Understanding Partial Pay-Period Payments

An employee's first or last employment period with the organization will likely not be a full pay period. For example, an employee might have commenced work in the middle of a pay period or have been terminated two days after a pay period had started. You must pay the employee for the portion of the pay period that was worked and tax the employee's earnings accordingly.

When you enter regular timecards and process them through a payroll cycle, the system calculates the amount of pay that the employee receives during that payroll cycle, and then calculates the amount of tax to be withheld from the employee's earnings. Therefore, if you were to enter timecards for a partial pay period, but process them through a regular payroll cycle, the system would treat the amount of pay as if it were earnings for a full pay period. Without taking into account the fact that the employee did not work a full pay period, the system would under-withhold taxes from the employee's earnings.

To ensure that employees who work partial pay periods are taxed correctly, you must create interim payments to process earnings for partial pay periods. On the Interim Entry form, you can enter a value in the Tax Factor field that represents the amount of time that the employee worked during the pay period. The values for this field are stored in user-defined code (UDC) table 75/TO.

For example, if an employee works 3 of the 12 days in the pay period, you can enter a code in the Tax Factor field that represents .25. The system uses this value to correctly annualize the employee's earnings and to correctly calculate the amount of payroll tax to be withheld.

Similarly, you can enter a value in the DBA Factor (deduction, benefit, and accrual factor) field on the Interim Entry form. The value in this field is used to prorate the DBA calculations for the portion of the pay period during which the employee works. For example, if an employee works three of the twelve days in the pay period, you can enter a code in the DBA Factor field that represents .25. The system uses this value to calculate DBA amounts at 25 percent of what they would normally be. The values for this field are also stored in UDC table 07/DO.

Note: Values that you enter in the Tax Factor field or the DBA Factor field represent the portion of the pay period for which you are paying the employee, not the actual numeric value. The system uses the value that is stored in the second description column of the UDC table to calculate the tax or DBA amounts for the interim payment.For example, you might set up code A in UDC table 75/TO, name this code Half, and enter .50 in the second description column for that code. When you want to pay an employee for half of a pay period, you enter A, not .50, in the Tax Factor field. The system uses .50 to prorate the employee's taxes for the period.