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Employee Deduction Setup

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.

In order to be able to set up a recurring payroll deduction for an employee, there must first be an appropriate Deduction Code set up on the company level. 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, ensuring it is automatically applied appropriately when initiating a payroll batch.

For recurring deductions like retirement plans or garnishments, which usually need to be deducted each pay period, it's most efficient to set them up with a recurring schedule on the Employee Profile.

Employee Profile: Deduction Setup

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. 

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. Please note that for employers utilizing Empeon's Benefits feature, recurring deductions for Health, Dental and Vision should be set up and facilitated through Empeon's Benefit Administration Module. 

Deduction Setup: Amount Settings, Occurrence, and Optional Payee

When setting up a recurring deduction, a window will appear with the following fields of information to be entered:

  • Deduction Code - Select the appropriate Deduction Code from the dropdown. All Deduction Codes available from the dropdown are 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.
    • Custom Calculation:  Custom Calculation Codes are designed for specialized deduction calculations, such as deducting a percentage of disposable pay (net) or managing maximum percentage calculations for garnishments. These codes can be tailored to meet specific calculation needs for particular deductions. If a custom calculation code is required, please 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. For deductions that apply every payroll, it's usually appropriate to apply percentage-based deductions on every check and flat amount deductions as OncePerPay (once per pay period). If a frequency preference is not available as a choice from the drop down, contact Empeon Customer Service for assistance.
  • 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 information on how Empeon's Agency service works and instructions on how to registered relevant Agencies to have payments sent to, please refer to Empeon's article Agency (Third Party) Payment Setup.
    • 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

The next two sections on this screen are Deduction Limits and Arrear Information. While the fields in these sections are optional, here’s what to consider and how to set them up if needed:

  • Deduction Goal - For a need where a recurring employee deduction should stop once a specific/total amount is reached, key in this "deduction goal" amount in the corresponding field. Once set up, Empeon will update the total amount deducted towards the goal after each payroll. 
    • Deducted - If contributions have already been made toward the Deduction Goal when setting up this deduction for the employee, 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 and Maximum Per Check - For percentage-based deductions, a minimum and/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 set up 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.

If there is a Deduction Goal set up, it will display a real-time remaining balance that will update accordingly as more paychecks are ran for this employee.

Deduction Setup: Allocated To

The final section is Allocated To which is optional and not often used for deductions. Only use this section if the deduction should be applied toward a Job Info record (Department, Position, Location, etc.) that is different than what is assigned as the employee's default Job Info settings identified on their Employee Profile.