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What is the order in which payroll deductions are taken?

What is the order in which payroll deductions are taken?

10 11, 2018

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