If your employee has a student loan, their tax code will include "SL" (for example, M SL or S SL). PaySauce automatically calculates and deducts student loan repayments from their pay each pay period and includes the amount in your PAYE payment to Inland Revenue.
How student loan deductions are calculated
The standard repayment rate is 12% of every dollar earned over the repayment threshold.
For the 2026 and 2027 tax years (1 April 2025 to 31 March 2027), the annual repayment threshold is $24,128. This often changes each financial year but stayed the same at 31 March 2026.
This is broken down across pay periods so deductions can be calculated each pay run.
Pay period thresholds (2026 tax year):
Weekly: $464
Fortnightly: $928
Four-weekly: $1,856
Monthly: $2,010.66
These figures are set by Inland Revenue and PaySauce updates them when they change.
Main tax codes (M SL and ME SL)
When an employee uses an SL tax code on their main job, the threshold is applied before the 12% rate kicks in.
The calculation is:
(Gross pay for the period − pay period threshold) × 12% = student loan deduction
Example: An employee earns $700 gross in a weekly pay.
$700 − $464 = $236 over the threshold
$236 × 12% = $28.32 student loan deduction
If the employee earns at or below the pay period threshold, no student loan deduction is made on their main pay.
Secondary tax codes (SB SL, S SL, SH SL, ST SL, SA SL)
The threshold does not apply to secondary income, because it has already been used against the main job. The full 12% applies to every dollar earned in the secondary pay.
The calculation is:
Gross pay for the period × 12% = student loan deduction
Example: An employee earns $300 gross in a weekly secondary pay.
$300 × 12% = $36 student loan deduction
If an employee's main job is below the pay period threshold and they want their unused threshold applied to a secondary job, they can apply to Inland Revenue for a special deduction rate. They give you the new rate certificate from IRD and you enter it in PaySauce.
One-off payments and non-recurring pays
Lump sum payments and non-recurring pays are treated differently. The pay period threshold does not apply to these payments, regardless of whether the employee is on a main or secondary tax code.
This is because these payments are treated as additional to an employee's regular pay. The threshold has already been (or will be) applied against the regular pay for that period, so applying it again to the extra payment would understate the deduction owed.
This means 12% is deducted from the full gross amount of:
Bonuses paid as a one-off
Backpay paid as a separate transaction
Commission paid outside of the regular pay cycle
Cashed-up annual leave paid out separately
Any other lump sum or non-recurring payment processed outside the normal pay run
Example: An employee receives a $2,000 bonus as a one-off payment.
$2,000 × 12% = $240 student loan deduction
This applies even if the employee's regular pay for that period is below the threshold. The bonus is assessed on its own.
If a non-recurring/one off pay run has been used in place of a normal recurring pay run, this may mean the student loan is overcalculated. Contact Support if this has occurred.
Things to be aware of
Special deduction rate certificates: If an employee gives you an IRD-issued special deduction rate, enter the rate against their record. PaySauce will use that rate instead of the standard calculation for the period the certificate covers. There is a special student loan rate field for this - contact Support if you need help finding it.
SLCIR and SLBOR: These are extra repayments above the normal repayment threshold. SLBOR is for voluntary additional repayments, SLCIR is for compulsory extra deductions that IRD may notify you of.
There's more information about these here:
If you think a deduction looks wrong, check the employee's tax code and other settings first, then confirm whether the pay includes any one-off or non-recurring components, as these are calculated without the threshold.