Set Up Negative Earnings: United States

You can use the PR Earnings Code form to set up negative earnings.

Note: While you can set up salary reductions as negative earnings, it is recommended that you set up salary reductions as pre-tax deductions. For more information, see Setting Up Pre-Tax Deductions.

Negative earnings can represent earnings reductions (e.g., 401(k) and cafeteria plans). For example, many salary reductions lower federal taxable wages and federal income tax, as well as state taxable wages and state income tax. Other salary reductions lower federal and state in this same manner, but also reduce FICA Social Security and FICA Medicare wages and taxes for both the employee deductions and employer liabilities (Section 125 plan).

Because these plans are typically either a percentage of earnings per pay period or a flat amount, it is often convenient to set them up as Automatic Earnings in PR Automatic Earnings instead of making an entry in PR Timecard Entry each time. You can also specify the limit of the salary reduction using PR Automatic Earnings. Always remember to use negativerates or amounts and limits. To determine the taxability of salary reduction plans, consult your plan administrator, appropriate tax laws, or insurance and craft requirements.

To process negative earnings/salary reductions for a current payroll, run the PR Post Auto Earnings form.

This topic discusses how to set up negative earnings codes. See Setting Up Earnings Codes: United States for more information on setting up true earnings codes.

Note: These instructions are provided for informational and sample setup purposes only. Consult your plan administrator or appropriate tax laws to determine whether these types of salary reductions plans reduce specific deductions and liabilities.
  1. In the Earnings Code field, enter a number that uniquely identifies the earnings code.
    Note: The numbers you assign to earnings codes determine the sequence in which the system processes earnings. See Determining Earnings Code Sequences for more information.
    Important: The code number should be a higher number than any earnings that the negative earnings would be based on.
  2. Enter a description of the earnings code in the Description field.
  3. From the Method drop-down, select the method the system users to calculate earnings. See Determining Earnings Code Calculation Methods for more information.
  4. In the Factor field, enter the number that the system multiplies the rate by for calculating this earnings code. Typically, you will enter a factor of 1.0.
  5. Check the Include in Liability Distributions box to have the system include the earnings code in liability distributions to the job. If you do not check this box, the system does not distribute the earnings to the job, but the payroll department associated with the employee (PR Employees) receives the benefit. Do this if you want to reduce job expenses.
  6. In the Earnings Type field, enter the earnings type that determines the GL account that the system expenses when updating earnings to GL. Press F4 for a list of available earnings types. See HQ Earn Types for more information.
  7. In the JC Cost Type field, enter the cost type the system uses for interfacing earnings to JC. Press F4 for a list of available cost types.
  8. Use the Limit Period field to select a limit for the earnings code. This limit determines how often the system resets the limit for this earnings code.

  9. In the Limit Amount field, enter the limit amount for automatic earnings. Make sure to enter a negative number to calculate the salary reduction appropriately.
  10. Check the Include Detail on Certified Reports box if you want to include these earnings on their own detail line when you run the PR Certified Payroll Transcript or PR Certified Payroll Transcript With Class Info reports.
    Note: If you do not check this box, the system summarizes this earnings code in the “Other Taxable” or “Other Non-Taxable” fields on these reports.
  11. In the Fringe Benefit Type field, select the fringe benefit classification to use with the LCPtracker or eMars reports. Based on the type selected, the system places the appropriate rates/amounts in the corresponding report fields.
  12. Set up automatic updates to AP, as necessary. See Setting Up Automatic AP Updates for more information.
  13. Set up deductions and liabilities for this earnings code. See Associating Deductions and Liabilities with Earnings Codes for more information.
  14. Save the record.
  15. In PR Automatic Earnings, set up the negative earnings code. Enter the rate/amount and limit as negative numbers. Because these earnings are generally not posted to a job or phase, or apply to insurance, leave those fields blank.