Introduction
Payroll Deductions refer to the process of an employer withholding money from employees' paychecks to address both mandatory and voluntary financial liabilities owed by employees. Empeon's deductions are used for both voluntary deductions (health benefit contributions, life insurance, 401k contributions, etc.) and mandatory deductions (child support and other court ordered garnishments) outside of tax withholdings.
Before setting up recurring payroll deductions on employee profiles, codes representing the deductions need to be created; for more information about creating deduction codes review Empeon's Company Payroll Deduction Setup article. Once added on the company level, deductions are available to apply to employee profiles for recurring use and can also be applied manually on employee checks in Payroll Entry. This article details the setup process for recurring deduction needs to ensure that you have a comprehensive understanding of how to manage deductions effectively within Empeon Workforce.
Employee Profile: Deduction Setup
For any recurring employee deduction needs, it's almost always best to use the deduction setup card on Employee Profiles. Recurring deductions are highly customizable in how they can be configured and help to streamline your payroll process by eliminating the need for manual entry with each payroll run.
To set up a recurring deduction so that it is automatically deducted from an employee's paycheck on a regular basis, navigate to the employee's profile: People tab > Employee > Select the employee.
Once you have selected the employee, navigate to the Payroll tab from the left-hand menu and then select "Deductions". Any recurring deductions that have been set up will show here along with the option to add a deduction by clicking the blue "+" icon in the top right corner.
Deduction Setup: Amount Settings, Occurrence, and Optional Payee
The first step is to apply the initial settings of the employee's deduction. Review the details below for important information regarding the initial setup fields.
- Deduction Code - Select the deduction code needed from the dropdown. All deduction codes set up on a company level are available to choose from.
- Amount - Click one of the corresponding icons to set the amount as a flat dollar or percentage of gross deduction. Then enter the amount to be deducted from the employee's paycheck.
- Custom Calculation: Custom calculation codes are created for specialized deduction percentage or amount calculation needs. You may see custom calculation options for items like deducting percentage of disposable pay (the net) or handling maximum percent of disposable pay calculations for garnishment deductions. Additional custom calculations can also be setup to address any specialized calculation need for a particular deduction. If you feel a custom calculation code needs to be created contact Empeon Customer Service.
- Occurrence - Choose the frequency the deduction should be applied from the employee's paycheck. If Every Check is selected, the deduction will be taken out of every paycheck issued to the employee. This includes instances of employees receiving more than one check within a pay period. Choose "Other" to select from a dropdown of other available frequencies. OncePerPay is recommended to be used for most flat amount benefit deduction needs; it ensures that the amount is deducted only once for instances of employees receiving multiple checks in one pay cycle. Other frequencies are also available such as first or last payroll of the month. If you don't see a frequency option that aligns with the deduction occurrence need, contact Empeon Customer Service for assistance in creating a new one.
- Payee (Agency) - Empeon has an optional Payee/Agency service available for all clients. When choosing an Agency code from the Payee field, Empeon sends a check or ACH payment to the third-party payee associated with the deduction. Be sure to leave this field blank for any instance where the actual payment to the associated payee is to be handled by the employer directly. For more detailed information on how Empeon's Agency service works and instructions on how to create new Agency codes, review Empeon's Agency Service article.
- Payee Reference - Payees/Agencies often require a reference number for payments sent to them so they can easily identify where to apply the funds they receive. An example of when this is often needed is for garnishment deductions. When applying a Payee code for Empeon to send the payment to the issuing agency, there is usually a reference number (often called "docket" or "court" number) the agency wants to be identified on the check stub. For these kinds of instances be sure to key in the reference number in this field.
Deduction Setup: Limits and Arrears
There are also optional fields available to handle deduction limit and arrear needs. Review the information below for information about how to set up these fields if needed.
- Deduction Goal - For a need where a recurring employee deduction should stop once a specific/total amount is reached, key in this "goal" amount in the corresponding field. Once set up, Empeon will update the total amount deducted towards the goal after each payroll. The amount deducted towards the goal can also be manually overridden if needed.
- Minimum and Maximum Per Check - For percentage-based deductions, a minimum or maximum dollar amount can be applied if needed; this will override the exact percentage calculation. Setting minimum or maximum amounts is usually only appropriate for percentage-based deductions.
- Maximum Per Year - For deductions that should have a total maximum deduction for the calendar year, key in the yearly maximum in this field.
- Please note: Yearly contribution limits for retirement (401k, Roth, 403b), FSA, and HSA types of deductions do not need to be identified in this field. Empeon tracks the year-to-date total deductions/contributions for every employee and will automatically stop the deductions once the contribution limit for the calendar year is reached.
- Arrear Information - Certain deductions may be setup on a company level to apply arrears for deductions that are missed due to lack of available funds on a check. Empeon will track the arrears and automatically apply arrear balance in the corresponding field. An arrear need can also be manually keyed into this field along with an Arrear Cap Per Check for instances where a total arrear owed should be made up over the course of multiple payrolls.