Employee Deductions
Overview
ProPay allows you to set up to 18 different user-defined deductions or income categories for each employer. Each deduction can be calculated using different methods based on your business needs.
Deduction Types
ProPay offers five main calculation methods for deductions and income categories:
Amount (A)
Use for fixed deductions or income amounts that remain the same each pay period.
Setup:
- Enter A under Type
- Enter the fixed amount under Standard Amount
Example: Union dues of $25 per paycheck
Percent of Gross (P)
Use for deductions or income calculated as a percentage of gross pay.
Setup:
- Enter P under Type
- Enter the percentage under Percent
Example: 401(k) contribution of 5% of gross pay
Hourly Rate (H)
Use 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 $0.50 per hour worked for meals
Garnishment (G)
Use for garnishments subject to Federal Law.
Setup:
- Enter G under Type
- Enter either an amount or a percentage
- If entering a percentage, it calculates based on disposable (net) income
How it works: ProPay calculates the minimum amount the employee must take home before garnishments are applied, according to Federal Law. Federal law provides an exempt amount before any garnishments are withheld.
Example: Federal tax levy or garnishment by court order for back taxes
Disposable (D)
Use for garnishments subject to State Law, typically 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
How it works: If an employee is subject to a garnishment under State Law, this calculates a straight percentage of the employee's Disposable Income (Gross minus Taxes), without regard to the Federal minimum subsistence level.
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 field only if the employee has a prior history on this deduction at the time of setup.
Example: Setting up a new employee with a 4-year loan currently in the 2nd year with two more years remaining.
Important differences:
- To-Date Amount: Not cleared annually (except for W-2-reportable deductions)
- Year-To-Date Amount: Cleared at the beginning of each year
Note: The To-Date amount field is disabled for deductions with W-2 box 12-14 codes (401(k), etc.). For these deductions, the To-Date amount equals the Year-To-Date amount and resets to zero each year.
Limit Amount
Set up annual or long-term limits for deductions or income. When these limits are reached, ProPay stops any further deductions or additions to income.
Annual limits:
- Apply to deductions like 401(k)
- Must assign a W-2 Box 12, 14, 11, or 10 code in Employer Deductions Setup
Long-term limits:
- Apply to items spanning several years (loan payments)
- Leave the W-2 box code blank
Pay To Agency
When you enter a deduction, ProPay prompts you to set up payment information. You can:
- Define new payees
- Select from a master payee list
See Payee setup for detailed information on managing payee agencies.
Tips and Garnishments
Important: In most states, cash tips are not included in Disposable Earnings for garnishment purposes.
To include tips in Disposable Earnings when required by garnishment instructions, add a T to the Garnishment type in Payee Setup.
Note: Generally, cash tips are not subject to garnishment in most states. Some credit card tips may be subject to garnishment depending on how the employer disburses them to employees. See the garnishment instructions for specific guidance.
Troubleshooting
Deduction not applying correctly
Double-check that the Type and corresponding value (Amount, Percent, or Hourly Rate) are entered correctly.
Garnishment exceeding legal limits
Ensure the correct Type (G or D) is selected based on whether Federal or State law applies.
Annual limit not working for a deduction
Verify that a W-2 Box code has been assigned to the deduction in the Employer Deductions Setup menu.