Code House Integrated Payroll (CHIP) FAQ Document PAY ITEM MANAGEMENT

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1 Pay Items refer to anything that affects how much an Employee gets paid, how much leave is accrued for any leave type or anything that affects how much you bill a Client They can be specific to one Client or for general use with many Clients and can consist of an Employee rate or Client Rate only, or both. For example: Hours worked by an Employee are generally charged to the Client so you would set up a Pay Item for Normal Time that includes an Employee Rate and a Client. Whereas a Child Support Deduction doesn t relate to a Client so you would only have an Employee Rate for this Pay Item. Some examples of Pay Items are as follows: Normal Time Over Time (Double Time, Triple Time etc.) Leave (Sick, Annual, Long Service, Bereavement etc.) Training Allowances Deductions (Union Deductions, Child Support) Salary Sacrifice Items Employee Super Pay Items need to be created for any after tax deductions or additions that you wish to appear on the Employee s pay advice such as a deduction for a uniform which you bought on behalf of the Employee, or reimbursement for kilometres travelled. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 1

2 If the Pay Item is to be used in Awards that have multiple rates for different levels or years you are able to enter the rates for each level or year in the one Pay Item. Some Pay Items such as Overtime and Leave Items can be based on a % mark-up of a Normal Item i.e. Annual Leave has 17.5% loading based on a Normal Time Item. Pay Items may also be used exclusively for special charges or discounts that you wish to give to your Clients. For example, you may give one Client a discount because they pay a traveling allowance which you normally have built in to your Normal Time Pay Item. When creating a Pay Item you also need to determine how it is treated within the system by selecting the Pay Item Type and also by nominating whether it is a taxable, whether superannuation guarantee, payroll tax and WorkCover is to be calculated on it and whether GST applies. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 2

3 CREATING PAY ITEMS Some thought is required prior to setting up Pay Items. You need to enter a code for each Pay Item which is used later to source the correct Pay Item when setting up Jobs, Hirings and Awards. Developing a logical Pay Item Code structure that is based on the Pay Item Description will enable easier entry of Pay Items The Pay Item Code cannot be changed once assigned to a hiring so establish a Pay Item Coding structure before creating Pay Items To create a Pay Item open the Pay Item Management screen via Edit Menu - Pay Items Pay Items or Click on the Pay Items Short Cut on the CHIP Main Toolbar. Click Copyright Code House Rundle Street KENT TOWN SA 5067 Page 3

4 Item Code Type in a code for the Pay Item in the Item Code Field Note: Codes are limited to 10 alpha-numeric characters and symbols such as %, $, (,), #, &, ^,@,!, /, etc. should not be used. Item Description This field is used to identify the Pay Item. e.g. normal time, annual leave, sick leave etc. Enter a description that accurately describes the Item being entered. This description is also what will appear on Pay Slips, Invoices etc. Admin Description This field is used to group Pay Items into categories for Management reporting. It is recommended that all Pay Items for an Award have the same Admin Description This field will not appear on Pay Slips, Invoices etc. User Type This field allows for grouping together of similar Pay Items for reporting purposes. ie: Overtime, Shift Allowances, Penalties etc. The User Types need to be set up before assigning them to individual Pay Items. To set up Pay Item Groups go to Edit Pay Items Pay Item Groups Inherit Hours From This field can be used to link a Pay Item to another Pay Item so that when hours are entered in the timesheet screen, the hours are automatically entered against the linked item. This field creates a Parent/Child relationship between the linked codes Copyright Code House Rundle Street KENT TOWN SA 5067 Page 4

5 Display On This field defines whether the Pay Item is displayed on Pay Slips and/or Invoices Both (default) Pay Item will be displayed on both the Payslip and Invoice Pay Advice Will appear only on the Pay Slip Invoice Will appear only on the Invoice None Pay Item will not be displayed on either the Invoice or Payslip Expense Account Sales Account When the General Ledger option is being utilised the Expense Account field will default to the Expense Account that has been set up in the General Ledger under Tools Options. When the General Ledger option is being utilised the Sales Account field will default to the Sales Account that has been set up in the General Ledger under Tools Options. Note: If you want to assign the Pay Item to another account the option in Tools Menu Options General Ledger Tab Assign Accounts by Pay Item needs to be checked on and then you can select the account the Pay Item needs to be allocated to from the drop down menu. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 5

6 Pay Item Type At the far right of the Pay Item Management Screen is an unnamed field where if visible the Pay Item Type is to be entered. The Pay Item Type will define how the Pay Item is treated by the system. Options Include: Administration Charge Leave Loading Normal Overtime 1 10 Used when need to accrue amounts but the Employee doesn t get paid and the Client may or may not be charged. ie: BIRST Used where loading is to be displayed separately on payslips Used for Ordinary Time Earnings Pay Items Defines the Pay Item from Ordinary Time Earnings Note: Only 1-3 are displayed on standard payroll reports RDO Accrual Salary Sacrifice Used when setting up a RDO accrual Pay Item. Denotes a before tax deduction Pay Items Note: If entering an Allowance, After Tax Deduction, Employer Super, Employee After Tax Super, or a Leave Item this field will be hidden. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 6

7 Payroll Settings These setting will determine how the system treats the Pay Item when processing payroll. Tax Applies If tax applies to the Pay Item you are entering, click in the check box for Tax Applies. This check box will be ticked for most Pay Items unless it is a Union Deduction or After Tax Deduction/Addition. Leave Item If the Pay Item is a leave item then check on this box. This will then bring up an additional section called Leave Item Details instead of the After Tax section. Refer to section further below on Leave Pay Items to see how to fill this section in. Super Applies Check this box if the Superannuation Guarantee calculation is to include amounts entered against this Pay Item. This option is not available if the Deductions, Employer Super or Employee Super boxes have been check on. WorkCover Applies Check this box if the WorkCover calculation is to include amounts entered against this Pay Item. If a WorkCover Rate has been entered in the Job Management screen the system will calculate the WorkCover on this rate and not the rate entered in the Hiring Division. Payroll Tax Applies Check this box if the Payroll Tax calculation is to include amounts entered against this Pay Item. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 7

8 GST Applies To automatically generate GST on a Pay Item on a Client Invoice check this field ON. The GST rate applied is sourced from Tools Options Debtor tab Tax Options Note: The generation of GST is controlled by the Pay Item. To charge GST on a Pay Item the GST check box must be selected. Deduction Check this box on if the Pay Item being set up is a deduction. Deductions can be set up as a before or after tax deduction and can be entered as a fixed amount or a percentage of gross wages. See below for more details on entering Deduction Pay Items. Union Deduction Allowance If the Pay Item is a Union Deduction check this box ON. This field is not available if the Allowances, Leave Item, Deductions, Employer Super or Employee Super fields are ticked. Check this box if the Pay Item being set up is an Allowance. This can be a before or after tax amount. See below for further instructions on setting up Allowance Pay Items. Employer Super Employee Super Fringe Benefit If the Pay Item is for additional super the Employer is going to contribute on top of the Superannuation Guarantee then this box needs to be checked ON. If the Pay Item relates to additional super the Employee is going to contribute then this box needs to be checked ON. See below for more details on entering Super Deductions. To denote that the Pay Item is a Fringe Benefit and reportable on the Employee s PAYG summary check this box ON. Note: The statutory rates for Super, WorkCover and Payroll tax are set up in the Hiring Divisions associated with each Employee. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 8

9 Taxable Rates In this section enter the rates to be paid to the Employee and charged to the Client. Award Year Rates If the Pay Item relates to an Award and there are different rates for different years and level click on the Award Year Rates tab and enter the amounts for the subsequent years. Use Adult Gross % If the rates are based on a percentage of a gross amount check this box This will bring up a Pay Item Adult Gross screen where you can enter the Adult Gross and the Normal Weekly Hours worked and the system will calculate the hourly Adult Rate. You can then enter the percentage in the % of Adult Gross field. Percentages for different years can be set up under the Award Year Rates tab. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 9

10 Use Oncost Calculator If the Client rate is to be a percentage mark-up of the Employee rate then check this box ON. This will bring up an additional field Client Rate % Oncost where the applicable mark-up percentage can be entered. To use the oncost in the Hiring you need to turn on the Application Preference below under Tools Menu Options Copyright Code House Rundle Street KENT TOWN SA 5067 Page 10

11 EDITING PAY ITEMS To edit a Pay Item open the Pay Item Management screen via Edit Menu - Pay Items or Click on the Pay Items Short Cut on the CHIP Main Toolbar. Select the Pay Item using the View List function Click Make the necessary changes If you make changes but wish to change the Pay Item back to the way it was, click Undo Note: You cannot undo the changes if you have already pressed save. Once you have made the changes click Save Deleting a Pay Item To Delete the Pay Item, click Ensure that you are deleting the correct Pay Item as this process cannot be undone. Note: You cannot delete any Pay Item that is attached to an active hiring or has been attached to a processed timesheet. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 11

12 Updating a Pay Item When updating a Pay Item, sales account and expense account changes are carried across to the Hiring screen automatically. The accounts are only updated in the hiring accounts screen if 1. Use Accounts by Pay Items is turned ON in Tools Menu Options General Ledger 2. The account is not blank 3. The old account in the hiring screen is the same as the old account in the Pay Items screen prior to the change. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 12

13 OVERTIME PAY ITEMS Overtime Pay Items are created to define the hours and rates of pay are not to be included in the Employees Ordinary Time Earnings. To set up an Overtime Pay Item you first need to select Overtime as the Pay Item Type. Note: There are 10 Overtime Types available from the drop down menu but as most payroll reports only use types 1-3 it is recommended that only these are used. Pay Item Type Rate Increase Field Flag the Payroll Settings as required (generally these would be the same as for the Normal Time Pay Items) By Using the Rate Increase (Leave Loading etc) field the rate can be set up directly as a percentage increase on the Normal Time Rate. to calculate ie: For Overtime to be paid at time and half you would select the Normal Time Pay Item in and enter the rate increase as 50%. The Employee Rate is automatically calculated and the field populated when you save the Pay Item. The Client rate will need to be set up to calculate based on a % mark-up or the amount entered manually into the Client Rate field. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 13

14 LEAVE PAY ITEMS There are many types of leave that may be utilised by your Company i.e. Annual Leave, Sick Leave, Long Service Leave etc. Each Leave Types must be set as a Pay Item. Whether an Employee is to accrue leave is then specified on an individual Employee basis, via the Accrue column in the Leave Tab of the Employee Record. To denote the Leave Type is to accrue each pay period the check box in the Accrues column needs to be ticked Where no leave accrues for the Leave Type (ie: Public Holidays) then the field is left blank Setting up Leave for an Employee is a two-step process. 1. Setup the Leave Pay Items (as shown below). 2. Assign the Leave Pay Item to the Employee a) If the Employee isn t on an Award then manually assign the Leave Pay Items to the Employee If the Employee is placed on an Award, when the Employee is assigned to the Award they will have their Leave Items assigned automatically. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 14

15 Creating a Leave Pay Item Check the Leave Item check box ON and this will activate the Leave Item Details section. type Type Hours Per Year Reset Leave Accrued Manually Accrue Leave Include in Timesheet Based Accrual Select the Leave Type from the drop down list. This determines how many hours are accrued per pay period. The system calculates based on a 38 hour week so if you are to accrue 4 weeks then enter 152 hours. Check this box if the leave does not accrue from year to year and the Employees accrual resets to zero at each anniversary of employment. Check this box if you are going to be manually calculating leave accruals for the Employee. Normally you would not check this box. Check this box if you want the Leave Item to be included in the Timesheet based leave accruals. This would be checked if leave is to accrue on leave hours taken Rate Increase If the Pay Item is to be based on a rate increase (Leave Loading etc) from another Pay Item such as leave loading, Select the other Pay Item from the look up and enter the Leave Loading %. When you press save the rate will automatically appear in the Employee Rate field. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 15

16 Leave Loading Pay Items Leave Loading Pay Items can be set up if you wish to display leave loading separately on a payslip. To set this type of item up, select Leave Loading from the Pay Item Types drop down menu on the right hand side of the Pay Item Management screen. You will also need to check on the Taxable flag and input an Employee Rate Note: Leave Loading Pay Items are NOT INCLUDED IN TAXABLE GROSS even if the taxable flag is checked on. Copyright Code House Rundle Street KENT TOWN SA 5067 Page 16