A deduction is money taken out of an employee's pay. Common examples are rent or board paid to you as the employer, repaying an advance or loan from you, Ministry of Justice fines, court-ordered attachment orders, and other payments to third parties.
There are also special deductions that go to IRD as part of PAYE filing, such as Child Support and Student Loan debt repayments.
This article covers:
custom deductions (one-off, recurring, or recurring until a debt is repaid)
where the deduction money goes (withheld in your account or transferred to a bank account)
editing and removing a deduction
Child Support
SLCIR student loan repayments
Where to set up deductions
There are two areas that you can start to set up deductions for an employee.
From Team: select Team, click the employee's name, then select Deductions in the right-hand frame.
From Pay: while you're running a payroll, click the employee's name in the payroll list, then select Deductions (this may show as Edit Deductions).
Using both of these options takes you to the same place.
Deduction types
When you create a deduction, you choose a Type. The type tells PaySauce how to treat and report the deduction.
Deduction Type | Use it for |
Custom deduction | Creating any sort of deduction where you need to specify the details, such as rent or board, repaying an employer advance or loan, Ministry of Justice fines, attachment orders and other third-party payments. |
Child Support Deduction | Child support deductions IRD has asked you to make.
These are included in your payday filing to IRD, so they must use this type rather than a custom deduction. |
Student Loan Arrears (SLCIR) | Extra student loan repayments (SLCIR) that IRD has asked you to make. These are filed to IRD under a specific code, so they must use this type. |
Deduction frequency options
The Frequency field controls how often the deduction is taken.
Frequency | What happens |
One-off | The deduction is taken once, on the date you specify. It won't happen again in the next pay. |
Recurring until further notice | The deduction is taken every pay run from the start date until you remove it. |
Recurring until repaid | The deduction is taken every pay run until a total debt amount has been repaid, then it stops automatically.
Use this for a debt-reducing deduction, where you know the fixed total an employee will pay over time. |
Calculation rule
The Calculation Rule field sets how the deduction is worked out each pay. Choose amount to deduct a set dollar value each pay, or percentage to deduct a percentage of the employee's gross pay.
Payment destination: withheld or transferred to a bank account
Every deduction needs a payment destination. There are two options.
Withheld in company account. The deduction amount stays in your wages account. There's no separate bank transaction for the deduction: when you process the pays, the total payroll amount that leaves your account already has the deduction taken off, so the money simply stays behind. You can still track withheld deductions through your reports.
Transfer to specific bank account. The deduction is taken from the employee's net pay and sent as a separate transaction to the bank account you enter. When you select this option, extra fields open for the account name, bank account number, and particulars, code and reference.
Which option should I use?
If the deduction is going to a third party (such as the Ministry of Justice or another creditor), use Transfer to specific bank account and enter the account details and any particulars, code or reference the third party has asked for.
If the deduction is repaying you as the employer, either option works. Transferring it to a nominated account is useful if you want the money to land somewhere other than your wages account, or if you want a separate transaction line to help you reconcile. Particulars, code and reference can help with reconciling too. You can also nominate the same account you pay wages from: the deduction leaves as part of the total payroll amount and is then banked straight back in, giving you a visible transaction line.
If you arrange your own payments through internet banking, your bank may charge per transaction. Transferring a deduction creates an extra transaction, which may add a small fee. Withholding the deduction avoids this.
How to set up a custom deduction
Use a custom deduction for rent, board, repayments to you, or payments to a third party.
Select Team and click the employee's name. (Or, during a pay run, click the employee's name in the payroll list in the Pay area.)
Select Deductions in the right-hand frame.
Under Type, choose Custom deduction.
Enter a name for the deduction. The employee will see this name on their payslip.
Enter the date the deduction will start from.
Choose the frequency: One-off, Recurring until further notice, or Recurring until repaid. For an ongoing deduction such as rent, choose Recurring until further notice.
In the Calculation Rule field, select amount (or percentage).
Enter the amount (or percentage) to deduct each pay.
If you chose Recurring until repaid, enter the total amount the employee needs to repay. The deduction stops automatically once this total is reached.
Select the payment destination. Choose Withheld in company account to leave the money in your payroll account, or Transfer to specific bank account and enter the bank account details.
Click Create.
How to set up a Child Support deduction
Child Support deductions must use the Child Support Deduction type so they're included correctly in your payday filing to IRD.
Select Team and click the employee's name. (Or, during a pay run, click the employee's name in the payroll list in the Pay area.)
Select Deductions (or Edit Deductions) in the right-hand frame.
Under Type, choose Child Support Deduction.
Enter the date the deduction should start from.
The frequency defaults to Recurring until further notice.
Enter the amount to deduct each pay.
Click Create.
How to set up an SLCIR student loan deduction
If you have received a letter from IRD stating that compulsory extra deductions must be made for student loan arrears, we have a special deduction option to use. It must be set up in this way, as these deductions must be filed to IRD using the correct code (SLCIR). Using this option ensures that we classify it to the right code for you. These are called SLCIR deductions.
These specify that the employee should repay an additional 5% of their gross earnings over the student loan threshold.
Select Team and click the employee's name.
Select Deductions in the right-hand frame.
Under Type, choose Student Loan Arrears (SLCIR)
Enter the date the extra repayments will start.
Enter the extra percentage to deduct. This is a percentage of gross earnings that recognises the student loan repayment threshold. The deduction will default to 5%, as this is what is typically in the letters from IRD.
Enter the total debt amount on the letter - the total to be repaid. Deductions will automatically cease when this value is reached.
Click Create.
Ministry of Justice fine
If a Ministry of Justice fine needs to be set up:
Select Team, and click on the employee’s name. Select Deductions on the right hand frame.
Select the deduction Type, and choose Custom deduction
Enter the name of the deduction (e.g. Ministry of Justice) and the date it will start from.
Enter the frequency - A Ministry of Justice notice will normally include the total debt that is owed, so select the “Recurring until repaid” option.
In the Calculation Rule field, select amount or percentage which defines how the payments are to be calculated each pay time. The notice should provide which option is to be selected.
Enter the amount (or percentage) to be deducted each pay cycle (this information will be on the Ministry of Justice notice).
Next enter the total (of the debt) to be deducted.
More fields will appear when a debt is set up, to display the total of payments made so far, and the remaining debt still to be paid. These fields will be greyed out as they cannot be manually edited.
At the bottom of the screen select the Payment destination for the deduction. As these fines will paid to the Ministry of Justice bank account, select the option: Transfer to Specific bank account.
The Account Name and Bank account number should be copied from the Ministry of Justice notice.
The checkbox next to PCR should be ticked. This will open the remaining banking fields to enter the Particulars, Code and Reference details. Note: These details must be accurately entered - they will correctly allocate the payments to the employee’s records at the Ministry of Justice.
Click the Create button to finish.
Edit or Remove a Deduction
Select Team and click the employee’s name, or if adjusting it in the Pay area, click the employee’s name in the payroll list.
With the Employee’s details open on the screen, select Deductions on the right hand frame.
Click on the Deduction and:
Edit the amount to deduct - or
Adjust the date that the deduction is to start from - or
Click the Delete button at the top to remove the deduction altogether.
Changes coming in future
In future, we will be adding more 'types' to the deductions type menu. These are not yet available. Planned types are:
Payroll Giving
SLBOR (extra voluntary student loan repayment amounts)
Pre-tax deductions