred to as a bonus, but they or may not be a ‘discretionary’ or ‘contractual’ bonus.
In this article we will cover how to add bonus payments in PaySauce, as well as some general information about bonuses.
If you have questions about whether or not a payment you give to your employees is contractual or discretionary we recommend you seek specialist employment advice. PaySauce is not able to give you legal or employment advice about classifying your payments, only generalist advice.
Entering a bonus in your pay run
Go to ‘Run a Pay’ and ensure first that your pays are in the data entry state (where you are still able to make changes).
Click on the employee’s name in the pay card, then click on the ‘Payments’ tab.
Click on the plus icon on the right hand side to add a new payment.
In the ‘Rule’ field, select ‘lump sum payment’.
The title field will default to lump sum payment, but you can type in this field to give the payment a name. This name will appear on the employee’s payslip and your reporting.
Leave the ‘taxable’ option on the default setting (yes).
You have some check boxes to make selections on: we have covered these below in more detail.
The frequency field should be set to ‘one off’.
In the amount field, enter the value of the bonus payment.
Leave the tax selection on ‘auto calculate’ to apply the tax rate according to IRD’s specifications. Select a specific tax rate if you want to override the selection.
The ‘Levy’ field relates to the ACC Earner Premium. This should remain at the default value unless you know that the payment is excluded from these calculations. A bonus payment would not be excluded, so the default setting is correct. The maximum threshold for higher earners will automatically be recognised if relevant.
You have important check boxes to interact with when setting up lump sum payments. Our advice here is generalist advice, you should ensure that you seek advice from an employment specialist if you are not sure.
KiwiSaver
This box defaults to unchecked. This means the payment will be included in KiwiSaver calculations. This is correct for most payments and is correct if you are paying a discretionary or contractual bonus. Only certain types of payments are excluded from KiwiSaver calculations (redundancy or retiring payments, employee share schemes).
You should leave this box unchecked unless you have received specific advice that the payment can be excluded from KiwiSaver.
Leave
This box defaults to unchecked. This means the payment will be included in leave earnings calculations. This is correct for most payments, except truly genuine discretionary bonuses. These are bonuses that do not relate to work done and are considered a ‘gift’ to the employee. If you are paying a discretionary bonus to an employee and are certain that the payment can be excluded from leave earnings, you can check this box on. That will exclude the earnings from the calculations used to pay the employee’s leave.
Any incentive or productivity related payments should still be included in leave earnings, even if you call the payment a bonus. Seek specialist advice if needed.
End of employment
From 1 April 2025, IRD has introduced tax rules to lump sum payments that relate to end of employment. They are taxed using a slightly different method than other payments. PaySauce will handle the calculations correctly for you, but you should check this box on if you know the payment relates to end of employment.
Once you're finished with these settings, click Ok to finish in the payment window, then Ok again to return to the pay card area.