There are many businesses and industries where employees are paid supplemental wages, which is more commonly called extra pay or lump sum payments.
In addition to their base wage for ordinary hours worked or hourly base rate, many employees receive extra payments in the form of sales commission, overtime, public holiday rates, allowances, and quarterly, half-yearly or yearly performance bonuses.
Here were provide an overview of the most common types of supplemental wages.
Sales commission
Perhaps the most common form of supplemental pay is sales commission. This is typically calculated as a percentage of a sale or revenue generated from a sale. There’s also tiered commission where the percentage paid increases as the salesperson achieves higher sales targets or volume milestones. Some employees may receive residual commission. In this instance an employee receives a payment if one of their customers renews a service or subscription.
Bonuses
Bonuses are often based on specific criteria. They can be either discretionary (at the employer’s choice) or non-discretionary (based on predetermined criteria). Performance based bonuses, referral bonuses, sign-on bonuses, and retention bonuses are popular types of supplemental pay.
Overtime pay
Although not a legal requirement, some New Zealand employers may offer a special overtime rate or time off in lieu (TOIL) for extra hours worked. This would need to be agreed upon by both the employer and employee and be included as part of an employment contract or in a collective agreement.
Allowances
Allowances provide compensation for specific work conditions, extra or higher duties, or hazardous tasks. This could be a food allowance to pay for meals, a travel and away from home allowance, which can be used to pay for fuel and being away from family. Trade professionals may receive a tool allowance, so they can purchase new equipment. For a carpenter this could be a new mitre saw for hairdresser it could be new scissors. An employer must provide and pay for protective clothing and equipment.
Easy and common mistakes
Incorrect calculation of wages
Calculating pay can sometimes be tricky. If you use the wrong base rate or apply incorrect multipliers you may inadvertently underpay or overpay your employees, which can create significant back-pay liability.
If included, collective agreements and employment contracts specify how overtime hours should be calculated and which allowances, if any, to include in the base wage rate. Penalty rates are applied when an employee works on public holidays.
Payslips
From 6 August 2028, New Zealand employers will be legally required to provide employees with pay statements (payslips). However, many employers already issue payslips and employees currently have a right to ask for, wage records and copies of timesheets, which is why it’s vital employers maintain accurate records.
An employee’s payslip may include:
- Employer and employee names.
- Pay date and specific pay period.
- Employee's tax code and IRD number.
- Annual salary or regular hourly rate.
- Gross earnings and net take-home pay.
- Deductions (such as PAYE tax, ACC earner's levy, KiwiSaver contributions, student loan repayments, or child support).
- Current leave balances (annual leave, sick leave).
An employer must retain wage and time records for a minimum of six years.
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This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.