At times you might need to pay your employees something other than what is included in their regular pay. Examples of other pay types include bonuses, overtime pay, expense reimbursement, commissions, mileage and more.
Some of these pay types are taxable. Not to worry, QuickBooks helps you handle the taxable pay types and the rates you contribute.
- For information about income tax rates and personal allowances, check out Income tax rates and personal allowances on the GOV.UK website.
- At the end of the year, you might need to fill out a year-end expenses and benefits form for HMRC. Examples of expenses and benefits include company car, health insurance, travel expenses, entertainment expenses and childcare. See Expenses and benefits for employers.
- It’s also important to keep records of all expenses and benefits you pay to your employees. HMRC might request supporting evidence when you file your tax returns. For more details, see Record keeping on the GOV.UK website.
To add or customise other pay types
- Go to Payroll and select Employees (Take me there).
- Select the applicable employee.
- Select Actions (at the top right of the page), then select Additional pay.
- Select or search for the pay type you want to add. If you can’t find the pay type you’re looking for, you can add it by selecting the plus sign icon.
- Select Actions to add any of the following:
- Bonus
- Other earnings
- Overtime
- Reimbursement
Note: When you add a new pay type, it is automatically added to your Pensionable pay types and reported to your pension provider as a pensionable earning. Unless you have already set up this pay type as a pensionable earning with your pension provider, go to the Gear icon > Account and settings (or Company settings is you're using QBOA) > Payroll. Scroll down to Pension pay types, then select the slider next to the pay type to turn it off. If you want this new pay type to be included in pensionable earnings, you must let your pension provider know.
- Save your changes.
Bonus
Occasionally, you might want to give your employee a little something extra as a thank-you or for a special occasion, such as a Christmas bonus. Since bonus pay is a type of earnings, you are required to deduct taxes and report it to HMRC. For more information about bonus pay, check out GOV.UK Expenses and benefits: bonuses.
To enter a bonus
- Select Add next to Bonus.
- Enter a Name for the bonus.
- Save your changes, then close the window.
The bonus pay type is added to the employee record. This bonus pay type is also added to the company settings, so that you can use it for other employees. To include or exclude this bonus pay type in your employee’s pay, select the slider to turn it on or off in the employee record. You can enter the amount when you run payroll.
Other earnings
To enter other earnings (such as car allowance and commission)
- Select Add next to Car Allowance or Commission.
- Edit the Name for the earning if needed.
- Enter a Default amount if you pay the same amount each pay period. You can edit this amount when you run payroll. If the amount you pay varies, then don’t enter a default amount.
- Save your changes, then close the window.
The new pay type is added to the employee record. The pay type is also added to the company settings, so that you can use it for other employees. To include or exclude this earning pay type in your employee’s pay, select the slider to turn it on or off in the employee record. You can change the default amount when you run payroll.
Overtime
Overtime pay is pay for hours worked beyond the normal working hours. You don’t always pay for overtime, unless it is stated in the employee’s employment contract that they will be paid for time worked that goes beyond their normal work time. If you’re paying overtime, then the contract should also state the rate of pay for overtime hours. For more information, check out GOV.UK Overtime: your rights.
To enter overtime pay
- Select Add next to Overtime.
- Keep the default Name or enter a descriptive name for this overtime.
- For Multiply regular pay rate by, enter the overtime rate. For example, if the overtime rate is 1.5 times more than the normal hourly rate, enter 1.5. If an employee gets paid £10 per hour, an overtime rate of 1.5 is £15 per hour.
- Save your changes, then close the window.
The new overtime pay type is added to the employee record. The pay type is also added to the company settings, so that you can use it for other employees. To include or exclude this overtime pay type in your employee’s pay, select the slider to turn it on or off in the employee record. You can change the default amount when you run payroll.
Reimbursement
Since you’re paying your employee back for a work-related expense, reimbursements are not taxed.
To enter a reimbursement
- Select Add next to Reimbursement.
- Enter a descriptive Name for the reimbursement amount.
- Enter a Default amount if you pay the same amount each pay period. You can edit this amount when you run payroll. If this is a one-time reimbursement amount or it varies, then don’t enter a default amount.
- Save your changes, then close the window.
The new reimbursement pay type is added to the employee record. The pay type is also added to the company settings, so that you can use it for other employees. To include or exclude this reimbursement pay type in your employee’s pay, select the slider to turn it on or off in the employee record. You can change the default amount when you run payroll.