About payroll calculations

Payroll calculations act as the rules for computing deductions, benefits, and employer costs. You can manually set up payroll calculations, or you can create the set of standard calculations supplied by Sage 100 Contractor.

Caution! Setting up payroll calculations can be complex. If you need assistance, consult your business partner.

After you have set up the calculations, you can add them to the employee records. Each employee record maintains its own list of calculation rates, calculation maximums, and quarterly totals for the payroll calculations. On the Calculations tab in the 5-2-1 Employees window, you can edit the calculation rates and maximums for one employee record without affecting the others.

When you compute payroll, Sage 100 Contractor reads the calculation rates and maximums from the employee record, and uses those rates with the payroll calculations. Depending on the type of calculation you want to set up, Sage 100 Contractor: (1) makes certain calculation selections for you that you cannot change; and (2) makes certain suggestions about what you may change:

• Federal and state taxes (Social Security, Medicare and FUTA ): Sage 100 Contractor contains the tax tables necessary for computing federal and state income taxes. For each state that your employees work in, set up a payroll calculation to compute the state income tax. While some states do not levy an income tax, the calculation is still necessary to maintain accurate wage information. To compute taxes correctly, some states require additional setup in the employee records. For details on setting up tax calculations for specific states and municipalities, see Appendix D—Tax Setup Information
• Local payroll tax districts: Many counties and municipalities levy income taxes. You can specify the correct local payroll-tax districts and then assign the locales to the appropriate job and employees.
• Calculated amounts that add to or deduct from pay for specific reasons: In some cases, it is necessary to create different payroll calculations for the same purpose. For example you may need different methods to calculate wage garnishments, retirement plans or union deductions.

Building Payroll Calculations

• Creating standard payroll calculations: To get started, we recommend that you take advantage of the standard calculations that Sage 100 Contractor can automatically create for you. If you choose to create the set of standard calculations, you will need to review and possibly adjust and/or manually add additional calculations later.
• Setting up payroll calculations: You can set up payroll calculations manually by defining each type of calculation that you will need. There are many parameters for each calculation that must be carefully reviewed before setup.

About pre-built standard payroll calculations

Sage 100 Contractor comes with a set of standard payroll calculations. We recommend that you use these standard payroll calculations as a starting point.

You can only use the pre-built standard calculations for a new company that does not already have the calculations set up. It is important to review and modify the standard calculations after you set them up to ensure they meet your regional requirements.

Sage 100 Contractor will create the following calculations:

• Social Security—Employee
• Medicare—Employee
• Federal Income Tax—Employee
• Social Security—Employer
• Medicare—Employer
• Federal Unemployment—Employer (FUTA)
• Per Diem
• Advances
• Workers’ Compensation
• Liability Insurance
• State Income Tax—Employee
• State Disability Insurance—Employee
• State Unemployment Insurance—Employee

Creating standard payroll calculations

Important!

• If you choose to create the standard calculations, you must do this before setting up any calculations manually.
• Even though some states do not have state income tax, the state income tax calculation needs to be set up in the 5-3-1 Payroll Calculations window so that the Workers’ Compensation report prints correctly. Additionally, the state income tax calculation needs to be set up so that W-2 forms calculate correctly.
• For details on setting up tax calculations for specific states and municipalities, see Appendix D-Tax Setup Information.

Setting up payroll calculations

The taxes that are subject to calculation vary by state or region. Verify the selections with your accountant, or if it is a benefit, the benefit plan administrator.

For details on setting up tax calculations for specific states and municipalities, see Appendix D-Tax Setup Information.

Caution! Verify that all your calculations are correct before computing your payroll by running a trial-compute. If you are unsure about the results, contact Customer Support or your business partner for assistance.

About calculations in employee records

When setting up a new employee record, Sage 100 Contractor inserts the package of default payroll calculations, including the calculation rates and maximums, on the Calculations tab. Each employee record has its own set of payroll calculation rates, maximums, and totals. You can edit the calculation rates and maximums in one employee record without affecting others. When you compute payroll, Sage 100 Contractor reads the calculation rates and maximums from the Calculations tab.

Before editing the individual calculation rates and maximums, familiarize yourself with how payroll calculations are set up. Most calculations that refer to tax tables do not allow editing. Sage 100 Contractor determines the tax table number, but does not display the data in the Calculations tab.

You can manage the marital status settings, allowances, and withholding amounts for federal and state tax calculations. For example, Steve works in Kansas and Nebraska. In Kansas, Steve claims married-joint status, but in Nebraska, he claims married-separate status. In the Marital column, you can enter the appropriate marital status for the Kansas and Nebraska income tax calculations.

You can also control whether a payroll calculation is active or inactive. When you type No in the Active cell for a calculation, Sage 100 Contractor does not include that payroll calculation in the compute for timecards. For example, John was given a $500 payroll advance, and the Payroll Advances calculation in John’s employee record was set up to recover $100 per paycheck. But John has said that the next few weeks are difficult and that he would like to suspend the repayment for a little while. In John’s employee record, type No in the Active cell of the Payroll Advance calculation. When you are ready to resume recovering the advance, type Yes in the Active cell of the Payroll Advance calculation.

Contractors who work on prevailing-wage jobs are required to match the difference between prevailing wages and benefits, and actual wages and benefits paid to each employee. For each employee who works the prevailing-wage job, you can enter the credit in the Offset column. When you compute payroll, Sage 100 Contractor applies the credit. To manage payroll for prevailing-wage jobs, set up paygroups.

Tips:

• Some states use additional tax tables to collect county taxes with the state taxes. To calculate the correct taxes, enter the tax rate or table number in the Table# cell of the calculation.
• You can withhold an additional flat amount for federal taxes or state taxes. To withhold a flat amount for a calculation, enter the amount in the Add W/H cell of the calculation.

Adding payroll calculations to employee records

When setting up a new employee record on 5-2-1 Employees, Sage 100 Contractor inserts the package of default payroll calculations, calculation rates, and maximums on the Calculations tab. You can insert additional payroll calculations at any time.

Tip: Alternatively, you can right-click in an empty cell of the Calculation column and select from the menu of Pick Lists. Press the F5 key to open the Payroll Calculations Lookup, or F8 to open the Payroll Calculations Lookup window as a Picklist.

About tax tables for setting up federal and state tax calculations

Even though some states do not have state income tax:

• The state income tax calculation needs to be set up in the 5-3-1 Payroll Calculations window so that the reports based on state wages are accurate and print correctly.
• State income tax calculations for employees must be set up in the 5-2-1 Employees window so that the payroll calculations compute correctly.

Sage 100 Contractor contains the tax tables necessary for computing federal and state income taxes. For each state you work in, create a payroll calculation for state income tax. The calculation is necessary to maintain the correct gross wage totals for each employee, and to ensure accurate state quarterly reports, state tax reports, and W-2 forms.

If you work in a state that does not levy an income tax, you still need to create a payroll calculation. For those states, a tax is not calculated but Sage 100 Contractor stores the state wage for state reports. In addition, some calculations use the state wage to compute additional deductions such as state unemployment or disability. For those types of calculations, it is important to select the State Income Tax check box. Otherwise, the payroll calculation may not compute the deduction correctly.

For details on setting up tax calculations for specific states and municipalities, see Appendix D-Tax Setup Information.

About local payroll taxes

Many counties and municipalities levy income taxes. In the Local Payroll Taxes window, set up the table of local payroll tax districts and their rates. You can then assign the locales to the appropriate job and employee records. If an employee lives in a locale, add the locale to the employee’s record. If a job site is located in a locale, add the locale to the job record.

There are a variety of ways to set up the districts:

• Some districts base the taxes on whether the employee lives inside or outside the locality. The resident rate applies to employees that work and live in the same locality, while the non-resident rate applies to employees who work in the locality but live elsewhere. During the payroll compute, Sage 100 Contractor compares the locale in the job record to the locality in the employee record. If the districts match, Sage 100 Contractor computes taxes at the resident rate. If the district numbers differ, Sage 100 Contractor computes taxes at the non-resident rate.
• In some regions, employees are subject to several taxes, such as city and county income taxes. As Sage 100 Contractor only lets you assign one locality to a job record, employee record, or timecard line, you can combine districts in the Local Payroll Tax window to form a new district. You can then assign the combined district as needed.
• When a local payroll tax applies to employees regardless where they work, you can set up the district to work like state income tax.
• When employees work multiple states but there are no local payroll tax districts, use the districts to control how Sage 100 Contractor computes state income tax for each timecard line.

Each locality requires a corresponding payroll calculation. In most circumstances, each payroll calculation uses calculation method 17-Tables, and refers to the table of localities for the rates.

About calculation types

The calculation type determines how a payroll calculation affects a timecard. For example, when you assign a payroll calculation 1-Deduct from Employee, Sage 100 Contractor deducts the result of the calculation from the employee’s wages.

For most payroll calculations, the program determines the calculation type and the taxes that a calculation is subject to based on the tax type.

If you select tax type 0-None, however, you instead of the program can select the calculation type.

Calculation type 1-Deduct from Employee

Payroll Taxes: For each payroll tax, set up a payroll calculation. If your company performs work in different states , set up a payroll calculation for every state in which you work, regardless of whether the state levies an income tax. In addition, set up a payroll calculation for each local payroll tax district, such as city and county.

At the calendar year-end, verify the tax rates and maximums for each calculation. Sage 100 Contractor provides Federal and State tax updates each year.

Payroll Advance: Create a calculation for payroll advances. Sage 100 Contractor automatically recovers the advance for you.

Tool Purchases: Some companies allow employees to purchase personal tools from vendors using the company account. You can set up a payroll calculation to deduct the employee’s purchases from his or her paycheck.

When you post the vendor’s original invoice for the tool purchase, post it to the Small Tools account in the Overhead Expense range of accounts. To then deduct the tool purchases from an employee’s paycheck, set up the payroll calculation to post a credit to the Small Tools account. Because the amount deducted from an employee’s paycheck varies based on the cost of the tools purchased, select calculation method 18-Variable (manual calculation).

While you can deduct the cost of tools from the employee’s paycheck, it is a better practice for employees to reimburse tool purchases through personal checks, made payable to your company.

Health Insurance: Create a payroll calculation to deduct the employee’s portion of the cost for medical insurance. Usually this is a fixed amount per month.

If you need to deduct the health insurance each pay period, convert the monthly amount to a per-period amount. From the monthly amount, compute the annual amount and divide by the number of pay periods in a year. If your company pays its employees weekly, for example, divide the annual amount by 52. Then enter the per-period amount in each employee’s record on the Calculations tab.

When employees cannot earn paychecks regularly, due to weather or other circumstances, set up the Health Insurance calculation with a maximum type of 6-Dollars/Month. Then on the Calculations tab in the employee records, enter an accelerated rate and a monthly maximum for the payroll calculation.

Garnishments: (Child support, Previous Year Income Taxes, Court Judgments, etc.) Create a payroll calculation for each type of garnishment. If similar garnishments require different methods of calculation, create a separate calculation for each garnishment.

Suppose you need to garnish the wages of two employees for child support, and a third employee’s wages for back taxes. The first employee’s garnishment is for a set dollar amount each pay period and the second employee’s garnishment is for a percentage of the net pay. Set up two separate calculations for child support garnishments, though both can post to the same payable account. Then set up a third calculation for the garnishment of back taxes, which posts to a different payable account.

If you want to post each garnishment to a different ledger account, create the separate ledger accounts in the Current Liabilities range of accounts. Select the Employee Number as Subaccount check box to post the garnishment to a subsidiary ledger account using the employee’s record number as the subsidiary account number.

Some methods of computing garnishments might be too complex for Sage 100 Contractor to automatically calculate, such as a percentage of the net pay with a minimum or maximum amount. In this case, set up a payroll calculation with a variable calculation method.

Pension Plans: Some businesses set up pension plans such as a 401(k), to which employees contribute. In general, 401(k) deductions are not subject to Federal and state income taxes. Check with your state agencies to determine what is taxable.

Many pension plans allow employees to contribute a flat amount or a percent of the employee’s paycheck. You may need to create two payroll calculations and assign the appropriate calculation to each employee based on how he or she wants to contribute.

To create a pension plan deduction, set up the payroll calculation with tax type 19-Elective Deferral and calculation type 1-Deduct from Employee. Because each employee can choose the flat amount or percent of his or her paycheck to contribute, enter the employee’s amount or rate in the Calculations tab of each employee record.

To post the credit, set up a separate ledger account in the Current Liabilities range of accounts. Select the Employee Number as Subaccount check box to post each employee’s contribution to a subsidiary ledger account using the employee’s record number as the subsidiary account number. The subsidiary accounts help you manage the individual employee contributions, and know what amount to pay on behalf of each employee.

Calculation type 2-Add to Gross

Cash benefits for prevailing wage: Non-union contractors working Davis-Bacon or prevailing-wage jobs must pay employees a cash equivalent to the union wage and benefits. After setting up the paygroups, set up a payroll calculation for each benefit, such as vacation, pension, and health and welfare.

Because the benefit is being paid as cash, set up the calculation using calculation type 2-Add to Gross, and post the credit to the ledger account number of the payroll checking account. Sage 100 Contractor adds the result of the calculation to the employee’s gross wage.

Tip: You can include cash benefits in the Certified Payroll report. In the Benefit list, click the type of benefit the calculation represents.

Calculation type 3-Employer Cost

Note: Calculations type 3-Employer Cost can be used can be used to accrue virtually any type of employer cost.

Payroll Taxes: For each payroll tax, set up a payroll calculation. If your company performs work in different states , set up a payroll calculation for every state in which you work, regardless whether the state levies an income tax. In addition, set up a payroll calculation for each local payroll tax district (city, county, etc.).

At the calendar year-end, verify the tax rates and maximums for each calculation. Federal and State tax updates are available each year.

Workers’ Compensation Insurance: When you set up a payroll calculation for Workers’ Compensation, Sage 100 Contractor uses the rates set up in the Workers’ Compensation window. Select 17-Tables as the calculation method.

Liability Insurance: You can set up the liability insurance calculation to use the rates from the Workers’ Compensation window. Select 17-Tables as the calculation method, and credit the account to which you post the insurance payments.

Generally, liability insurance covers field employees and sometimes the owner, but not office employees. For each exempt employee, change the payroll calculation’s rate to 0 on the Calculations tab of the employee record.

Some companies compute the liability insurance as a percent of gross pay. In the Tax Type list, click 0-None. In the Calculation Method list, click 1-Percent Gross Pay. The rate is usually the same as the payroll rate on the insurance policy.

Health Insurance: Set up a payroll calculation to deduct the employer’s portion of the cost for medical insurance. The amount is usually a fixed rate per month.

To deduct the health insurance each pay period, convert the monthly amount to a per-period amount. First, convert the monthly amount to an annual amount, then divide by the number of pay periods in a year. If your company pays its employees weekly, for example, divide the annual amount by 52.

Pension Plans: Some businesses set up pension plans, such as a 401(k), to which employers contribute. In the Tax Type list, click 0-None. In the Benefit list, click 2-Pension to include the matching amount on Certified Payroll reports.

To create a pension deduction, set up the payroll calculation as follows: tax type 0-None and calculation type 3-Employer Cost. Because each employee can choose to contribute either a flat amount or percent of his or her paycheck, you might have to create two calculations.

To post the credit, you can post to the same account used to post the employees’ deduction for the pension plan, or you can set up a separate ledger account in the Current Liabilities range of accounts. Whether you post the employer portion of the pension plans to subsidiary accounts depends on your particular needs.

Union shops or open shops that perform Davis-Bacon or prevailing-wage work should not use subsidiary accounts to track the individual matching amounts. To make the payment, each subsidiary account would have to be referenced on the check. Instead, you can use the certified payroll reports to track the amounts paid. If you are using paygroups, you need to enter the pension rates in the Paygroup Benefits window.

Select the Employee Number as Subaccount check box to post each employee’s contribution to a subsidiary ledger account using the employee’s record number as the subsidiary account number. The subsidiary accounts help you manage the individual employee contributions, and know what amount to pay on behalf of each employee.

Tool Use: You can recover the cost of small tools by setting up a calculation for a flat rate per hour that applies to all working field employees. To determine the hourly rate, look at the amount your company spent purchasing small tools for a time, such as the previous year. Then divide that amount by the number of hours worked by field employees during the same time. For employees that do not work in the field, change the rate to 0 in the Calculations tab in the employee records.

Calculation type 4-Add/Deduct

Vehicle use: Some companies provide a vehicle to an employee as a benefit.

Set up the payroll calculation with calculation type 4-Add/Deduct (taxable). The calculation adds the dollar value to the gross wages, computes the taxes, and then deducts the dollar value from the gross wages. The calculation results in an increase to the taxable wage.

Union Vacation: Contractors are responsible for computing the taxes for vacation pay and filing the necessary reports. When dealing with two or more unions, you might need to create a separate payroll calculation to compute the union vacation for each union local.

Set up the payroll calculation with calculation type 4-Add/Deduct (taxable). The calculation adds the dollar value to the gross wages, computes the taxes, and then deducts the dollar value from the gross wages. The calculation results in an increase to the taxable wage.

To include the calculation in the default set of paygroup benefits, select the Use in Paygroup Benefits check box.

Calculated type 5-Accrued Hours

You can use calculation type 5-Accrued Hours to create a calculation that builds up hours. For example, you could use this calculation to keep track of hours used to determine an employee’s vacation time. A payroll calculation that uses calculation type 5-Accrued Hours does not post to the general ledger or create job costs.