The Inland Revenue Department (IRD) will send you a letter with instructions to start deducting child support from an employees' earnings.
For child support deductions, you must keep 60% of the employees net earning. This protection only applies to child support payments, if there are other deductions from an employee's earnings then these will still be taken out of the protected 60% of the employees net earnings.
You are not to deduct the full amount of child support if this leaves an employee with less than 60% of their net earnings. You do not need to make up the balance in future pays. The IRD will make arrangements with the employee to pay the balance.
Child support deductions have priority over any other deductions from an employee's pay. After deducting PAYE, you must deduct child support before you deduct anything else like student loan repayment and KiwiSaver.
To set up a Child Support deduction, go to the employee file and then to "Pay Run Inclusions". You will see this screen.
Following the IRD child support instructions,
- Click on 'Add'.
- Select the "Child Support" deduction category from the drop down list.
- Enter the deduction amount to be applied per pay run of "Fixed", "Percentage of Gross", or "Percentage of Net".
- Enter either the percentage or dollar value amount for Child Support deduction.
- Select the deduction to be "Paid to the IRD".
- Select preserved earnings. See below for more information on preserved earnings.
- Enter any notes if you want the employee to see them on their pay slip.
- Enter the date this inclusion is to commence.
- Choose when this inclusion should cease.
- Click on 'Save'.
Setting up Preserved Earnings
Preserved earnings is defined as the minimum net earnings an employee MUST be paid before a deduction amount can be applied in the pay run. For Child Support deduction:
(a) Preserved earnings: select 'Once a percentage of net earnings limit has been reached';
(b) Preserved earnings percentage: '60'%;
(c) If the amount is not reached:'Do not pay deduction';
An example of a Deduction paid to the IRD with a 60% preserved earnings is as follows:
Once the employee's Child Support deduction is saved, the details will display under the Deduction line. If you need to make any edits, click on the "Child Support" text which will expand the details again, make the required edits, and click on save.
You will need to ensure that the correct child support code is reflected based on the employee's circumstances for that pay period. You can change the child support code by selecting the relevant code via the drop down. 'N/A' displayed as the default.
The '?' help/tooltip provides the child support code descriptions, which are:
- C=ceased employment
- A=advanced payment
- P=protected earnings
- S=short term absence
- D=deducted previously
- O=other
- N/A=standard child support payment, no exceptions.
A pay run example of an employee's standard Child Support deduction within the 60% preserved earnings.
A pay run example of an employee's Child Support deduction falling below the 60% preserved earnings. The child support deduction amount will automatically update to $0.00.
Important: You must select the applicable Child Support code to reflect the employee's child support payment circumstance for that pay period.
You will get written instructions from the IRD once the Child Support deduction can cease. If this is the case, then go into the employee's Child Support deduction, and update accordingly e.g. enter an expiry date.
Once the Child Support expiry date has reached then the Child Support deduction will automatically cease.
To delete the deduction, hover to the far right until the 'x' appears and then click on the 'x' icon.
A "Confirm delete" popup will appear. Click on 'OK' to continue with the deletion.