It is not uncommon to find that a business thinks they have been paying court fines on behalf of their employees, and then they find out that actually they have not. This is because the method Xero Payroll explains in Xero Central does not include the payment in the ways you might normally expect.
There is an alternative method to manage Court Fines in Xero Payroll which ensures the payments are included but doesn't have some of the features offered by listing it as a Statutory Deduction.
Both methods are outlined below with pros and cons, and showing the differences of how the Court Fine appears on various reports from Xero Payroll.
At the end of the blog I have given a screen shot to also show how Court Fines are not included in the Xero Payroll payments to IRD - for both Method 1 and Method 2.
That depends on your business and what suits you best.
Method 1 might suit if it's important to not have to keep track of protected income and balances separately, and you are comfortable with ensuring there is a separate payment made for all court fines - perhaps in a separate batch. This method may suit if your bookkeeper always fully balances the payments reports.
Method 2 might suit if it's important to have all the payments included in the batch you download from Xero, and not to have to make manual payments separately. Also if you are comfortable relying on the Court to advise when fines have been paid off.
Xero Central outlines how Court fines in Xero Payroll can be added to an employee template as a Statutory Deduction.
Payments can be missed because they are not in the batch produced by Xero Payroll, and they are not in the net payment showing in Taxes and Filing for payment to IRD.
In my view this is surprising because Court Fines are listed alongside Child Support and Student Loan Payments, which are automatically included with PAYE IRD payments.
Here are some screen shots to clarify. Please bear in mind these are only demos, and all the information on the reports might not be consistent - I've just produced them to make the point. e.g. dates / number of employees and payment amount might not be consistent.
This is how the Pay Template looks if you add a Statutory Deduction as detailed by Xero Central. You can see the $50.00 payment shows including the balance owing, protected net earnings and the balance owing.
This is what the payslip will look like. You can see the $50.00 court fine appearing under Statutory Deductions along with Kiwisaver and Student Loan. You can also see the $50,00 is not listed as a Payment, only the net amount due to the employee is showing of $665.34.
Consistent with the PaySlip, there is no mention of the $50 court fine in the payments report - only the net payment due to the employee of $665.34. The $50 will not be included in the batch file downloaded from Xero Payroll.
In this view you can see the $50 Court Fine listed as the deduction along side other Statutory Deductions like Kiwisaver and Student Loan payments. The only payment listed is the net payment to the employee of $665.34.
This $50 showing as a statutory deduction has to be loaded separately and manually as a payment to the court. It will not be included in the normal batch payment downloaded from Xero Payroll - only items in the PAYMENTS column are included in that batch.
Method 2 - Adding a Court Fine as a Second Bank Payment.
The second option is to completely ignore the Xero Payroll feature and instead add the Court Fine Payment to the employee record as a second Bank Payment. The same way you might add a second payment to go to a charity each payrun, or a savings account, or rent, or anything else.
There is no change to the Pay Template if using Method 2. Instead the Court Fine is entered in the Employee Payment Information tab, adding the IRD account number as a second account number to make a regular payment to. In this example below I have not entered the details, just showing where the section is.
With this method the Court Fine will be seen in the Payments Section, alongside the net payment being made to the employee. This example is from the demo file so the bank accounts are for demo only. Normally it would be the IRD number as advised by IRD. With this method, the Court Fine will not show under Deductions - in this example with Kiwisaver and World Vision.
With this method the payments will mirror the payslip - both the net pay and the Court Fine as showing in the Payments Report. The Court Fine will also be included in the batch file downloaded from Xero.
In this view you can see the $60 Court Fine listed as a payment along side other net payment to be made to the employee. It's a payment and will be included in batches.
The Taxes and Filing Summary in Xero Payroll does not include Court Fines or any other Statutory Deductions besides Child Support, Kiwisaver, and Student Loans. Court Fines or other Statutory Deductions are not included in the amounts Xero Payroll show as due to IRD.
If you would like help with Court Fines in Xero Payroll, then get in touch. We would love to hear from you.