47 Overview to Deduction, Benefit, and Accrual Setup

This chapter contains these topics:

Section 47.1, "Objectives,"
Section 47.2, "About Deductions, Benefits, and Accruals."

47.1 Objectives

To understand how the system applies and calculates deductions, benefits, and accruals
To learn how to set up simple, typical, and complex deductions, benefits, and accruals
To streamline processing and entry with constants that associate information with groups of employees

47.2 About Deductions, Benefits, and Accruals

You set up deductions, benefits, and accruals (DBAs) to automate the process of subtracting monies, calculating benefits, and tracking accruals when you run your payroll cycle. DBA setup includes the following tasks:

Setting up deductions, benefits, and accruals
Setting up calculation table information
Setting up group constants

Deductions represent dollar amounts withheld from an employee's earnings (excluding taxes). Benefits and accruals represent amounts that the company funds for additional employee compensation. You set up benefits to calculate dollar amounts, such as health care insurance. Typically, you set up accruals to calculate hours, such as vacation and sick time.

Before you set up DBAs for your company, you need to consider the functions that you want the DBA to perform:

Which method should the system use to calculate the DBA?
When will the system calculate the DBA?
What are the effective dates for the DBA?
Should the system pass the information to the general ledger?
Do you want to base the calculation for the DBA on another DBA or on a pay type?
Should the deduction arrear in a negative pay situation?
Should an accrual balance roll over into the next year?
Should taxes be calculated for this DBA?
Do you want to set up limits for the DBA?
Is the DBA mandatory or voluntary?

47.2.1 How Do You Assign DBA Codes?

When you set up DBAs, you assign each DBA a numeric transaction code. Because the numeric transaction codes 001-999 are reserved for pay types, use the numeric transaction codes 1000-9999 to define up to 9000 DBAs.

JD Edwards World recommends that you group similar DBAs by function. For example, you might group all long-term disability deductions and assign numbers within a range, leaving some numbers available for later additions, as follows:

1220 - Long-term disability insurance coverage at 66 2/3%
1222 - Long-term disability insurance coverage at 50%

DBAs are not specific to one company. You can use DBAs across different companies.

47.2.2 How Do You Assign DBAs to Employees?

You can assign DBAs to employees in the following ways:

You can set up a DBA to calculate for all employees.
You can set up group plans which include specific DBAs that apply to all employees who are assigned to that group.
You can assign specific DBAs to a single employee.
For one time only, you can enter a DBA in time entry for the current payroll.

There are no limitations to the number of DBAs that you can assign to each employee.

You can specify the amount of a DBA

When you set up the DBA
At the group level
At the employee level
During time entry

You can override the amount at any level in time entry for any given payroll. The amount at the employee level overrides the group level and DBA setup. The amount at the group level overrides DBA setup.

Example: DBA Amounts as a One-Time Override

An employee has a health insurance deduction included in the assigned group plan. If the employee is hired in the middle of the pay period, you can enter a prorated amount in time entry for the first pay period. The system deducts the regular amount for health insurance in subsequent pay periods.

The following graphic illustrates the order you use to set up DBAs and the order the system uses to process DBAs:

Figure 47-1 DBA Setup and System Processing Order

Description of ''Figure 47-1 DBA Setup and System Processing Order''

47.2.3 How Does the System Calculate DBAs?

The system can use different methods to calculate DBAs. The most common methods used to calculate DBAs include:

Flat dollar amounts
Percentages of gross pay
Calculation tables with criteria that vary from employee to employee

Example: DBA Calculations

DBA calculations can be based on values, such as gross pay, hours, pieces, salary, month-to-date, or year-to-date earnings. You might set up the following:

Flat dollar amount for health insurance with a deduction of 12.50 per pay period
Percentage deduction of 4% per pay period to be used for a 401K or RRSP savings plan
Calculation table using the following variables to determine an employee's annual vacation accrual:
- 40 hours if employed 1-2 years
- 80 hours if employed 3-5 years
- 120 hours if employed 6-99 years