Cash Rounding for Cash Payments

For employees who receive cash payments, you can use cash rounding to pay the employees in specified monetary increments. In the tax calculation options, you specify the cash rounding increment and identify the DBAs that are used to administer cash rounding. These examples illustrate the effects of the cash rounding process on employee cash payments.

Without cash rounding, an employee's payment might look like this:

  • Gross: 1000

  • Tax: 300.95

Therefore, the gross to net calculation is:

699.05 net = 1000 gross − 300.95 tax

Using cash rounding with a cash-rounding increment of 1.00, which forces the employee's net amount to the next whole amount, the same payment might look like this:

  • Gross: 1000

  • Tax: 300.95

  • Cash rounding benefit: . 95

Therefore, the gross to net calculation is:

700 net = 1000.95 gross − 300.95 tax

The system added a cash benefit (using the DBA that you specify in the tax calculation options) of .95 so that the net payment is increased to the next whole amount.

During the next payroll cycle, the employee would have a deduction (using the cash rounding deduction that you enter in the tax calculation options) for .95. After all of the deductions, including the cash rounding deduction and taxes, are satisfied, the system determines whether an additional benefit is needed to make this payment a whole amount. The employee's next payment might look like this:

  • Gross: 1000

  • Cash rounding deduction: .95 (created during the previous payroll cycle)

  • Tax: 300.95

  • Total deductions (300.95 + .95): 301.90

  • Cash rounding benefit: .90

Therefore, the gross to net calculation is:

699 net = 1000.90 gross − 301.90 total deductions

If you set the cash rounding increment to 5.00, the system would add a cash rounding benefit that would increase the net amount to the next increment of 5.00. If you are using a cash rounding increment of 5.00, the calculations for the previous example might look like this:

  • Gross: 1000

  • Cash rounding deduction: .95

  • Tax: 300.95

  • Total deductions 300.95 + .95 = 301.90

  • Cash rounding benefit: 1.90

Therefore, the gross to net calculation is:

700 net = 1001.90 gross − 301.90 total deductions

Note: You do not need to use cash rounding for employees who receive payments through automatic deposit. Cash rounding is used only for employees who receive cash payments.