Creating a custom Pay Type for Allowances/Deductions

How to create a custom paytype for allowances or deductions

A custom Pay Type can be created for situations where you need to make a payment/deduction outside of the standard Pay Types.

For example: Backpay, Bonus payment, Phone Allowance, Vehicle Allowance, Tool Allowance, Employee works another job with different rate, Rent Allowance, Accommodation Allowance, WINZ deduction, Rent deduction, Accommodation deduction.

There are two options for loading these Pay Types; either taxable or non taxable. Make sure you create the Pay Type in the correct section.

Creating a custom Pay Type

From the employee Profile click on the 'pay types' tab

  1. Pay types created here will be taxed.  
  2. Pay types created here will be non-taxable.
  3. Give your pay type a name that will be recognisable in a timesheet.
  4. Value of rate.  This can be 1 for an allowance or -1 for a deduction, you can then enter the full value into the timesheet, OR you can enter the full value in rate and then enter 1 into the timesheet.  See examples of this further down.
  5. Select per unit if using 1 or per hour/day/week/year/ if entering full value ($).
  6. Here you can enter codes for tracking, reporting and Xero integration purposes.
  7. Once you have created your Pay Type don't forget to click 'save' at the bottom of the page.

WINZ deduction

We have not yet automated employee WINZ payments so it is necessary to create a custom pay type that deducts the payment amount from your employee's net pay, then you can create a manual/automatic payment to WINZ (via your bank) as per their instructions.

In your employee's profile

Go to the lower section: 'Non taxable pay types and allowances'

  1. Set the name: 'WINZ deduction' (or any name that you will clearly recognise in the list of pay types on the timesheet for this payment)
  2. Set the rate to '-1'. The system will treat this as $1 to subtract per unit .  Variations are possible here i.e. you can set it to '1' and in the timesheet remember to set it to '-30', OR you can set the whole deduction amount '-30' and in the timesheet enter just '1' in the WINZ deduction row. Each option will result in the same outcome.
  3. Set 'per unit'.

In the timesheet

Once the Pay Type is created you can now add a row in the timesheet for this Pay Type.

  1. Be sure to use the + icon on the right to add a line not a week.
  2. Select Pay Type you have created from the list.
  3. Enter the amount to be deducted (we used '1' per unit as an example).

Don't forget to click 'update and save' once you have completed the timesheet.

  1. Pay summary shows the deduction

Taxable Accommodation Allowance

In some cases you may want to include a taxable accommodation allowance in an employee's pay, and then deduct the cost of accommodation from them.

For example, if your employee lives on your property and you agree that they will get an accommodation allowance of $100 a week and you will charge them $150 to stay on your property. The employee still needs to pay tax on the $100 that you are giving them as an allowance.

To set this up you need to create custom pay types.

  1. Add the allowance name (Accom Allowance).
  2. The $100.00 week allowance to be set as unit (100 per unit).
  3. Add the allowance name (Accom Deduction) in the non taxable deduction section.
  4. The rent you are charging will be added as a negative value for the $150.00 (-150 per unit).
  5. Save the entries made.


There are times when you may forget to change the pay rates for an employee that is meant to have a pay rise which will require a back pay for the period that has been under-paid. To do this, you can create a new custom pay type in the employee's profile under the pay types tab.

The new pay type created for a back pay should be entered in  the normal pay types and allowances [taxed] section.

Below is an example where Ethan had a raise and the total dollar amount came to $500.00. You will need to calculate the total amount your employee is due.

  1. In the employee profile, go to the pay types tab and add the name for the pay type being created in the normal pay types and allowances section.
  2. Add a 1 in the Rate field
  3. Change the Rate per to per unit.

In the timesheet entry and reporting page, enter the standard pay as you would normally enter for a pay.

  1. Add a new row to the timesheet.
  2. From the drop down list where it says 'select type', select the new pay type created (Backpay).
  3. Enter the total amount due to the client.
  4. Update and save.
  5. To confirm the correct amount being paid, click inside the box where you have entered the total amount. You will see the amount below in the costing/tracking section which should match the amount required to be paid.

Note: The size of a backpay on top of standard wages will also affect tax, so if it's large the employee may be better off having it done in a one-off pay run, or as a lump sum using the lump sum pay type. 


Leave without pay

Generally if an employee isn't paid you don't need to create a timesheet for them. If you want to record leave without pay, you will have to create a new pay type and set it to pay at a zero dollar value.

  1. In the employee profile, go to the pay types tab and add the name for the pay type being created in the normal pay types and allowances section.
  2. Enter the rate as 0.00.
  3. Leave it as rate per hour, though the rate doesn't really matter (You will be entering the normal hours this person would have worked if they were working that week in their timesheet).

In the timesheet entry and reporting page, instead of the 'standard pay' pay type, you will select the new pay type created for leave without pay.

    1. Add the new pay type created for 'Leave without pay'.
    2. Enter the hours this employee would have worked if they were at work.
    3. Update and save.
    4. The pay summary should have a zero dollar value for the gross and pay day transfer.

Note: If you only have one employee in a given pay run recording leave without pay, that pay will not process. Any pay worth $0 will need to be processed manually by us. Please send an email request to to process these pay runs.