If you are paying contractors in your business, you can easily set them up to be paid in PaySauce. We even have a contractor payment option that provides for the non-taxable GST payment to be made easily if required!
đĄ Check the rules for what determines whether a worker is a 'Contractor' or an 'Employee' here.
Set up a contractor on your computer
Select the Employees icon in the left-hand panel.
On the right-hand side of the screen, click the + New Employee button.
The 'New Employee' window will open. You can't save progress so you will need to complete the process in one go, ensure you have these details handy:
Full name
Email address
IRD number
Bank account number
Tax rate
Enter the contractor's first name, last name and email address.
Enter the contractorâs IRD number, bank account, start date and job title.
â ď¸ IRD numbers are checked to see if they are valid by using a specifically prescribed method from IRD. If the account number is returning as invalid, please ask the contractor to re-check their IRD number.
Enter the tax code as WT.
If they are a contractor receiving schedular payments, you should enter the withholding tax rate as provided to you by the contractor on their tax rate notification form (IR330c).
When no withholding tax is to be deducted, you should enter 0.
â ď¸ The tax rate notification form is a mandatory document that contractors receiving schedular payments must complete and give to you. The form is available on the IRD website here. PaySauce support is not able to advise you which tax rate your contractor should be using.
Turn KiwiSaver off by clicking the toggle, as contractors are not able to make KiwiSaver contributions via payroll.
Turn off the leave options, as contractors are not entitled to leave payments.
Payments
You can choose to add a pre-existing payment set up at your company level or to create a new payment for this employee.
Selecting Add from company will show a list of available payments. Mark the selection box to select, then Apply.
To create a new payment, select Create New Payment.
Select the + button to open up the new payment settings.
Set up an hourly rate
To set up an hourly rate for a contractor, select âhourlyâ in the rule option.
You can change the title of the payment - it will default to hours/rate when selecting an hourly payment method.
Leave the âtaxableâ selection as yes.
If the contractor works different hours each period, select Variable for the frequency.
If the contractor will record their worked hours on the PaySauce mobile app, set the âuse templateâ option to yes and then select the timesheet template. Enter 0 for the Hours field - they'll be entered through the timesheets instead - and enter the their hourly rate in the Rate field.
If the contractor will not be recording time on the PaySauce mobile app, select No for the Use Template option.
Set up a fixed invoice amount
PaySauce has a contractor's invoice payment option available. This can include the non-taxable GST payment if required.
In the Payments screen select the rule âFixed Amount (+GST)â. At pay time, the GST payment will be an option you can select or not.
Enter the title of the payment as you wish to appear on reports, including on payslips.
Selecting âyesâ for âhas narrativeâ will allow an extra text field with the payment, so more information can be entered.
Leave the taxable setting as âyesâ.
If you wish the amount to be set each time, set the frequency as variable and enter 0 for the amount.
Alternatively, you can set the frequency to regular and set the amount to populate each pay time.
Set up a salary
To set up a contractor on a salary, select Salary in the payment rule option. Select âannualâ.
The frequency option should be set to regular.
Enter the annual salary amount in the Amount field.
You do not need to tick the checkbox 'Reduce by Leave taken', as this is only relates to recording leave for an employee.
Enter the hours that the contractor is working for this salary.
If you would like your contractor to receive a payslip, select Yes (this will be confirmed again in the Finalise screen when running a pay).
Enable the child support deduction option if you are required to make child support deductions for this contractor.
Deductions work similarly to Payments. If any are set up at your company level, you can apply them from âAdd from companyâ. Otherwise you can select âCreate New Deductionâ or Next if no deductions are required.
You can read more about deductions in our article here: Deductions.
Lastly, choose whether to invite the contractor to download the app so they can fill in timesheets, view payslips, etc.
If you select Yes, the contractor will receive an email invitation to download the PaySauce phone app. They will be able to enter their own details in (e.g. bank account, IRD number). They will only be able to enter specific fields such as hours worked, but not items such as the pay rate.
Adding your contractor on the PaySauce mobile app
Log into the PaySauce app using your employer login.
Tap on the âemployeesâ button.
Tap on the plus symbol in the top right hand corner
If you wish to complete the contractorâs details yourself (or the contractor is not able to use the PaySauce app) then leave the âinviteâ toggle off and press ânextâ.
If you wish to invite the contractor to complete their own personal details, toggle the âinviteâ option on, complete their name and email address then press âinviteâ.
Refer to the instruction above for adding an contractor on the web/computer, as the information you must select is the same except presented on shorter screens on your mobile. If you have invited the contractor they will complete their personal details, but you must still complete information relating to their work hours and payment types.
At the end of the set up process you will see the button at the bottom says âactivate employeeâ.
Paying your contractor
If you have selected the fixed invoice amount payment option, in your pay run you will have a field on the pay card to enter the amount of the invoice, as well as a description if you have narrative enabled.
If the Contractor is to be paid GST, select the tick box next to + GST.
The GST payment is a non-taxable payment.
You can click the Preview button to check the calculations.
We often receive queries about the tax calculations for contractors not being an exact percentage. This is because the percentage for the tax is worked out on the whole dollar amount only, and excludes the cents portion. This is calculated in line with IRDâs specifications and is the correct method to calculate withholding tax.