How Payroll Manages Earnings Exempt from SIT

When you have completed your element and Time and Labor configurations, this is how the payroll system identifies and calculates the state income tax (SIT) exempt earnings.

1. The employee enters their hours in your time system.

2. The time system identifies the number of hours worked over the statutory limit and marks them for SIT exemption.

3. The time system passes the hours to the payroll system along with hours identified for exemption, using either of these attributes.

   • Exceeds Statutory Hours Limit

   • Hours Worked Over Statutory Limit

4. When you run the payroll process, it uses the info passed by the time system to these attributes to calculate the wages exempt from SIT.

5. The payroll run populates two payroll balances.

   • Wages Earned for Hours Worked in Excess of Statutory Limit

   • Hours Worked Over Statutory Limit

6. The payroll process and reports use these balances to determine what wages are exempt from SIT.

7. To meet the downstream reporting requirements, the Third Party Periodic Tax Filing Extract reports:

   • Total exempt overtime paid

   • The total number of employees receiving the exempt overtime pay