There are two ways you can pay an employee a bonus or commission:
include the payment in the employee's regular pay, or
process the payment in a separate pay.
To add a bonus or commission payment to an employee's pay, you'll need to set up a new pay item and assign it to the employee.
Some bonus and commission payments need to be included in your KiwiSaver calculations. To clarify your obligations for your bonus or commission payments, speak to your accounting advisor or check the IRD guidelines.
Tax on bonus and commission payments
When paying a bonus or commission, MYOB treats the total gross pay as the employee's regular wage and taxes it accordingly. This means you'll need to calculate and manually adjust the PAYG withholding on the pay.
You can create one pay item for a bonus or commission payment, then assign it to the applicable employees. If the amount of the payment varies between employees, just change the amount when you do a pay run. Or you can can create separate pay items for each employee - it's up to you.
Go to the Payroll menu and choose Pay items.
Click Create earning.
Set up the earning:
For the Type, select Bonus or Commission.
(Optional) Change the Name for the earning.
If you'd like a different, more personalised, name to show on payslips for this earning, enter a Name for payslip, such as "Annual Bonus - Steven". Otherwise, this can be the same as the Name field.
Enter the Amount for the bonus or commission. If needed, you can change this amount during the pay run.
Choose whether the bonus or commission is Taxable or Non-Taxable. If unsure, check with your accounting advisor or the IRD.
Choose how to handle KiwiSaver contributions. If the payment should be excluded from compulsory employer contributions, select the option Don't include in KiwiSaver contributions. To exclude the pay item from gross earnings, select the option Don't include in gross earnings when calculating leave payments.
Here's our example setup for a $750 bonus payment:
Assign the pay item to the employee as described in the next task.