Recurring deductions are used where an amount needs to be deducted from an employee across multiple pays.
They can be used to:
deduct a regular amount from an employee's pay
calculate a deduction as a percentage of selected earnings
send amounts deducted to an external Agency
maintain a reducing balance that decreases as deductions are processed
A recurring deduction can continue indefinitely until it is made inactive, or it can automatically stop once the Balance owing has been cleared.
One-off deductions: If a deduction only needs to apply to a single pay, do not use a recurring deduction. Use the Sundry deduct tab in the Payrun screen instead.
How recurring deductions are structured
Recurring deductions involve three connected parts of SmoothPay:
The Agency defines the general deduction, where it is allocated to and how it operates.
The employee's Payments record then links that Agency to the employee and defines their individual rate, amount, priority and any reducing balance.
Once established, the deduction appears under Recurring deduct when that employee is included in the Payrun.
Create the Agency
Before a recurring deduction can be assigned to an employee, create the Agency it will use.
Go to the Codes screen.
Select Agencies and super funds.
Click the + button.
Enter an appropriate Title for the Agency.
Set Classification to Deduction.
Select the required Calculation method.
Complete the remaining applicable fields.
Save the Agency.
For a standard recurring deduction, use the Deduction classification. More specialised Agency classifications are available for specific purposes; where they exist details of them will be included within the country specific guide.
Choose the Calculation method
The Agency's Calculation determines how the recurring deduction is calculated.
The appropriate method depends on what the deduction needs to do.
Amount per pay period
Use Amount per pay period when a specific amount should be deducted each pay.
For example:
$50.00 per pay
The employee's Rate/Amount is then set to:
50.00
Earnings × rate
Use Earnings × rate when the deduction should be calculated as a percentage of selected earnings.
For example:
5% of Ordinary earnings
When using Earnings × rate, the earnings that form the calculation base must also be selected.
Set Calculation to Earnings × rate.
Select the Agency's Fine tune tab.
Select the applicable pay codes that the deduction should calculate on.
Save the Agency.
You can also use the buttons on the left to select the appropriate pay codes:
All – Selects all pay codes.
Taxable – Selects only taxable pay codes.
Superable – Selects only pay codes that are subject to superannuation.
Toggle – Inverts the current selection of pay codes.
SmoothPay calculates the percentage from the earnings produced by the selected pay codes.
The percentage itself is entered against the employee as a decimal.
For example:
5% = 0.05
If the selected earnings for a pay total $1,000.00:
$1,000.00 × 0.05 = $50.00 deduction
The Agency's Fine tune controls determine which earnings are included in that calculation.
Configure Agency payment details
If the deducted money is being paid to an external Agency through the bank file, complete the Agency's Payee details.
These can include:
Account name
Bank account
Employer number or Agency reference
The Individual payment transactions option determines how payments to the Agency appear in the bank file:
selected: SmoothPay produces a separate Agency payment transaction for each employee
not selected: SmoothPay combines the deductions into a single consolidated payment to the Agency
Where applicable, also select the required Holding account for accounting purposes.
Assign the recurring deduction to an employee
Once the Agency has been created navigate to the Payments tab and create a new entry:
Go to the Staff screen.
Select the employee.
Select the Payments tab.
Click the + button.
Select the required Agency.
Enter the employee's Rate/Amount.
Select the appropriate Priority.
Complete any applicable payment references.
Configure a reducing balance if required.
Save the recurring deduction.
The Calculation method itself comes from the Agency. It cannot be changed independently for the employee.
Rate/Amount
The meaning of Rate/Amount depends on the Calculation method selected against the Agency.
Priority
Priority determines what SmoothPay should do if the employee does not have enough net pay available for the full deduction.
The options are:
Compulsory: The deduction is taken regardless of the available net pay.
This can result in the employee having a negative net pay.
Protect net pay: SmoothPay deducts only as much as the employee's available net pay allows.
For example, if a $100 deduction is due but only $60 of net pay is available, the deduction can be reduced to the available amount.Zero if unpayable: The deduction is only taken if the full deduction can be processed.
If the full amount cannot be taken, the deduction for that pay is zero.
Payment references
Where the Agency payment is being included in a bank file, the employee's recurring deduction can also contain:
Particulars
Code
Reference
These values are used as the corresponding banking references for that employee's Agency payment.
Using a reducing balance
Select Reducing balance? where the deduction relates to a specific amount that needs to be repaid.
This enables:
Original balance
Balance owing
Original balance
The Original balance records the starting value of the debt or amount to be recovered.
For a new balance, this will normally be the full amount originally owing.
Balance owing
The Balance owing records the amount still left to deduct.
As pays are processed, SmoothPay reduces this balance automatically.
When the balance reaches zero, the recurring deduction automatically becomes inactive.
Example
An employee owes:
$1,060.00
Their recurring deduction is:
$100.00 per pay
After nine pays, the remaining balance is:
$100.00
The next deduction clears the balance and the recurring deduction becomes inactive.
If instead the employee has only:
$60.00 remaining
SmoothPay does not deduct the normal $100.00.
The final deduction is automatically reduced to:
$60.00
This clears the balance exactly, after which the recurring deduction becomes inactive.
How the deduction appears in the Payrun
When the employee is included in a pay, their active recurring deductions appear under the Recurring deduct tab in the Payrun screen.
The deduction is calculated using:
the Agency's Calculation method
any Fine tune earnings selections
the employee's Rate/Amount
the employee's Priority
any remaining reducing balance
Recurring deductions reduce the employee's net pay rather than their gross earnings.
Payments and Recurring deduct are the same setup
The Payments tab in the Staff screen and the Recurring deduct tab in the Payrun screen are two views of the same underlying recurring deduction record.
Changes made in either location affect the recurring setup.
For example, if the Rate/Amount is changed from the Payrun screen, that new Rate/Amount remains against the employee's recurring deduction until it is changed again.
Likewise, making the deduction inactive from either area makes the underlying recurring deduction inactive.
For more information about the two areas themselves, refer to:
Stopping a recurring deduction
For an ongoing deduction that no longer needs to apply, mark the recurring deduction as Inactive.
A reducing-balance deduction does not normally need to be manually stopped. Once the Balance owing reaches zero, SmoothPay makes the deduction inactive automatically.
If the deduction is only required once, use Sundry deduct instead of creating a recurring deduction.