Paying a lump sum bonus
With Christmas fast approaching you may be starting to think about Christmas functions and Christmas bonuses. Do you know what the tax implications are if you do a lump sum payment to staff?
Bonuses are taxed depending on their type and frequency. If it's just a Christmas bonus that is not frequent then it's treated as a lump sum payment. You'll not only need to consider the tax implications of this but also any student loan repayments, Kiwisaver deductions and employer contributions.
To calculate the right PAYE
1. Work out what your employee has earned (before PAYE) over the past four weeks.
2. Multiply this figure by 13.
3. Add the lump sum payment.
4. Work out what income bracket your employee is in.
5. Deduct PAYE from the lump sum payment at the rate appropriate.
If you're not sure of the PAYE rate for an income bracket, or to see the full article have a look here.