This article provides a step-by-step guide for paying shearers using PaySauce.
Shearers are often engaged as contractors or sometimes as casual employees. Whether you are paying your shearer as a contractor or as an employee, you may have already paid their net pay (meaning you may only need to file and pay their tax or you are looking to pay and file the pay as normal through PaySauce - paying their net pay and their tax at the same time. This article will cover both options for you.
Before you begin, decide whether you will be paying:
Tax and net wages: PaySauce will calculate and pay both the net amount to the shearer and the tax to the IRD.
Tax only: The shearer has already received their net pay, and you need PaySauce to file and pay the tax only.
If you need to file the tax only, review the provided instructions below before closing the pay run. This is an important step to prevent the net pay being paid via PaySauce.
1. Add or verify shearer details
The first step is making sure every shearer is correctly set up in PaySauce, including their bank account and tax code.
A. Existing shearers
If the shearer is already in your employee list, you just need to check their bank account details.
Go to the Employee tab.
Select the employee's name.
Navigate to Details > Employment.
Check that the bank account number matches the one on the shearer's invoice.
Note: If you are only paying the tax and the shearer does not have a bank account recorded, you can enter your company's bank account number here just to complete the setup process.
B. Setting up a new shearer
If the shearer is new to your system, follow the steps below to set them up. You can also refer to our guides on adding employees or contractors for fuller, more detailed information.
Go to the Employees section and click + New Employee on the right side of the screen.
Personal Details: Enter their details. If you don't have their email address, use your company's email address. Click Next.
Bank and IRD Details:
Enter their IRD number.
Enter their bank account number.
If paying tax only and you do not have a bank account number for the shearer: Enter your company bank account number (this field must be filled).
Enter the start date. Click Next.
Tax Settings:
Select the correct tax code depending on what your shearer's arrangement is.
For contractors, select WT as the Tax Code and then enter the appropriate rate.
For shearers engaged as employees, select the code provided by them (e.g. CAE or other code that they have decided).
Click Next
KiwiSaver and Leave:
Turn KiwiSaver off for contractors or exempt employees and click Next.
If your shearer is a casual employee who is contributing to KiwiSaver, leave it on and choose the appropriate rates
If the 8% holiday pay is included on the invoice leave this setting on and adjust the details as necessary.
If the 8% holiday pay is not included, switch the slider off and click Next.
Skip Tagsets: Click Next
C. Create payment rules (Add payment types)
Payment rules define the different ways you will pay the shearer (e.g., Hours, Shearing, Meals). Create a payment type for each item listed on the shearer's invoice.
Click Create New Payment and then click the + symbol in the top right corner.
Set up the required payment types as shown below. You can set up as many payment types as you need by clicking the + after each one.
Payment Type | Rule | Taxable | Initial Amount/Quantity |
Hours | Hourly | Yes | Hours: 0, Rate: from invoice |
Shearing/Crutching | Rate and Quantity | Yes | Quantity: 0, Rate: from invoice |
Meals/Allowances/Travel | Fixed Amount | Yes or No (as per invoice) | Amount: 0 |
Non-Taxable Allowances | Rate and Quantity | No | Quantity: 0, Rate: from invoice |
Click Next after finishing all payment types.
Payslips: Select Yes if their email was entered; select No if you used your own email or do not wish to send them a payslip. Click Next.
Skip Child Support & Deductions: Click Next on both screens to skip these.
Invite Employee: Select No and click Finish.
2. Create a one-off pay run
This step sets up the pay period for the current batch of invoices.
Go to Run a Pay and click new period.
Set the Pay Run Details:
Period Type: Weekly (or other as required, but for contractors this will not make a difference to tax calculations).
Start Date: The Monday at the beginning of the week.
Group Name: Shearer’s Wages
Is Recurring: No
Payment Date: The date you want the payment to be made.
Paycard Import: No
Employees: Select Selected, then choose the shearers from the list below.
Click OK.
3. Add invoice amounts
Go into the new pay run and enter the amounts from the invoices into the corresponding payment lines for each shearer.
For meals, enter the total dollar value.
To check the net pay, click the magnifying glass icon next to the shearer's name.
Ensure the Net Pay amount (in green) matches the total on the shearer's invoice.
When deducting withholding tax from contractors, the tax is calculated on the ‘whole dollar’ amount only. This is what is listed in IRD’s specifications. A common mistake we see is that the shearer will calculated tax on their invoice as a percentage of the total gross value, including the cents. This may mean there is a mismatch of a few cents on the values.
4. Close the pay run
The final steps depend on whether you are paying the full net wages or just the tax.
Option A: Paying tax and net wages
Close off the pay run as you normally would. The system will automatically pay the net amount to the shearer and file the tax to the IRD. You're all done!
Option B: Paying tax only - requires $0 net pay in PaySauce
If you have already paid the shearer's net wages manually or they have been paid by the shearing contractor, you must adjust the net payment to $0 using a deduction before closing the pay run.
Record net amount: Click the magnifying glass icon in the pay preview and write down the Net Amount shown in green (e.g. $631.00).
Add deduction: Click on the employee’s name, go to the Deductions tab, and click +.
Set up the deduction:
Rule: Fixed Amount
Title: Net Already Paid
Frequency: One-Off
Amount: The exact Net Amount you wrote down (e.g.$631.00).
Account: Leave as 'Select One'. This doesn't send the deduction anywhere - it just holds the funds in your company account.
Click OK at the top of the screen, and then OK at the bottom of the screen.
Confirm $0: Click the magnifying glass again to check that the net payment now shows $0.00
Close Pay: Once all shearers have a $0.00 net payment, close and pay as normal. PaySauce will file and pay the PAYE only.