Deduction code
A deduction code represents a reduction in pay or an add-to-net amount that needs to be applied to employee wages. A deduction code can represent any type of deduction, including tax, workers' compensation, pre-tax, and so on.
You can define three categories of deduction codes:
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Employee-paid, which reduces employee gross pay.
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Company-paid, which calculates the amounts that companies must pay for certain deductions.
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Add-to-Net, which adds the deduction amount to employee net pay.
Payroll uses deduction codes to determine how to:
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Calculate the deduction amount
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Print descriptions of the deduction on the payment stub or direct deposit receipt
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Post deduction accruals to the general ledger
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Expense company-paid deductions to the general ledger
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Store deduction history
The following table lists the different types of deduction codes you can create:
| Tax | A deduction code Payroll uses to deduct taxes from employee pay and to calculate and expense employer paid taxes. |
| Company Match | A deduction code to use for a matching contribution to employee defined contribution plans, such as 401(k) plans in the U.S. |
| After Tax Limit | A deduction code to use for contributions to a defined-contribution plan after an employee reaches the federal limit for pre-tax contributions. These deductions are taxable. |
| Pre-Tax | A deduction code for deductions that Payroll deducts from employee pay before taxes are applied. |
| Garnishment | A deduction code to use for employee garnishments in the U.S. and Canada. |
| Workers' Compensation | A deduction code to use for workers' compensation deductions. |
| Benefits | A deduction code tied to a benefits plan in the Benefits Administration application. |
| Add-to-Net | A deduction code which will add an amount to employee net pay. |
| Miscellaneous | A deduction code for any use including union dues, employee loans, or any other type of deduction. |
Example
Two Rivers Company has defined the following deduction codes.
| Employee-paid Deduction | Deduction Code | Company - paid Deduction | Deduction Code |
|---|---|---|---|
| U.S. Medicare - Employee paid | MEDE | Medicare - Company paid | MEDC |
| U.S. Social Security - Employee paid | SS-E | Social Security -Company paid | SS - C |
| U.S. Federal Tax | FIT | U.S. Federal Unemployment | FUTA |
| MN Tax | MNW | MN Unemployment | MNU |
| NJ Tax | NJW | ||
| NJ Unemployment -Employee paid | NJUE | NJ Unemployment -Company paid | NJUC |
| NJ Disability -Employee paid | NJDE | NJ Disability - Company paid | NJDC |
| Employee Loan | LOAN | ||
| Federal Tax Levy | LEVY | ||
| Child Support | CSUP | ||
| United Way | UWAY | ||
| Medica Health | HLTH | ||
| 401(k) - Employee | 401E | 401(k) - Co-Match | 401C |
| Canada Pension Plan- Employee | CPPE | Canada Pension Plan - Company paid | CCPR |
| Canada Employment Insurance - Employee | EIEE | Canada Employment Insurance - Company | EIER |