Set up New Pay Items

Allocate/Deduct Payments to an Employee's Gross Pay

Jake Ellis avatar
Written by Jake Ellis
Updated over a week ago

What are Pay Items?

Pay Items are payment methods used for both allocating and/or deducting payments to an employee's gross pay. All monetary transactions within Indigo Payroll are done through Pay Items including basic pay, fringe benefits, bonuses etc...

What are Pay Items used for?

Pay items allow for the settlement of due payments whether they are owed to, or from employees.

Adding a new Pay Item

To create a new Pay Item click on the "Insert" icon.


Code: The code applicable for this Pay Item that must be unique within this company.

Description: Enter a short description of the Pay Item being set up. This will serve as a friendly identifier for this specific contract. The Pay Item description can be useful when searching for, and locating Pay Items. The Description should be a friendly name that will make searching for and finding this Pay Item easy.

Amount allocation: Select where the monetary amount tied to the Pay Item is set.

  • Individual:  Select this option when the Pay Item value is different from one employee to the next, example:  Salary, hourly rate, cash for use of car, charitable contribution, and allowances.  This type of Pay Item is set individually per employee and can be changed at calculation stage Fringe Benefit payment types should be set as Individual.

  • Fixed:  This can be used in instances where the Pay Item is of fixed value.  Some examples include union contributions and the sickness benefit rate deducted from salaries.  These are all fixed amounts and are the same across all employees. Fixed Amount Allocation cannot be changed during payroll calculation although the user may be allowed to change the number of contributions affected at this fixed rate.

  • Adjustable:  This offers the option to change the amount at calculation stage. This pay item can be applied to any employee at calculation stage. It does not necessarily have a default value because values can vary between payrolls and employees and the same adjustment may not be required for each payroll.  A typical example would be a Production bonus which is only applicable if an employee exceeds the standard production rate and varies according to the production achieved for the particular payroll period.  Such pay items could also be applied to particular employees where the system will default the applicable amount but it can be changed at calculation stage.  Such an example would be on-call allowances which can be changed if the maximum number of support calls serviced for one week was exceed but is otherwise consistent. 

Group: Select a Pay Item Group. This groups Pay Items together to enable the system to process a payment based on the total value of Pay Items in the group. Example:  An employee has a salary and a performance allowance and it is agreed that the overtime rate is to be calculated on the total value of the salary and the performance allowance.

Groups can be created from the Pay Item Group support file.

Analysis: Analysis is a Pay Item grouping method used for reporting purposes. Analysis allows you to show pay items related to a particular analysis group in a separate column in the payroll report. 

Fringe benefit category: Fringe benefit categories are categories set up by the IRD which define different type of benefits. Kindly select the applicable category. The system will use the selected Fringe Benefit Category to work out any tax due on these values.

Payment basis: The system provides for three different methods of calculating the applicable values/rates linked to each Pay Item during the payroll calculation.

  • Amount: Choose Amount where the Pay Item is for a fixed amount such as government bonuses, certain fringe benefits (such as car allowance), and salary.

  • Contribution: Choose Contribution where the Pay Item is of a fixed amount but is paid in a number of contributions per payroll. This can include union payments, periodic charitable donations, and injury or sickness benefits (deducted based on the number of days employee is away from the office). Note: The SSC contribution is handled by the system from a different source.

  • Multiplier: Choose Multiplier where Pay Item is paid as a multiplication of an existing Pay Item or Pay Group. The multiplication rate is set in the Based on the section of the Pay Item file.

Overtime is the typical example where it is paid based on the number of hours which need to be multiplied by the applicable rate defined above.

Default Amount:  If Pay Item has a default monetary amount, kindly enter it here. This field is only applicable if Payment Basis is set to Amount or Contribution.


Reported as gross: When checked, this Pay Item is reported as gross in all information reports including the Payslip. This does not imply that the amount identified in the Pay Item is taxable. It is used for reporting purposes only. Pay Items that fall into this category include fringe benefits part of which is taxable and part is not such as cash allowances and use of own car.

Subject to FSS tax: When checked, this Pay Item will be included in the total taxable gross, when calculating any tax due based on; the current tax regulations and tax status of the employee. This can include Basic Pay and Overtime payments.

Subject to SSC: When checked, this Pay Item will be included in the basis amount on which SSC is calculated.

Is Due to 3rd Party: When checked, Pay Item is identified as due to 3rd parties. This is used for reporting purposes only. Examples include union contributions, contributions to charitable organisations, and transport expenses.

Based on (available with Payment Basis Multiplier)

Pay multiplier: Pay Multiplier and the subsequent fields are only made available when selecting Payment Basis: Multiplier. Enter the factor by which the chosen Pay Item or Pay Group will be multiplied. As an example, to set up overtime at time and a half enter 1.5 whilst double time requires a pay multiplier of 2.

Factor of: Pay Item: If the Pay Item value is calculated as a factor of another Pay Item, select the Pay Item here.

Factor of: Pay group:  If the Pay Item value is calculated as a factor of a group of pay items identified by a common Pay Group, select the Pay Group here.

Tax Rates

To go to Tax Rates, click on the "Tax Rates" tab at the top right side of the screen.

Adding a new Pay item tax rate

To create a new Pay Item Tax Rate, first highlight the Pay Item you would like to add a tax rate for, then click on Tax Rates followed by the Insert icon.

Amount from: Enter the starting amount from which this FSS percentage rate applies.
Amount to: Enter the amount to which this FSS percentage rate applies.
Percentage subject to FSS: Enter the FSS percentage rate. 

Editing an existing Pay item tax rate

To edit an existing pay item, highlight the payment by clicking once on the respective row and click the Edit button, or double-clicking it.

Deleting an existing Pay item tax rate

To delete an existing pay item highlight the Pay Item and click on delete.

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