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Earning Codes

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Earning Codes - Earning Tab

Access this tab using Maintain>Payroll>Earning Codes.

Use this form to add a new Earning Code or edit an existing one. Distribution of Earnings is determined on the timesheet.

Use this tab to set up earnings. Later, use an earning code when entering employee’s timesheets for your payroll.

You must assign a General Ledger expense account on this tab, in order to create an accounting entry.

 

Code: Enter an Earning Code. You should make the first eight characters of the code unique so that the paycheck displays a useful identifier. We recommend limiting your entry to strictly alphabetic characters (A through Z) or numeric characters (0 through 9), and avoiding the use of symbols.

Status: Specify the status of the Earning Code. When creating a new code, accept the default status, A (Active), or select I (Inactive) or D (Discontinued), from the drop-down list. The status can be changed at any time. Below are valid status entries and their descriptions:

  • Active - An active status allows payroll to be processed using this code.
  • Inactive - Set a code to inactive when it is not used regularly for payroll, but it could be used at some point. A warning message appears when attempting to use an inactive code. The warning message is for notification only; the code can still be used in a payroll process.
  • Discontinued - Designate a code as discontinued when it is no longer being used. The system does not allow payroll to be processed using a code with a discontinued status.

Title: Enter the title of the Earning Code.

Expense Account: Enter the General Ledger expense account for this Earning Code. The account must be an existing General Ledger account that is not a subledger-type account. The account must have a status of Active or Inactive.

Track Labor Hours: Select this check box to track the employee labor hours entered on any timesheet. The system distributes the hours entered on the timesheet, using the same percentages applied to the earnings dollars when the distribution codes were created (Maintain>Payroll>Distribution Codes). This check box defaults to track the employee labor hours.

Contribute to Net Pay Only: Select this check box to process employee reimbursement and advances through regular payroll processing (by applying the net pay amount without the amount being subject to taxes and fringe benefits). To enable the Contribute to Net Pay Only check box, clear the Track Labor Hours check box. The Calculation Method defaults to "Amount on Timesheet" and the Taxes tab is disabled.

Note that if selected, this Earning Code is unavailable to use for a calculation using Maintain>Payroll>Benefit Codes, Deduction Codes, Leave Codes, and Worker's Compensation Codes.

W-2 Information Box Number, Box Code: Select W-2 Box Number 7, 8, 10, 11, 12, or 14 if this Earning Code falls into one of those W-2 categories.

  • Box 12 requires a corresponding box code, and cannot be used for anything other than the items specified by the box codes. You must enter one of the following Box Codes: A-H, J-N, P, R-T, V, W, Y, Z, AA, BB, CC, DD, EE, FF, GG, or HH.
  • Box 14 should be used for any other information you want to give your employee. You can enter up to five alphanumeric characters. The Box Code serves as a "label" for the optional amount displayed in box 14.

To have the earnings and taxes from this Earning Code appear in W-2 boxes 1-6, 16, 17, 18, and/or 19 (for Federal, State, and Other Taxes), select the check boxes on the Taxes tab and leave the W-2 Box Number box on this tab blank.

  • See IRS W-2 instructions for more information.
  • On the Earning tab, a General Ledger expense account is assigned in order to create an accounting entry. To distribute expenses across all other segments, enter a Distribution Code on the Timesheets>Enter Regular/Supplemental Timesheets>Summary tab.
  • Earnings are moneys that are paid to an employee (they increase net pay). A benefit, on the other hand, is something provided to the employee for which the employer pays a third party (they do not increase net pay). For example, life insurance for an employee that exceeds the federally allowed maximum, and use of a company car for personal reasons, are benefits. These benefits do not increase the employee's net pay, but must be included as taxable income to the employee (and thus they increase taxable earnings and applicable taxes). Use this distinction when determining whether to enter an item as an Earning or a Benefit Code.
  • Enter as many Earning Codes as needed and apply as many as are necessary to each employee's timesheet.
  • For Salaried employees, you can distribute wage hours based on earning codes. Using Timesheets, select multiple earning codes with the Calculation Method Employee Pay Rate (ER) and enter the employee’s Hours and Distribution Codes; the system will use the hours to break down earnings by dollar amount for each wage code. Use Reports>Payroll>Processing>Timesheets, to view the wages with hours and net check amount that was contributed by that wage code.
  • Note that there is no internal default Earning Code for wages. The code must be created on the Earnings tab, then assign it a Calculation Method of Employee Pay Rate on the Calculation tab.
  • To see how W-2 data is set up in the system, see the Tips section of the Calculate W-2s information (Reports>Payroll>Payroll Tax Worksheets >Calculate W-2 Information).
  • Ensure that your timesheet labor hours match your distribution labor hours.