Understanding Deductions

This topic lists prerequisites and discusses:

  • The four steps to defining deductions.

  • General deductions and benefits deductions.

Before you begin defining deductions:

  • Define special accumulator codes on the Special Accumulator table.

  • Read through the sections that describe how to set up deductions tables.

  • Map out how you want the deductions, general deductions, and benefits to be defined and segregated within the system before you actually set them up.

  • As with earnings, you may want to develop a deduction worksheet on which you can put information to set up deductions in the related tables.

To define how you want the system to process a deduction, follow these four general steps:

  1. Use the Deduction Table component (DEDUCTION_TABLE) to select a plan type, enter a deduction code, and specify the deduction processing rules, including the priority of the deduction, how the deduction affects taxes, related general ledger account codes, and other special payroll process indicators, such as how arrears should be handled.

  2. Use the General Deduction Table component (GENL_DEDUCTION_TBL) to define the rules for the actual calculation of general deductions such as parking or union dues.

  3. Use the Company General Deductions component (GDED_COM_TBL) to build a general deduction plan using the general deductions you have set up.

  4. Use the Benefit Program Table component (BEN_PROG_DEFN) to define the rules for the actual calculation of benefit deductions such as health plans and dental plans.

In Payroll for North America, there are two types of deductions: general (non-benefit) deductions and benefit deductions. The system uses different deduction rules depending on the type of deduction that you're setting up.

Term

Definition

Deduction Table Component

Defines the deduction processing rules for both general deductions and benefit deductions.

General Deduction Table Component

Defines the deduction calculation rules for general deductions, such as parking fees and union dues.

Benefit Program Table Component

Defines the deduction calculation rules for benefit deductions, such as health plans and dental plans.

Note: While the system enables you to set up benefits as general deductions rather than benefit deductions, we recommended against this because the general deductions cannot process the complex calculations and rules needed for some benefit deductions, such as 401(k) participation.

Whether you are setting up a general deduction or a benefit deduction, you must set up corresponding entries on the Deduction Table component. For example:

  • If you're setting up a 50.00 USD general deduction for parking, indicate the dollar amount and any special calculation routines and parameters using the General Deduction Table component. Then use the Deduction Table component to indicate that this is an after-tax deduction.

  • Similarly, if you're setting up a benefit deduction for a monthly life insurance premium, use the Benefit Program Table component to enter the plan and the associated rates, rules, and routines that determine the cost of the deduction. Then use the Deduction Table component to indicate that this, too, is an after-tax deduction.

Note: General deductions are set up using Payroll for North America. Benefit deductions are set up using Payroll for North America and the Manage Base Benefits business process in PeopleSoft HR.