An employee share scheme (ESS) is an arrangement involving the supply of shares from a company to an employee. A benefit exists when shares are provided free or at below-market value.

The amount of ESS provided to the employee must be reported to IRD via payday filing. It is treated as extra pay, and a lump-sum tax is calculated on it, along with student loan (if it applies). However, KiwiSaver and ACC do not apply.

To set this up in Payroll, you first need to create a fixed unit pay category for the Employee share scheme benefit. Tick the Employee Share Scheme tick box, and when this is ticked, Kiwisaver exempt and ACC levy exempt will automatically be ticked.

Run a pay run with ESS

When running the pay run that will include ESS, within the pay run, follow these steps:

1. Within the pay run, click the name of the employee you need.
2. Click the Actions button for the employee.
3. Click Add lump sum payment - This will ensure the ESS is taxed as a lump sum payment.
4. Choose your ESS pay category along with the amount.

Once the pay run has been finalised, the ESS will be reported in the EI payday filing, both for the manual file upload and gateway services.