Business Expenses & Deductions based on Net Pay

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Posted on by WindyCityGP

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We have an employee that has a deduction based on 25% of net wages ($0-$435 there is zero deduction, anything over $435 gets 25%). The also have $435 Minimum Net Pay. Oftentimes, they will also have a business expense for travel reimbursement which is set up not to be included in wages. What I am seeing is that the total of the travel reimbursement, plus gross wages, less $435 is being used to calculate the 25% deduction. Why is the travel reimbursement getting included in the wages for the calculation of the deduction?

We do use Advanced Payroll but I disabled those 4 products and had the same results.

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Thomas Franz 1,105 on at

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I'm thinking you need to base the deduction on selected pay codes, rather than "All" and include all pay codes except the reimbursement pay code.

Hope this helps.

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WindyCityGP 1,069 on at

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Interesting...your idea made sense, so I made the change to that deduction in the Deduction Setup window and rolled it down when I saved it (manually selected 700 pay codes and inserted each one individually). No error messages. Entered a sample trx, built, and calculated the batch. For the deduction, it actually took the amount based on the gross wages, not the Net. I checked the main setup of that deduction again, and noticed that the method was set to Percent of Gross Wages. I figured when I rolled it down it had changed it from Net to Gross on the one employee. Nope, on the Employee Deduction Maintenance window, it was still set to Net. So changed it to Percent of Gross and saved it. I went back in an attempted to change it back to Percent of Net Wages, when I received a message: "A deduction based on selected pay codes cannot be calculated on a percentage of net wages". Back to the drawing board :(

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WindyCityGP 1,069 on at

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The Pay Code that is designated as a Business Expense is not marked to be "Report As Wages" so I wonder why it is getting included anyway.

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WindyCityGP 1,069 on at

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I thought I got it to work by creating a deduction based on Percent of Earnings Wages. Although it calculated the gross properly (meaning the "earnings" did not include business expense). It failed to take into account the minimum net pay. I can't create a tier to use 0% up to their minimum net pay, and the regular percentage for anything over the minimum net pay. Drats.

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L Vail 65,271 on at

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Windi,

Can you do anything with the Garnishment Maximum setup to exclude the first $425?

Leslie

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Chris.Hadden 726 on at

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If I'm understanding this correctly, it sounds like the best way to handle this setup would be as a tiered based deduction code, with $0-$435 at 0%, and more than $435 at 25% of net wages. The challenge with this is that the business expense needs to be excluded from the employee's wages available to be garnished. Typically you could configure an Earnings Code to handle this, and in the Earnings Code you could exclude the business expense pay code from being included in the calculation. So you would say 25% of Earnings Wages on the deduction code. Unfortunately in GP you are unable to do a tiered based deduction on an Earnings Code.

When I've run into this scenario in the past the GP user ultimately took a look at the Greenshades Garnishments module since it's able to handle this.

If you only have one employee impacted by this it may make sense to just handle this manually. But if this is time consuming for you, you might want to check out this add-on module.

Feel free to email me (chadden@greenshades.com) if you are interested and I can ask someone to contact you regarding pricing.

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