With MYOB Payroll, how do I deal with employee advances?
In many ways, the best way to deal with employee advances is to say, ‘Nope, you can’t have one!’ They’re such a headache and generally more trouble than they’re worth. But if this sounds too hard-hearted, then the second best way is to give your employee cash from your petty cash tin and stick an old-fashioned I.O.U. in the box. That way, you don’t have to worry about the advance affecting tax, super, payment summaries or anything else.
Having said all this, if you end up giving an employee a large advance and they intend to pay it back over a few pays, it makes sense to track the advance using MYOB software. This way, no-one can argue about who owes what, and the outstanding balance of the advance shows up on every payslip.
Here’s what you have to do:
- Go to your Accounts List and create a new asset called Employee Advances.
- Go to Payroll Categories, click the Wages tab, and click New to create a new category called Advance (or click Edit if a category by this name already exists). As the Type of Wages select Salary and click Optional Account. Next to Override Account select your new Employee Advances account.
- Still in the Advance payroll category, click Employee, select the employee(s) who will receive this advance and click OK. Then, click Exempt and then All to mark this wages category as exempt from all taxes and deductions and click OK. Click OK once more to return to your payroll category list.
- Now click the Deductions tab and then New to create a new category called Advance Repayment (or Edit if a category by this name already exists). As the Linked Payable Account select your Employee Advances account and as the Type of Deduction select User-Entered Amount Per Pay Period.
- As you did just above, click Employee to select the employee(s) who will repay this advance.
- Go to the Superannuation tab in Payroll Categories and double-click the superannuation guarantee category that applies to this employee. Click the Exempt button and ensure that the wages category called Advance is marked as exempt (this means that you won’t pay 9 percent superannuation on employee advances, which is just how you want it to be!)
Now, when you go to process the next pay for this employee, both Advance and Advance Repayment show should up as categories. To pay the advance, enter the amount as a positive figure next to the Advance category. To deduct an advance repayment, enter the amount as a negative figure next to the Advance Repayment category. Neither the payment of the advance nor its repayment should affect tax or superannuation, so double-check that this is indeed the case.
MYOB Payroll Advanced tip
To double-check how much an employee still owes, go to Find Transactions, select your Employee Advances account, along with a suitable date range. The Ending Balance of this account indicates the closing balance of all employee advances combined.
The contents from this page are taken from the MYOB Payroll eBook series, by Veechi Curtis, available online for only $9.95 each.
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