Payroll Deductions are amounts subtracted from an employee’s paycheck to cover both voluntary and mandatory financial obligations. Examples of voluntary deductions include health benefit contributions, life insurance, and 401(k) contributions, while examples of mandatory deductions are child support, tax liens, and other court-ordered garnishments.
In Empeon Workforce, any deduction that needs to be applied toward an employee's paycheck, first needs to be set up as a Deduction Code within the system. Then once the Deduction Code is established, it can be applied manually within Pay Entry as needed, or assigned to the Employee Profile with a recurring schedule. For recurring deductions like retirement plans or garnishments, which usually need to be deducted each pay period, it is best to set them up with a recurring schedule on the Employee Profile.
Setting up a Recurring Deduction
To set up a recurring deduction for an employee so that it is automatically deducted from an employee's paycheck on a consistent basis, navigate to Payroll section of their Employee Profile and select Deductions.
Deductions that have been set up with a recurring schedule will be displayed within this section of the Employee Profile, along with the option to add a new deduction using the blue "+" icon in the top right corner.
For organizations utilizing Empeon's Benefit Administration feature to register their benefit plans and facilitate open enrollment sessions, recurring deductions for health, dental, and vision plans will not be displayed here. Instead, they are maintained within the Benefits section of the Employee Profile, under Benefits Enrollment.
Amount Settings, Occurrence & Optional Payee
When setting up a new recurring deduction, the first part of the setup is establishing the deduction amount, the deduction schedule, and whether any third-party agencies should receive the deducted funds. With this in mind, please note the following fields:
- Deduction Code - Select the appropriate Deduction Code from the dropdown. All Deduction Codes available from the dropdown are active Deduction Codes that have been set up on the company-level.
- Amount - Establish whether the amount being deducted will be structured as a Flat-Dollar Amount ($) or a Percentage (%) and then enter the amount in the field. For more advanced calculations that need to be applied toward the deduction amount, "Custom Calculations" can be created and applied. Be sure to consult with Empeon Customer Support if you feel a custom calculation is needed.
- Occurrence - Establish the frequency in which the deduction should applied toward the employee's paycheck. In most cases, recurring deductions are set up with a frequency of "OncePerPay" referring to the deduction being removed once per pay period. This way anytime there might be multiple checks within the same pay period, the deduction is only removed once. If a frequency preference is not available as a choice from the dropdown, please contact Empeon Customer Support for assistance.
- Payee - This is referring to Third-Party Agencies who may need to be the recipient of the deducted funds. Third-Party agencies first need to be added to the company-level in order for them to be available here within the dropdown. If no third-party agencies are applicable to the deduction, be sure to leave this field blank.
- Payee Reference - If a third-party agency is linked to the deduction, a reference number may be required by the agency, which allows them to identify where they are receiving the funds from. For court-ordered garnishments, this could be the "docket number" or "court number." If a reference number is provided by any third-party agency, enter it here.
Limits and Arrears
The next two sections on this screen are Deduction Limits and Arrear Information. While the fields in these sections are not required, they define deduction goals and limits, as well as any existing arrear balances associated with the deduction. With this in mind, note the following fields:
- Deduction Goal - If the Deduction Code has a capped amount to be paid over time, the total deduction amount is entered here. As the deduction is paid over time, the system will stop once the Goal" Amount is reached.
- Deducted - If any contributions have already been made toward the Deduction Goal, enter the total contributions here. The system will subtract this amount from the Deduction Goal and calculate future deductions based on the remaining balance until the goal is met.
- Minimum Per Check - For deductions calculated by percentage, this sets a minimum value that prevents the deduction from being calculated below a specified amount.
- Max Per Check - For deductions calculated by percentage, this sets a cap to prevent the deduction from exceeding a specified amount.
- Maximum Per Year - The value entered here sets a cap on the total amount to be deducted over the course of a calendar year. Once the cap is reached, the deduction will pause until the start of the new calendar year, at which point the deduction will resume.
- Please note that any applicable yearly contribution limits associated with the deduction are already accounted for in the system when the correct Deduction Type is applied. Yearly contribution limits should not be entered here.
- Arrear Balance - If there is an Arrear Balance prior to setting up this deduction, enter the balance here. Once the deduction is set up, this section will update if arrears are incurred. This field is only entered during setup if there is an existing balance.
- Arrear Cap Per Check - If there is an Arrear Balance, this determines the maximum amount that can be deducted per paycheck to cover the outstanding arrears balance. If no value is entered, the system will attempt to deduct the full arrears balance in the next scheduled payroll. However, if wages are still insufficient to cover the full amount, the system will deduct what it can and any remaining balance will carry forward to the next scheduled payroll.
- Last Deducted - Displays the date when the arrears deduction was last applied in payroll.
If there is a Deduction Goal set up, it will display on the deduction within the Employee Profile the remaining balance. This balance will update accordingly as more and more paychecks are paid to this employee.
Allocated To
The final section when setting up a new recurring deduction is Allocated To. Though not often used, this section of the deduction offers the ability to allocate the deduction toward a different Cost Center from what the employee is already assigned.
Once all fields have been appropriately attended to, click "Save" to finalize the deduction on the Employee Profile.
When setting up a recurring deduction, it is important to note that the deduction will only populate automatically on the employee's check once their regular pay is applied. Although not commonly used, recurring deductions can also be set up as Auto Pays within the Employee Profile, if there is a need to have the deduction is applied regardless of whether pay is entered for the employee or not.
For any questions about setting up and managing recurring deductions within Empeon Workforce, please don't hesitate to reach out to Empeon Customer Support.