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Employee Deductions

Understanding Deductions and Income Categories #

Overview #

ProPay allows you to set up to 22 different user-defined deductions or income categories for each employer. This article explains the various types of deductions and income categories available, how they are calculated, and how to set them up correctly.

Types of Deductions and Income Categories #

ProPay offers five main types of deductions or income categories:

  1. Amount (A)
  2. Percent of Gross (P)
  3. Hourly Rate (H)
  4. Garnishment (G)
  5. Disposable (D)

Amount (A) #

Use case: For fixed deductions or income amounts that remain the same for each pay period.

Setup:

  • Enter “A” under Type
  • Enter the fixed amount under Standard Amount

Percent of Gross (P) #

Use case: For deductions or income calculated as a percentage of gross pay.

Setup:

  • Enter “P” under Type
  • Enter the percentage under Percent

Hourly Rate (H) #

Use case: For deductions or income based on the number of hours worked.

Setup:

  • Enter “H” under Type
  • Enter the hourly rate in the appropriate column

Example: A restaurant charging employees for meals at $0.50 per hour worked.

Garnishment (G) #

Use case: For garnishments subject to Federal Law.

Setup:

  • Enter “G” under Type
  • Enter either an amount or a percentage
  • If entering a percentage, it will be calculated based on disposable (Net) Income

Note: The program calculates the minimum amount the employee must take home before garnishments are applied, according to Federal Law.

Disposable (D) #

Use case: For garnishments subject to State Law, typically used for child support.

Setup:

  • Enter “D” under Type
  • Enter the applicable percentage in the Percent column
  • Optionally, enter a maximum amount per pay period in the Standard Amount column

Note: If both an amount and a percentage are entered, the garnishment will be the lower of the two.

Additional Setup Options #

To-Date Amount #

  • Use this for employees with prior history on a deduction at the time of setup
  • Different from Year-To-Date amount, which is cleared annually
  • Disabled for deductions with specific W2 box 12-14 codes

Limit Amount #

  • Set up annual or long-term limits for deductions or income
  • Annual limits require assigning a W2 Box 12, 14, 11, or 10 code
  • Long-term limits (e.g., loan payments) should have no W2 box code assigned

Pay To Agency #

  • Set up payment information for deductions
  • Define new payees or select from a master list

Tips and Garnishments #

  • In most states, cash tips are not included in Disposable Earnings for garnishment purposes
  • To include tips in Disposable Earnings, add a “T” to the Garnishment type in Payee Setup

Troubleshooting #

  1. Issue: Deduction not applying correctly
    Solution: Double-check the Type and corresponding value (Amount, Percent, or Hourly Rate) are entered correctly
  2. Issue: Garnishment exceeding legal limits
    Solution: Ensure the correct Type (G or D) is selected based on whether Federal or State law applies
  3. Issue: Annual limit not working for a deduction
    Solution: Verify that a W2 Box code has been assigned to the deduction in the Employer Deductions Setup menu

Need More Help? #

For additional assistance, please consult our help menu within the ProPay payroll software or visit our website at https://www.Paysoft.com.


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