Issue/Symptom/Question

Employees can have many deductions with varying deduction calculation rules, what is the order in which PENTA calculates these deductions during the Gross to Net Payroll process?

Applies To

• PENTA For Windows > Payroll > Setup > Deductions, Reimbursements and Other Compensation > Master Deductions 
• PENTA For Windows > Payroll > Payroll Check Processing > Gross to Net Processing
• PENTA For Windows > Payroll > Centralized Payroll Check Processing > Centralized Gross to Net Processing

Resolution/Fix/Answer

PENTA performs 4 passes through an employee’s deductions to determine the sequence in which their deductions will be calculated / taken. The following attributes can impact whether a deduction is taken in pass #1, pass #2, pass #3 or pass #4:

• Calculation base
• Before Tax or After Tax status
• Employee receives Statutory Vacation pay
• Employee receives Add-To-Gross fringe benefit with calculation base 17 – Reimbursable FICA

Note – deductions within the same pass are calculated in deduction # sequence (lowest to highest).

Deduction Pass #1 – order of deductions

• Calculation base = 1 or 12 and the following is true:
  • Deduction is Before Tax for any tax type OR the employee check does not include an add-to-gross fringe with calculation base 17 (Reimbursable FICA)
• Calculation base = 2, 3, 10, or 11 and all the following are true:
  • Employee check does not include statutory vacation pay
  • Deduction is Before Tax for any tax type OR the employee check does not include an add-to-gross fringe with calculation base 17 – Reimbursable FICA
  • Deductions basis amount is NOT adjusted by other deductions, other compensation and/or reimbursements (applies to calculation bases 2 & 3 only - via the Basis Amt window)
• Calculation base is 15 and the deduction it is based on is calculated during pass 1

Deduction Pass #2 – order of deductions

• Calculation base = 9
• Calculation base = 2, 3, 10, or 11 and the employee is receiving statutory vacation pay
• Calculation base = 2 or 3 and the deduction’s basis amount is adjusted by other deductions, other compensation and/or other reimbursements (Basis Amt window)
• Calculation base = 15 and the deduction it is based on is calculated in pass 2

Deduction Pass #3 – order of deductions

• Calculation base = 1, 2, 3, 10, 11, or 12 and all of the following are true:
  • The employee check includes an add-to-gross with fringe calculation base 17 – Reimbursable FICA
  • The deduction is After Tax for all tax types
  • The deduction’s basis amount is not adjusted by other deductions, other compensation and/or other reimbursements (applies to calculation bases 2 & 3 only - via the Basis Amt window)
  • The employee’s check does not include statutory vacation pay
• Calculation base = 15 and the deduction it is based on is calculated in pass 3

Deduction Pass #4 – order of deductions

• Calculation base = 4, 5, 6, 7, 8, 13, 14