Answer
When an employee has more than one completed pay in the same pay period within a single pay run, Lightning Payroll adds those pays together and works out the tax on the combined amount, instead of taxing each pay on its own. This is called split-tax calculation, and it is switched on by default.
It matters because tax scales are progressive. Two smaller payments taxed separately withhold less than one larger payment of the same total, so taxing each pay in isolation would under-withhold for the period.
Where The Setting Lives
In the online app and the desktop app, go to Settings >> Other Settings and look for Use split-tax calculations when an employee has multiple completed pays in one pay run?. Leave it ticked unless you have a specific reason not to.
Which Pays Are Combined
- Only pays for the same employee within the same pay run are combined.
- The pays must share the same pay period.
- Only completed pays take part. A pending pay is ignored until it is completed.
- Pays whose tax has already been locked are left alone.
With the setting unticked, each pay is taxed on its own figures. Please note: this can leave the employee under-withheld for the period, which they may need to make up when they lodge.
