Paying team members a bonus can be a good way to reward outstanding performance and motivate your team. Here’s a practical guide to help you get the tax right on any lump sum bonuses you make to staff.
Lump sum payments include:
Overtime or any regular payments are not considered lump sum payments.
Follow these steps to work out the PAYE rate to use for a lump sum payment:
You can use the PAYE rate of 34.39 cents in the dollar if the employee asks you to.
You also need to calculate student loan repayments, KiwiSaver deductions and employer contributions on lump sum payments, if applicable.
ACC earners’ levy should only be applied to earnings below the threshold of $124,053.
But you don’t deduct the ACC levy from:
In these cases, you’ll need to reduce the above rates by 1.39%. Redundancy payments and retiring allowances are exempt from KiwiSaver employee deductions and employer contributions.