Deduction Processing Overview
The Deduction Processing functional area of Advantage HRM comprises of the various deductions processed during employee payroll calculations.
A deduction is an amount that is deducted from an employee's pay during Gross-to-Net processing of Payroll Management. The Advantage HRM system calculates the deduction, adjusts the employee’s net pay accordingly, and then passes on the information about the vendor/service to Accounts Payable (to produce the actual payment checks) or electronically transfers the payment to the vendor.
In order to perform these tasks, the system requires you to identify the deduction type, deduction plan, and effective date for each deduction. A database of deduction types and deduction plans is established in the system prior to entering employees. The database identifies different types of deductions:
Automatic deductionsAutomatic deductions
Examples of automatic deductions include default income tax withholding deductions for federal, state, and local tax entities, FICA, and Medicare deductions.
Appointment-specific deductionsAppointment-specific deductions
An example of an appointment-specific deduction is union-dues. It is a deduction that is automatically incurred by any individual assigned to a certain type of appointment.
Employee-specific deductionsEmployee-specific deductions
An example of an employee-specific deduction is an Internal Revenue Service (IRS) tax levy. It is a type of deduction that is applied to an individual rather than a category of employees.
From the employee’s perspective, there are several kinds of deductions including:
Mandatory deductionsMandatory deductions
Mandatory deductions are those that are required by law or as a condition of employment such as income tax withholding.
Elective deductionsElective deductions
Elective deductions are those that have been taken upon the instructions and authorization of the employee such as health benefits, savings bonds, deferred compensation, and charitable deductions.
Involuntary deductionsInvoluntary deductions
Involuntary deductions are those taken as a result of an order from a court, the Internal Revenue Service (IRS), or as a result of a labor relations case. Examples include family court payments, bankruptcy court payments, garnishments, tax levies, fines, and awards.
The Deduction Processing business area includes the following activities:
Setting up Deduction PlansSetting up Deduction Plans
Advantage HRM system allows you to set up Deduction plans in the system before any employees can be enrolled to use them. A deduction plan defines a deduction type and associated processing information such as amounts and percentages, deduction frequency, whether the standard deduction amount or rate may be overridden on an employee basis, and whether a special deduction routine should be performed to calculate the deduction.
Setting up a deductions involves defining deduction plans, deduction types and effective dates for each deduction that is defined.
For information on setting up Deduction Plans, refer to Setting Up Deduction Plans.
Creating DeductionsCreating Deductions
Advantage HRM system allows you to create various types of deductions such as Income Tax Deduction, Electronic Fund Transfers, Savings Bond Deduction, Pension Deduction, Family Court, Arrears and Bankruptcy Deduction, Garnishments and Miscellaneous Deductions. These deductions can be created using various transactions available in the system.
For information on Creating and Modifying deductions, refer to topics in the Common Business Tasks topic of this guide.
Making a Deduction Eligible in a PolicyMaking a Deduction Eligible in a Policy
Advantage HRM system allows you make a deduction available in a policy by defining this on the Deduction Policy Type (DDPL) page that lists the deduction types and plans that are available under the policy.
Advantage HRM system allows you to auto-enroll an employee in deductions. Employee is enrolled on the Employee Benefit Plan (BENP. The BENP ties the Employer Benefit Plan (EFBP) to it, and both enrollments are handled with one Enrollment (ENRL) page. The setup steps here include the accounting setup for the fringe payout using the Pay and Leave Events (EVNT) page, Employer Fringe Benefit Plan (EFBP), and Employee Fringe Benefit Plan (BENP). After these setups are complete, the employee will be enrolled in a plan which handles all transactions when processed through payroll.
Terminating Employee’s Enrollment in a DeductionTerminating Employee’s Enrollment in a Deduction
Advantage HRM system allows you to terminate an employee's enrollment in a deduction after which the deduction ceases to exist and the employee ceases to get that benefit.
Expire a DeductionExpire a Deduction
Advantage HRM system automatically expires a deduction for a dependent of an employee when the effective date of benefits enrollment is reached.
Download, View, and Print Employee Tax FormsDownload, View, and Print Employee Tax Forms
Advantage HRM system allows you to view, download and print Employee Tax Form attachments. For information on accessing employee tax forms, refer to Downloading, Accessing, and Printing Employee Tax Forms.
