Negative Gross Payment (deduction before tax)

There may be times where you need to reduce an employees gross pay due to an overpayment of gross pay in a previous pay period. In this case you would not use a "deduction", as a deduction is taken off the pay after PAYE has been calculated and deducted.

To create a deduction which reduces the gross pay.
Steps 1 to 5 only need to be done once, since once this option is turned on it will remain on:

1. Select General Program Options (click File > General Program Options)
2. Select the Advanced tab.
3. The option Allow Negative Taxable Allowances (Gross Reduction) will be available.
4. If not ticked already, click this so that a tick appears, then click OK.
5. You will now need to restart Payroll Pro.
6. Open your payroll data, and select Allowances & Extras.
7. Click New to create a new allowance.
8. Enter a code of up to 4 characters and a name.
9. Ensure Taxable is selected, and then tick Negative (Gross Reduction).
   
10. Tick other options depending on what your requirements are. In most cases you would select Reset to zero after employee paid, (both the rate and the number of units) because this is unlikely to be used regularly.
    

 

To use this newly created item:

1. Under Enter Current Pay select Allowances/Extras.
2. Enter the new code in the Allowances column (the second column).
3. Enter a positive number for the amount, and a negative number for the units. The total of the amount times the units will then be a negative number.
   
4. This amount will be subtracted from the employees gross pay.

 

Use this option with care. Allowances with this option selected will reduce the gross taxable amount.
In turn this will lower the PAYE, the Student Loan deduction, and KiwiSaver deduction, as these are calculated on the reduced gross amount.