Appendix B - Entering Special Payrolls

Vacation Checks
Bonus or Commission Checks
Manual Checks
Reversing a Check
Voiding a Check
Handling Computer-Generated Zero Checks

Issuing Vacation Checks

When issuing a vacation check, it is desirable that the employee and employer-paid taxes be calculated as accurately as possible. When the vacation period does not correspond to the employee’s normal pay period, this may require adjusting of the normal pay period entry.

For example, When an employee is normally paid weekly and is being issued a two week vacation check, taxes will most accurately be calculated by entering ‘B’ (for Biweekly) in the Pay Period field of the Payroll Entry task. A ‘W’ (Weekly) entry would cause taxes to be calculated and withheld as if this amount was earned in a single week (i.e., too much would be withheld for taxes).

Conversely, When an employee is normally paid biweekly (every two weeks) but is being issued a check for one week’s vacation pay, enter ‘W’ (for Weekly) in the Pay Period field, since a ‘B‘ (Biweekly) entry would cause taxes to be calculated as if this amount was earned for a two-week period (i.e., too little would be withheld for taxes).

Whenever an employee’s normal pay period does not coincide with the vacation period for which a check is being prepared, use these guidelines, bearing in mind that the module calculates all taxes based on a pre-defined number of days per employee pay period. Also note that a separate sequence number may be assigned to regular and vacation checks by entering the appropriate numbers in the Seq field of the Payroll Entry task. This allows two or more checks to be generated for an employee during the same payroll run.

Issuing Bonus or Commission Checks

Calculation of taxes for bonus checks, commission checks, or any checks that are issued on an infrequent or irregular basis may be calculated differently than normal pay checks. Set up one or more tax codes for these types of earnings and then assign the appropriate codes to employees eligible for bonuses, commissions, or other non-regular earnings.

For example, a tax code of ‘CB’ (for California bonuses) with a ‘D’ tax type based on a percentage of dollars earned may be created. A flat tax rate is then assigned for calculating taxes on this type of earnings. A flat rate (known as the “supplemental wage payment rate”) is defined by the federal and state governments and is found in the Federal and State Tax Guides.

Once the tax code is created, enter this code for each employee eligible for a bonus, using the Tax Code Maintenance option of the Employee Masterfile Maintenance task. Ensure that a pay code is set up for “bonus pay” so that this description can be printed on employee checks. Each time a bonus is due an employee, enter the appropriate tax code during Payroll Entry and the tax will be calculated correctly for the bonus earnings.

Also note that a separate sequence number may be assigned to regular and bonus checks by entering the appropriate numbers in the Seq field of the Payroll Entry task. This allows two or more checks to be generated for an employee during the same payroll run.

Supplemental or Flat Rate Tax Calculation

When a bonus or commission check is issued, you may be required by law to collect supplemental federal (and possibly state) taxes. This section will discuss setting up the Federal withholding using 'FE' tax code. Setting up this tax rate requires two steps. First, in Tax Code Maintenance, 'FE' tax code, enter the percent in Tax Rate field. (Example: 28.0 for 28%). Then, in Pay Code Mainteneance for the appropriate pay code, enter 'S' for supplemental in the Total To area, Special field. This will tell the system that earnings for this pay code are to be taxed at the supplemental rate instead of calculated from the tax table.

Entering a Manual Check

Payroll Entry is used to record a manual (handwritten) check previously written or to calculate taxes and employer contributions before a manual check is written.

NOTE: When making manual check entries, the module will not automatically generate deductions, taxes, contributions or accruals as is done for computer-generated checks. This information must be manually entered as described in the following steps.

When making a manual check entry, follow the normal procedures for entering the heading, earning, deduction, tax, contribution, and accrual information, with the following exceptions:

Enter M in the Check Type field of the Payroll Entry task to identify the entry as a manual check.
Enter the number of the check in the Check No field.
Enter the date the check was, or is to be, written in the Date field.
Enter earning information as would be done for a computer-generated check. When recording a previously written manual check, be certain to record earning hours and amounts exactly as they appear on the check. When the information is accurate, select Y at the verification prompt displayed following the final entry and the Deduction Entry screen appears with the appropriate header information.
Using the Deductions Entry screen, enter deduction information as would be done for a computer-generated check. Be certain to record the exact deduction amounts when recording a previously written manual check. Press Enter and F4 to move to the Taxes screen display.
Only the tax codes on file for the employee and the taxable amount of earnings will be displayed for the employee. The cursor will be positioned to a new Seq number line. Press F2 for access to the lines for which taxes are to be calculated. Press Return to advance through each field of the line. This causes the applicable tax tables and rates to be displayed. The taxes will calculate and display automatically and may be overwritten with a different tax amount if necessary (e.g., to record taxes withheld from a check already written and distributed).

NOTE: Taxes are only generated for the tax codes on lines that are accessed and accepted by pressing Return through each field displayed. Be sure to access lines such as federal or state withholding even if the withholding amount for this check is zero. The gross and taxable amounts must be displayed correctly. This will leave the Amount field blank so that the tax will not be calculated and withheld from the employee’s earnings.

After tax calculations, the next screen to appear will be the Contributions screen. When entering employer contributions for a manual check, the contribution codes on file for the employee will automatically display with blank amounts in the basis and rate fields. Follow the same procedures as described for entering employee taxes in Step 6 to calculate contributions.
The last screen to appear will be for accrual entry. This screen will also contain blank amounts in the fields displayed. When entering a manual check for earning types that require accrual entry, enter the appropriate pay code in the Pay Code field. The basis entered must be either the number of units or the dollar amount on which the accrual is to be calculated. The rate that is automatically displayed is the accrual percentage rate defined in the Pay Code Maintenance task.

The percentage rate as displayed or entered is converted to decimal format (divided by 100--example: 2%=.02%). The basis as displayed or entered is multiplied by the rate, and the resulting dollars or units are displayed in the Amount column. The accrual entry may then be accepted by pressing Return, modified by pressing F2, or deleted by entering D.

All normal payroll audit reports and registers may be printed to verify that the information for manual checks is entered accurately. Manual check entries are identified on payroll reports by the letter M preceding the check number printed in the far right-hand column. Once the manual check information is verified as correct, the Payroll Check Printing task must be run to transfer the information to the Payroll Check Register.

NOTE: The Check Printing task must always be run, even if there are no printable checks (i.e., the batch contained voids, reversals, and manual checks only). When Check Printing is not run, the check transactions will not be processed or posted to the general ledger.

During the Check Register update process, the manual check information is updated to the affected employee, status, and history files and is distributed to the appropriate General Ledger accounts.

Reversing a Check

Check reversal is the process used to cancel or reverse the information of a payroll check for which the Check Register Update has completed. A check may be reversed whether it was generated manually or by the computer. Refer to the next section, Voiding a Check, for information on voiding checks that have not been issued.

When reversing a previously processed computer or manual check, follow the normal procedures for manual checks; enter the heading, earning, deduction, tax, contribution, and accrual information, with the following exceptions:

Enter R (for a check reversal) in the Check Type field of the Payroll Entry task.
Enter the number of the check to be reversed in the Check No field. When the check number was in fact issued to this employee, the date of the check is displayed and the cursor advances to the date, which can be changed to current period, and then to the heading verification prompt line. When the check number is not found, or was not issued to this employee, you will be returned to the Check No field. (Only an existing check may be reversed.)

NOTE: To reverse a check that was never entered into the system (i.e., a check that was included in the summarized amounts entered during the conversion process), follow the same procedures as noted under “Entering a Manual Check” (enter the check as a type ‘M’ for manual check), and enter all negative units and amounts.

Proceed with entry of employee earnings, deductions, taxes, employer contributions, and accrual information, as would be done for a normal check. All units and dollars must be entered exactly as they appear on the original check except that they must be preceded with a minus sign (-) to show that they are negative amounts. To speed this process, simply enter the units (e.g., hours worked) as a negative figure, and the dollar amount is automatically displayed as a negative number. Since contribution and accrual amounts are not printed on employee pay checks, refer to the Contribution Status and Accrual Status reports for the amounts from the original check as these must also be reversed. Be sure to reverse any tax line from the original check. Even if the withholding amount is zero, the gross and taxable amounts for that tax code must be adjusted.

NOTE: All dollar and unit amounts must be entered as negatives. When making check reversal entries, the module will not automatically generate deductions, taxes, contributions, or accruals as is done for computer-generated checks. This information must be manually entered as described above.

Once all payroll entries are completed, print all normal payroll audit reports and registers to verify that the reversal is affecting the proper codes. Check reversal entries are identified on payroll reports by the letter R preceding the check number printed in the far right-hand column. Once all check reversal information is correct and check printing process is done, the Check Register must be printed and updated.

NOTE: The Check Printing task must always be run, even when there are no printable checks (i.e., the batch contained voids, reversals, and manual checks only). When Check Printing is not run, the check transactions will not be processed or posted to the general ledger.

During the Check Register update process, the check reversal information is updated to the employee, status, and history files affected and is distributed to the appropriate General Ledger accounts.

Voiding a Check

Voiding a check is the process used in accounting for a damaged or otherwise unused manual or continuous-form computer check in order to maintain check number sequence integrity. The check number is entered into the module and assigned a void status for future reference. Remember that the Payroll module will only allow voiding a check that has never been entered into the module. Any check entered and on file in the module must be reversed by a check reversal (Refer to Reversing a Check).

To void an unused manual or computer check, use the following procedures as a guideline:

Enter employee number -or- Press F3 to select from a list of all valid employee numbers.
Enter V (for a void check) in the Check Type field of the Payroll Entry task.
Enter the number of the void check in the Check No field.
Enter the date of the check to be voided in the Date field. The cursor will advance to the heading verification prompt line. Enter Y when the void check information is correct.

Since earnings, deduction, tax, contribution, or accrual information were not entered in the module for this check, no entries in these categories are made for a void check.

The cursor will return to the Employee No field for a new entry.

Handling Computer-Generated Zero Checks

Some versions of the software do not allow zero checks, and will void any check that has a zero net pay amount. When zero checks are allowed by your software, each zero check will show all appropriate earnings and deductions on the registers. These earnings and deductions will be posted during the Payroll Check Register update. When zero checks are not allowed by your software, the zero checks will be voided but they will still show all appropriate earnings and deductions on the registers. These earnings and deductions will not, however, be posted during the Payroll Check Register update.

If your software does not allow computer-generated zero checks, they may be created manually.