Setting Up and Processing Payback Deductions

This topic provides an overview of payback deduction processing and discusses how to:

  • Set up payback deduction and earnings codes.

  • Use payback deduction and earnings codes on the paysheet.

When you enter an earnings on the paysheet using a payback earnings code, the system associates that amount with the corresponding payback deduction code that you entered on the Earnings Table - Taxes page. The system attempts to recover the arrears that are associated with a payback deduction code during subsequent payrolls until it becomes zero. The actual amount that you deduct each payroll is based on the maximum arrears payback amount, which you enter for the payback deduction code on the Deduction table (or on the General Ded Code Override page at the employee level).

This example illustrates the steps required to set up a payback deduction code and associate it with a corresponding payback earnings code. It describes how to define an earnings code for salary advance (ADV) and create a salary advance payback deduction code (ADVPB):

  1. Define the ADVPB deduction code in the Deduction table and indicate arrears information.

    Enter a flat dollar amount or a percentage to indicate the maximum amount to deduct.

    See Setting Up Deductions.

  2. Define the ADVPB deduction code in the General Deduction table with a flat dollar deduction amount of zero, unless you specify a dollar amount to take in addition to the actual payback amount, which you enter in the Deduction table.

    See Defining General Deductions.

  3. Create the ADV earnings code in the Earnings table.

    Enter ADVPB as the payback deduction code on the Earnings Table - Taxes page for the ADV earnings code.

    See Establishing Earnings Codes.

    Note: The system creates the advance payback as a before-tax deduction if the earnings code associated with it has the Subject to FWT (subject to federal withholding tax) check box selected. If you deselect this check box, the deduction is after-tax.

After you set up the Earnings and Deduction tables to reflect the salary advance earnings and advance payback deduction codes, the first employee to take advantage of the advance program is Terry, who requests a salary advance of 500 USD. Here's how you use the payback deduction and earnings codes that you set up to process Terry's advance:

  1. During the first pay period, update Terry's paysheet to include other earnings of 500 USD, with the ADV earnings code.

    The Pay Confirmation process automatically creates a payback arrears balance of 500 USD under the ADVPB deduction code because you linked that payback deduction code to the ADV earnings code.

  2. In subsequent pay periods, the system automatically tries to recover any outstanding arrears based on the ADVPB deduction code, which you defined with a flat maximum payback amount of 50 USD.

    In Terry's case, the system takes the deduction amount of 50 USD as arrears payback in the second pay period, and reduces the payback arrears balance to 450 USD. It continues to take 50 USD each pay period until the arrears balance is zero.