Need to advance or loan an employee some money? Easy - just set up a wage pay item to pay the money and a deduction pay item to record repayments.
You'll also need to create an asset category to help keep track of how much you've advanced, what's been repaid, and how much is outstanding.
To set up an asset category for wage advances
This category will be used to show the value of wage advances so you can tell when the advance has been repaid.
Go to the Accounting menu and choose Categories (Chart of accounts).
Click Create category.
Leave the Detail category option selected.
For the Type, choose Bank.
Choose the applicable Parent header. This determines where the new category will sit in your category list. If unsure, check with your accounting advisor.
Enter a Code that'll suit your account list.
Enter a Name, such as "Payroll Advances", or similar.
For the Tax code, choose N-T.
Click Save.
To set up a wage advance pay item
Pay items are used to add extra payments to employees' pays. MYOB has a pay item you can use for pay advances, or you can set up one from scratch.
We'll set up the pay item with a $0 value so you can enter the wage advance amount on the employee's pay. This also means you can re-use this pay item for other employees.
OK, let's do it.
Go to the Payroll menu and choose Pay items.
On the Wages and salary tab click the Advance pay item, or click Create wage pay item to create a new pay item.
Set up the pay item:
Enter a Name for the pay item, such as "Wage advance" or similar.
Choose the applicable ATO reporting category. If unsure, check with your accounting advisor or the ATO.
For the Pay basis, select Salary.
Select the option Override employees' wage expense category.
In the field that appears, select the asset category you created earlier.
Under Allocated employees, choose the employees receiving a wage advance.
Under Exemptions, choose any deductions or taxes that shouldn't be calculated on wage advances. If you're not sure, check with your accounting advisor or the ATO.
When you're done, click Save.
To set up a wage advance deduction pay item
We'll set up a deduction pay item so you can deduct repayments from the employee's pay. MYOB has a deduction pay item you can use for advance repayments, or you can set up one from scratch.
We'll set up this pay item with a $0 value so you can enter the repayment amount on the employee's pay. This also means you can re-use this pay item for other employees.
Here we go:
Go to the Payroll menu and choose Pay items.
Click the Deductions tab.
Click the Advance Repayment pay item, or click Create deduction pay item.
Set up the deduction:
Enter the deduction Name, such as "Wage Advance Repayment" or similar.
For the Linked payables category, choose the asset category you created earlier.
Choose the applicable ATO reporting category. If unsure, check with your accounting advisor or the ATO.
For the Calculation basis, choose User-entered amount per pay period.
Leave Limit set to No limit.
Under Allocated employees, choose the employees who will be repaying advances.
Under Exemptions, choose any taxes that shouldn't be calculated on this deduction. If you're not sure if the deduction should be pre- or post-tax, check with your accounting advisor or the ATO.
When you're done, click Save.
To pay the wage advance
When you process the employee's next pay, the wage advance pay item will be listed.
Go to the Create menu and choose Pay run.
Choose the Pay cycle. If the pay isn't part of a typical pay cycle, choose Unscheduled.
Confirm the pay dates and click Next.
Select the employees you want to include in this pay, and deselect those you don't.
Click the employee who's being paid the advance.
Next to the wage advance pay item, enter or confirm the amount being advanced.
Continue processing the pay as normal. Need a refresher?
After paying the advance, you can unlink the wage advance earning pay item from the employee (so it no longer shows when processing their pays). If they're paid another advance in the future, you can re-assign the pay item to them as described above.
To deduct repayments from the employee's pay
It's up to you how many repayments the employee will make. Here's how you enter a repayment on the employee's pay.
Go to the Create menu and choose Pay run.
Choose the Pay cycle. If the pay isn't part of a typical pay cycle, choose Unscheduled.
Confirm the pay dates and click Next.
Select the employees you want to include in this pay, and deselect those you don't.
Click the employee who was paid the advance.
Next to the wage advance repayment deduction, enter or confirm the amount being repaid.
Continue processing the pay as normal.
Remember:
Keep track of how much the employee has repaid so you know when to stop the deductions. You can run the Pay item transactions report for a given date range to show how much has been deducted using the Wage Advance Repayment pay item (Reports > Standard > Pay item transactions).
Repeat the above steps for each repayment until the advance is repaid.
Once the advance is fully repaid, unlink the wage advance deduction pay item from the employee (so it no longer shows when processing their pays). If they're paid another advance in the future, you can re-assign the pay item to them as described above.
To track how much has been advanced and repaid
Run the Pay item transactions report for a specified period for employees who have been paid wage advances (Reporting > Reports > Payroll tab > Pay item transactions).
The value of the Wage Advance pay item will show how much has been paid in advance.
The value of the Advance Repayment deduction pay item shows how much has been repaid.