Employee Payroll Items – Create New Items

Tax Calculation Type

Fixed Amount:

• A flat dollar amount that is deducted or contributed regardless of the employee’s hours worked or wages earned.

Federal:

• A tax item specific to federal taxes, such as:
  • Federal Income Tax (FIT): Calculated based on federal tax brackets and employee W-4 details.
  • Social Security (FICA): 6.2% of gross wages up to an annual limit (employee portion).
  • Medicare: 1.45% of gross wages, with an additional 0.9% for high earners.

Hourly Amount:

• A fixed dollar amount applied per hour worked.

Hourly Percentage:

• A percentage of an employee’s hourly wage that is deducted or contributed.

Local:

• Taxes specific to local jurisdictions such as counties, cities, or school districts.

Percent:

• A percentage of gross or net wages applied to calculate the tax.

State:

• A tax item specific to state-level taxes, such as:
  • State income taxes (SIT).
  • State unemployment insurance (SUTA).
  • State disability insurance (SDI).

Tax Name

•  The name of the tax item (e.g., “Federal Income Tax,” “State Income Tax”).
• Used to identify the tax item in reports and on employee pay stubs.

Account ID

Example:

• Payroll Liabilities for withheld taxes owed to agencies.
• Payroll Expenses for employer-paid taxes.

• The flat dollar amount for the tax if the calculation type is Flat Amount.
• Leave blank if the tax is based on a percentage.

• Annually: Resets at the start of each calendar year.
• Quarterly: Resets every quarter.
• None: No reset; the limit applies perpetually.

• Indicates whether this tax should be factored into job costing for customers.
• Useful for accurately calculating job profitability.

• A brief description explaining how the tax item relates to a specific customer or job.
• Used to provide additional clarity for job-specific taxes or deductions.

• Marks the tax item as inactive, hiding it from selection in future transactions.
• This does not delete the tax item, preserving historical data for reporting purposes.

• This is the label or title for the liability. It should be a clear and descriptive name that identifies what the liability represents (e.g., “401(k) Employer Match” or “Health Insurance Contribution”).

• A brief explanation of what the liability is. For instance, if it’s a tax, describe its type and purpose.

• Specifies whether the liability is deducted from the employee’s paycheck or paid by the employer.

• The entity to which the liability payment is sent (e.g., a government agency, insurance provider, or benefits administrator).

• The monetary value of the liability. This could be a fixed amount or a percentage (e.g., a percentage of wages for Social Security tax).

• The general ledger (GL) account used to track this liability. Typically, this is a liability account (e.g., “Payroll Liabilities”).

• If enabled, this indicates that the liability is associated with job costing. This means the liability will be tied to specific jobs or projects for reporting purposes.

• The account where the expense associated with the liability is recorded. For example, employer contributions to benefits might be recorded as an expense.

• The maximum amount of the liability that can be withheld or accrued. For example, this could be a cap for social security taxes.

• Defines when the limit resets (e.g., annually or per quarter).

• Specifies whether this liability should appear on reports or be allocated to customer jobs for cost tracking purposes.

• The highest value the liability can reach within a specific period.

• Identifies how the liability should be treated for tax reporting purposes (e.g., taxable, exempt, deferred).

• A note or description that will appear on customer-related documents or invoices, explaining the liability if it impacts billing or job costs.

Deduction Calculation Types

• A predetermined, unchanging dollar amount is deducted for each pay period.
• Example: If an employee agrees to contribute $50 per paycheck for a savings plan, this deduction is $50 regardless of hours worked or earnings.

2. Hourly Amount:

• A specific dollar amount is deducted for each hour worked.
• Example: An employee has a $2/hour deduction for a tool rental program. If they work 40 hours, the deduction will be $80.

3. Hourly Percent:

• A percentage of the employee’s hourly wage is deducted for each hour worked.
• Example: If an employee earns $20/hour and the deduction is 5%, then $1 per hour (5% of $20) will be deducted. For 40 hours worked, the total deduction would be $40.

4. Percent:

• A percentage of the employee’s gross or taxable earnings for the pay period is deducted.
• Example: If the deduction is 3% and the employee earns $1,000 for the period, $30 (3% of $1,000) will be deducted.

Choosing the Right Calculation Type:

• Fixed Amount: Use for deductions unrelated to hours or earnings, such as fixed loan repayments or flat charitable contributions.
• Hourly Amount: Use for deductions tied directly to hours worked, such as tool rentals or equipment fees.
• Hourly Percent: Use when deductions are proportional to the hourly wage, such as for certain benefit contributions.
• Percent: Use for deductions like retirement contributions or taxes based on a percentage of total earnings.

• A unique identifier for the deduction item, often auto-generated or manually set for tracking purposes.
• Example: 401K-01 for a 401(k) contribution.

• A label or name for the deduction item. This description will appear on reports and pay stubs.
• Example: “401(k) Employee Contribution” or “Health Insurance Deduction.”

• Specifies the base on which the deduction is calculated, such as:
  • Gross Pay: Deduction is calculated on total pay before taxes.
  • Net Pay: Deduction is calculated after taxes.
• Example: Retirement plans are usually deducted from gross pay, while garnishments may be deducted from net pay.

• The entity to which the deducted funds are paid.
• Example: An insurance company or a retirement plan provider.

• Determines the order in which deductions are processed or displayed on pay stubs and reports.
• Example: You may want deductions sorted by priority, such as garnishments processed before voluntary deductions.

• The dollar value for a fixed deduction or a default value for percentage/hourly-based deductions.
• Example: A flat $50 per paycheck for health insurance.

• The liability account where the deducted funds are tracked until paid to the vendor.
• Example: “Payroll Liabilities – 401(k)” for retirement contributions.

• The percentage rate used to calculate the deduction if it’s a percent-based deduction type.
• Example: A 3% deduction for a retirement plan contribution.

• Determines how the deduction affects tax reporting.
  • Taxable: Includes the deduction in taxable wages.
  • Non-Taxable: Excludes the deduction from taxable wages.
• Example: A pre-tax deduction like a 401(k) lowers taxable income.

• A maximum annual deduction amount. The system stops deducting once this limit is reached.
• Example: $22,500 annual contribution limit for a 401(k) in 2024.

• Indicates when the annual limit should reset (e.g., annually, by calendar year).
• Example: Most deductions reset at the beginning of the calendar year.

• Specifies if this deduction reduces the wages subject to Federal Insurance Contributions Act (FICA) taxes (Social Security and Medicare).
• Example: A 401(k) deduction typically does not reduce FICA wages, but health insurance premiums might.

• Indicates if the deduction lowers wages subject to Federal Unemployment Tax Act (FUTA) taxes.
• Example: Pre-tax health insurance contributions often reduce FUTA wages.

• Determines if the deduction reduces wages subject to State Unemployment Tax (SUTA).
• Example: Some deductions like health insurance may lower state unemployment taxable wages.

• If selected, applies the deduction to all tax calculations uniformly.
• Example: For general deductions that affect both state and federal taxes without exceptions.

• Purpose: A unique identifier for the time off type, often used internally by the system for tracking.
• Example: “VAC” for Vacation, “SICK” for Sick Leave, “PTO” for Paid Time Off.
• Recommendation: Use a concise, meaningful abbreviation to make it easy to identify.

• Purpose: A detailed name or explanation of the time off type.
• Example: “Vacation Leave” or “Sick Leave.”
• Recommendation: Use clear, descriptive names that employees and payroll managers will easily understand.

• Purpose: Links the time off type to a specific general ledger (GL) account.
• Example: An expense account like “Payroll Expenses – Paid Time Off” or “Wages.”
• Recommendation: Ensure this account matches where you want the costs of paid time off to appear in your financial statements.

• Purpose: Defines how often time off hours are accrued.
• Options:

Annually: At the start of each year.

Monthly: Accrual occurs each month.

Per Pay Period: Accrual based on pay cycles.

• Recommendation: Match this to your company’s policy for accruing time off.

• Purpose: The number of hours employees receive at the start of the year or accrual period.
• Example: 40 hours of vacation awarded at the beginning of the year.
• Recommendation: Use this if employees are granted a lump sum of hours annually.

• Purpose: The maximum number of hours an employee can accumulate.
• Example: If an employee earns vacation hours but can only carry over 80 hours, set this to 80.
• Recommendation: Align this with your policy on maximum accrual limits.

• Purpose: Indicates when the accrued hours reset (if applicable).
• Options:

Start of Year: All unused time is wiped clean.

Hire Date Anniversary: Resets based on the employee’s hire date.

• Recommendation: Set this based on whether unused time carries over or resets annually.

• Purpose: Determines the order in which this time off type appears in lists or reports.
• Example: Use numbers (e.g., “1” for Sick Leave, “2” for Vacation) to control sorting.
• Recommendation: Organize logically, so the most commonly used types appear first.

• Purpose: Marks the time off type as inactive, preventing it from being used in the future.
• Example: A discontinued time off type or one no longer applicable.
• Recommendation: Use this for historical records you no longer need to appear in active lists.

Earning Calculation Type

Fixed Amount: This calculation type applies when an employee is paid a consistent, predetermined amount regardless of hours worked. It is not tied to time tracking or hours logged.

Hourly Rate: This type is for employees paid based on the number of hours worked. The system calculates pay by multiplying the hourly rate by the number of hours entered in timesheets or work logs.

• This is a unique identifier for the earning type.
• The ID should be short and descriptive, such as “SAL” for Salary or “HRLY” for Hourly Pay.

• This provides a detailed explanation of what the earning type is used for.
• For instance, “Annual Salary for Full-Time Employees” or “Hourly Rate for Non-Exempt Staff.”

• Refers to standard working hours that an employee is paid for at their base hourly rate or salary.
• Typically applies to hours worked up to the threshold for overtime as defined by labor laws or company policies.

Overtime:

• Refers to hours worked beyond the regular time threshold, such as over 40 hours per week in most U.S. states.
• Usually paid at a higher rate, such as time-and-a-half (1.5x) or double-time (2x), depending on company policy and legal requirements.

Other:

• A flexible category for pay types that don’t fall into regular or overtime categories.
• Examples might include commissions, stipends, or miscellaneous payments.

Prevailing Wage:

• Used for employees working under government contracts where specific wage rates are mandated by law.
• Ensures compliance with wage determinations under the Davis-Bacon Act or similar regulations.

Time Off:

• Pay type for hours allocated to non-working time such as vacation, sick leave, or personal time.
• May include subcategories like paid time off (PTO), unpaid leave, or holiday pay.

Bonus – Discretionary:

• A one-time, non-recurring bonus given at the discretion of the employer.
• Typically not tied to specific performance metrics and often given as a gesture of goodwill or recognition.

Bonus – Performance:

• A bonus tied to specific performance goals or metrics, such as meeting sales targets or achieving key performance indicators (KPIs).
• Structured to motivate employees and reward measurable achievements.

• This field links the earning type to a specific account in the Chart of Accounts.
• Typically, it is used to designate an expense account, such as “Payroll Expense” or “Wages,” ensuring that the payroll entries are correctly recorded in the accounting system.
• Example: If the earning type is “Overtime Pay,” the Account ID might link to an account like “Overtime Wages Expense.”

• A checkbox or selection field indicating whether the earning type pertains to time off.
• Used for categorizing earnings such as vacation, sick leave, or holiday pay.
• Enables tracking of time-off balances and ensuring that these payments are distinguished from regular wages in reports and accounting.

• Associates the earning type with a specific department in the organization.
• Helps in departmentalized reporting and analysis, such as tracking payroll expenses by department.
• Example: Assign “Regular Time” to “Operations” or “Sales,” ensuring wages for employees in those departments are tracked separately.

• A numeric or alphanumeric value used to determine the order in which earning types appear in lists or reports.
• Helps organize earning types for easier selection during payroll processing.
• Example: Assign “1” to “Regular Time,” “2” to “Overtime,” and so on, to ensure they appear in logical order.

• Represents the base amount associated with the earning type.
• Could be a fixed amount for bonuses or a placeholder rate for hourly wages or salaries.
• For hourly or salaried employees, this may not be directly used but serves as a reference for calculations.
• Example: A bonus type might have a fixed amount like $500 entered here.