Thankyou Payroll HelpThankyou Payroll help Processing PaysAdding a lump sum or bonus payment to a timesheet

Adding a lump sum or bonus payment to a timesheet

Lump sums or bonus payments often have implications for taxation and leave calculations

Say you earn $500 a week. Your PAYE tax is calculated by assuming that you consistently earn $500 a week. If you get an additional bonus of $500 in one week, the tax for that week would be calculated by assuming you consistently earn $1000 a week, and you would be taxed a larger amount.

Reducing overtaxing

The simplest option and the most accurate, is to use a tax return to reclaim the overtaxed amount.

 You can also use the "Lump sum" pay type. It is a distinct pay type and automatically is taxed as if spread over a month anyway.

Alternatively, you can spread the payment over a wider pay period to minimise the unnecessary tax payments for lump sum or bonus pay. This could be done using a custom pay type.

Lump Sum

Lump sum as applied in the timesheet is a system pay type that can be used to pay any amount that is above standard pay.

It is a distinct pay type and is taxed as if spread over a month anyway.

 

Using a custom pay type

You may wish to manually spread the bonus out, or you may need to give it a specific title. For this you'll use custom pay types.

To reduce the effect of a sudden high income pay period, we recommend spreading the payment out over a longer period. A good period of time is 2 to 3 weeks. Any longer than that may result in a tax bill at the end of the year.

Select "pay types" from the "employees" drop-down menu at the top of the page.

Create a new pay type

  1. Name the pay type so that it is clearly recognisable in the employees timesheet
  2. Set the rate as "1". The dollar amount will be set later, in the timesheet
  3. Set the rate per as 'per unit' because then the amount can vary
  4. Save the pay at the bottom of the page

For this example, the bonus will be spread over three weeks:

  1. Return to the Dashboard, and the appropriate Pay number
  2. Set the Pay period to start  3 weeks prior to the desired Pay day (the end of payments)

Select the timesheet of the employee getting the bonus

  1. Add an additional week to the Pay Period
  2. Move this addition week's start date to one week earlier than the original Pay
  3. Set a nominal amount for the first week ($1 or $10 or perhaps half the amount)
  4. Hit 'Update and save', and then refresh the page

Add an additional Row to the Pay Period by selecting the green icon

  1. Select 'Quarterly Bonus' from the drop down menu
  2. Add the second entry of the bonus, and enter the remainder
  3. Note: when entering the lump sum or bonus payments, the figure can be selectively excluded from all calculations regarding annual leave
  4. Select "update and save", and you're done