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NCT109: Set Up Payroll Management CERTIFIED COURSE CURRICULUM SAGE UNIVERSITY

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Page 1: NCT109: Set Up Payroll Managementftp.sagesoftwareuniversity.com/lms/cre/SMB20/NCT109-SetupPR_Management.pdfSet Up Payroll Management 8/2011 3 Set Up Payroll Management This course

NCT109: Set Up Payroll Management

CERTIFIED COURSE CURRICULUM

SAGE UNIVERSITY

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NOTICE

This document and the Sage Master Builder software may be used only in accordance with the accompanying Sage Master Builder End User License Agreement. You may not use, copy, modify, or transfer the Sage Master Builder software or this documentation except as expressly provided in the license agreement.

Visit our Web site at www.SageU.com/CRE, call 1-877-724-3286, or e-mail us at [email protected] to learn about training classes that are added throughout the year.

Information in this document is intended solely as general information with respect to common business issues and is not to be construed as professional advice. Consult a tax or accounting professional for all tax and account related questions. THE INFORMATION HEREIN IS PROVIDED“AS IS” AND ALL WARRANTIES ARE EXPRESSLY DISCLAIMED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY: OF MERCHANTABILITY; OF FITNESS FOR ANY PARTICULAR PURPOSE; OF NON-INFRINGEMENT OF ANY PROPRIETARY RIGHT OF ANY THIRD PARTY IN ANY COUNTRY; OTHERWISE ARISING OUT OF ANY PRODUCT, PROPOSAL, SPECIFICATION OR SAMPLE; AND ANY WARRANTY THAT THE DOCUMENT IS ERROR FREE. No license, express, implied, by estoppel or otherwise, to any intellectual property right is granted by this document. Sage Software may make changes to the information in this document at any time, without notice. Recipient is solely responsible for assessing the suitability of the information and assumes all risk of use.

© 2011 Sage Software, Inc. All rights reserved. Sage, the Sage logos, and the Sage product and service names mentioned herein are registered trademarks or trademarks of Sage Software, Inc., or its affiliated entities. All other trademarks are the property of their respective owners.

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Set Up Payroll Management

Set Up Payroll Management

This course is designed to help you set up and use the basic payroll module. It is the first of three lessons that explain new payroll set up. This lesson includes activities and step-by-step instructions to give you practice in setting up payroll.

Setup Payroll Management Table of Contents

Using Sage Master Builder Payroll .............................................................................. 5

Set Up Employee Positions ......................................................................................... 6

Unions, Paygroups, and Localities ............................................................................ 10

Workers’ Compensation ............................................................................................ 10

Payroll Calculations ................................................................................................... 14

Setting up Pre-Built Payroll Calculations ................................................................... 17

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Set Up Payroll Management Sage Master Builder

What You Will Learn

At the completion of this course you will be able to:

Understand the basic steps to set up and use payroll.

Set up employee positions.

Set up workers’ compensation codes.

Set up payroll calculations.

Before You Begin

This course assumes that you have:

An understanding of basic financial accounting.

Sage Master Builder installed on your computer.

Sample Company installed on your computer.

Completed course NCT102: Program Basics.

4 © 2011 Sage Software, Inc.

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Using Sage Master Builder Payroll

You can enter timecards, calculate payroll, and even print payroll checks without posting the payroll records.

When you post payroll, Sage Master Builder:

Debits gross payroll as follows:

Job costs are posted to the Direct Expense account. If you have selected the Post Payroll to WIP check box in the job record, payroll posts to a WIP Assets account. If the WIP Assets account uses subsidiary accounts, payroll posts to a subsidiary account that uses the Job# as Subaccount# check box.

Equipment repair or maintenance costs post to the Equip/Shop Expense account.

All remaining costs post to the Overhead Expense or Administrative Expense account, as determined by the employee position.

Debits payroll expenses to the ledger accounts as indicated in the payroll calculation.

Credits net payroll to the checking account entered in the Payroll Posting window.

Credits the ledger accounts as indicated in the payroll calculation.

The flexibility of Sage Master Builder’s payroll module allows you to specify which records you want to post and the posting period to which they should be posted.

Steps to Start Using Payroll

The main tasks that are necessary to start using payroll are as follows:

1. Set up employee positions.

2. Set up union and paygroup information (if applicable).

3. Set up localities (if applicable).

4. Set up payroll calculations.

5. Set up employees.

6. Enter historical timecards and verify they are correct (if applicable).

7. Process payroll.

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Set Up Employee Positions

The first step in setting up payroll for any company is to establish a list of positions, usually defined by the work performed. This lets you designate what position an employee holds within a company.

Within Sage Master Builder, positions have two functions:

They control how payroll posts to general ledger accounts and departments (if applicable).

They supply information for a variety of reporting purposes.

Employee positions determine how you post payroll costs to the general ledger. Create employee positions that represent the type of work performed by employees such as office workers, job supervisors, and laborers. The list does not need to be complex. However, you must create at least one employee position.

When considering which positions to create, start simple. Additional positions can easily be added later. For example, you may want to start with generic positions such as:

Job Labor

Shop Labor

Office Labor

Administrative Salaries

When assigning numbers to the positions, be sure to skip numbers to allow for additional positions at a later date, for example, 5, 10, 15.

NOTE: You can add a department to each position. When you post a payroll record, the application first looks to the job record for a department number. If the program does not find a department number in the job record, it searches for it in the cost code. If the cost code does not contain a department number, the program searches for it in the employee position.

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Menu Path—(5-3-3) Employee Positions

TIP: If you have set up departments to represent different offices, create duplicate employee positions for each office. Then assign the positions for each office to the corresponding departments.

After creating the employee positions, assign them to employee records. When you post a payroll record, Sage Master Builder looks at the position in an employee’s record, and the ledger accounts in the employee positions table:

When a timecard line contains a job number, payroll posts to the ledger account in the Job Wages cell.

When a timecard line contains an equipment number (for maintenance or repair), payroll posts to the ledger account in the Equipment Wages cell.

When a payroll record does not contain timecard lines, or a timecard line does not contain a job number or equipment number, Sage Master Builder posts to the ledger account in the Other Wages cell.

Window Item Required Description

Position# X User-defined. Leave gaps in the numbering for additional positions at a later time. Use numbers up to 999999.

Description X Relative to the type of work performed.

Job Wages X Defines which general ledger account wages post to when a job number is entered on the timecard

Equip/Shop Wages

X Defines which general ledger account wages post to when a piece of equipment is entered on the timecard

Other Wages X Defines which general ledger account wages post to when no job or piece of equipment is entered on the timecard

Department Allocates a position’s wages to different departments set up in your company.

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You can also add a department to each position. When you post a payroll record, the software program first looks to the job record for a department number. If Sage Master Builder does not find a department number in the job record, it next looks to the cost code. If the cost code does not contain a department number, the software program then looks to the employee position.

Menu Path—(5-3-3) Employee Positions

Activity 1—Create New Employee Positions

1. Open 5-3-3 Employee Positions and enter the following information.

2. A message appears asking whether you want to create a new record. Click Yes.

Scenario Your company has added a new Sales Department for both the California and Nevada offices. You must set up employee positions for both offices as well as create a new general ledger account. Your company has an internal numbering system that uses 20 for the California office and 30 for the Nevada office. The new general ledger account is 7500, and will have departments.

Window Item Value

Position# 20

Description CA Sales

Job Wages 5400

Equip/Shop Wages 5600

Other Wages 7500

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To Create A New General Ledger Account

Menu Path—(1-7) General Ledger Accounts

1. Type Sales Payroll in the Short Name and Long Name boxes.

2. Select 2-Departments in the Subsidiary box.

3. Select File > Save and the window closes.

To Complete the Setup of Employee Positions

Menu Path—(5-3-3) Employee Positions

1. In the Department column, press F5 to open the Departments window.

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2. Double-click 1-California Office and the window closes.

3. Type the following information in the next row:

4. Select File > Save.

Unions, Paygroups, and Localities

Now that you have set up employee positions, you can create unions, paygroups, and localities if they apply to your company.

WARNING: Unions, paygroups, and localities must be set up correctly from the beginning. For more information about how to set up these entities, see online classes PYR02 and PYR03.

Workers’ Compensation

Workers’ compensation insurance is regulated by each state. It covers employees in the event of an injury sustained on the job. The rates are dictated by the work performed and in some states vary based on hourly pay rates. Workers’ compensation can be an employer cost, or it can be paid by the employee, depending on the state regulations.

Using Workers’ Compensation in Sage Master Builder

Workers’ compensation codes are important for detailed job costing, even if you do not use Sage Master Builder to manage your payroll. Set up your workers’ compensation table during the payroll set up.

In the Workers’ Compensation window, you can set up the table for workers’ compensation codes, rates, and experience modifiers. Sage Master Builder uses the

Window Item Value

Position# 30

Description NV Sales

Job Wages 5400

Equip/Shop Wages 5600

Other Wages 7500

Department 2-Nevada Office

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table in conjunction with the workers’ compensation payroll calculation to calculate the premium for each code category. Your setup of the workers’ compensation codes depends on the requirements for each state.

Whenever possible, use the compensation codes from the insurer's policy or report. Companies with multiple policies may find that the policies share compensation codes. If this occurs, you may need to create a separate numbering system for Sage Master Builder to use. Then include each state’s compensation code at the end of the description.

TIP: Keep the code and description similar to what is on your workers’ compensation insurer’s policy for consistency.

Menu Path—(5-3-2) Workers’ Compensation

Window Item Description

Code#

Description

Use the compensation code numbers and description from the insurer’s policy or report whenever possible. Use greater than and lesser than symbols to indicate hourly rate splits.

State A required field if you report to more than one state. Companies that operate in a single state do not need to assign the state abbreviation to either the workers’ compensation code or the workers’ compensation payroll calculation.

Employer% Use this column if the workers’ compensation insurance premiums are calculated on a percentage of pay on per $100. The application removes the overtime differential when calculating the total.

Employee Hrly Employer Hrly

Use these columns if the workers’ compensation rates are calculated at a rate per hour. If your state requires both employee and employer to contribute, set up two calculations.

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About Split Rates for Workers’ Compensation

In a split rate system for workers’ compensation, a category of work uses two different rates. Some states, such as California, use a two-tiered system of rates based on employee pay. The wages an employee earns determine the rate at which the insurance company calculates Workers’ Compensation.

Each rate uses a different code; enter each rate on a separate line in the 5-3-2 Workers’ Compensation window. You should also include the wage cutoff point in the description.

After you set up the table, you can assign the workers’ compensation codes to the cost codes and employee records. When you enter a timecard, Sage Master Builder first looks to the cost code. If Sage Master Builder does not find a compensation code, the software program then looks to the employee record.

Liability Enter the rate of your liability insurance if it is tied to wages. The program calculates the burden at the time payroll is processed only for calculations with the tax type 12-Liability Insurance and calculation method 17-Tables. (See Sample Company payroll calculation #19 as an example.)

Exper Mod Enter the experience modification. If you need to add an additional experience modification, enter it in the Add Exper Mod column.

Window Item Description

Code# Description State Employer

5140 > $20 Electrical CA 3.9300

5190 < $20 Electrical CA 8.8200

5201 < $17 Flatwork Concrete CA 9.8600

5205 > $17 Flatwork Concrete CA 8.4200

5140 > $20 Electrical CA 3.9300

12 © 2011 Sage Software, Inc.

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Menu Path—(5-3-2) Workers’ Compensation

Activity 2—Determine Workers’ Compensation Rate, Cost, and Experience Modification

For this exercise, assume that the workers’ compensation for California is paid by the employer and based on gross wages. Use the window shown on the previous page to complete the exercise.

1. Open 5-3-2 Workers’ Compensation.

2. What is the workers’ compensation rate for an employee who works as a carpenter and makes $25 per hour? ___________________

3. If the gross wages were $1000, what would the workers’ compensation cost be? _______________________

If you have to pay an extra 15% for experience modification, how would you enter it in the Exper Mod column? ________________________

TIP: Write the expiration dates of your Workers’ Compensation policies on your company calendar. Also, create a reminder on the calendar one month prior to the policy expiration so you can get quotes for the next policy term. When you renew the policies, adjust the rates and experience modifications in the Workers’ Compensation window.

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Payroll Calculations

NOTE: Setting up payroll calculations can be complex. If you need assistance, consult your Sage Software Certified Consultant.

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

Here are a couple of things to consider when deciding on setting up your payroll calculations:

To get started, we recommend that you take advantage of the standard calculations that Sage Master Builder can automatically create for you. If you choose to create the set of standard calculations, plan to review them later to decide whether you need to add or adjust calculations.

You can set up payroll calculations manually by defining each type of calculation that you will need. Review the parameters for each calculation carefully.

Payroll calculations govern how Sage Master Builder calculates net payroll as well as total labor cost. Payroll calculations includes deductions, benefits, and employer costs.

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Menu Path—(5-3-1) Payroll Calculations

Window Item Description

Calculation number

This field is required. Enter a number you want to assign the new calculation.

Description This field is required. Enter a brief statement about the calculation

Tax Type Helps define the purpose of a calculation. It also determines whether a calculation is to be included in certain payroll or wage reports. Selecting a tax type causes entries to appear automatically in other fields in the window. Select 0-None if the specific type of calculation is not found.

Calc Type Determines how a payroll calculation affects a timecard. For example, when you assign a payroll calculation 1-Deduct from Employee, the application deducts the result of the calculation from the employee’s wages.

Calc Method Select the manner in which the calculation is calculated. For example, if a calculation uses a per hour calculation method, Sage Master Builder multiples the number of hours worked by the rate assigned to the calculation.

Based On Use only in special circumstances when one calculation is calculated on the result of a previous calculation.

Default Rate Use only if the rate does not vary from employee to employee. Some calculations apply to all employees and have fixed rates, such as Social Security and Medicare taxes.

Default Max Use only if the maximum does not vary from employee to employee. The same criteria used to determine the default rate should be used to determine the default maximum.

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Max Type Specify how the application determines that the employee’s wages have reached the maximum level.

Job Acct

Shop Acct

Admin Acct

Credit Acct

Credit Subaccount

These fields are posting accounts that the application uses to post each timecard line. If a job number is specified on the timecard, Sage Master Builder debits the direct labor account; if an equipment number (for repair or maintenance) is specified on the timecard, the application debits the shop labor account; if no job or equipment is listed on the timecard, Sage Master Builder debits the overhead or administrative account. The Credit Acct is required and generally designates where the liability will be posted.

Empl# as Subaccount

Select whether you want the calculation to post to the general ledger account and then to a subaccount based on the employee number. Use to track garnishments, 401k plans, and medical deductions per employee.

Tax State Type the two letter abbreviation for the state for which this calculation is made. This affects how taxes are calculated and how reporting reflects tax liabilities.

Tax Locale Use for a local payroll-tax district. Many counties and municipalities levy income taxes. This can also affect the 3-5 Jobs (Accounts Receivable) window when a separate tax is collected for work performed in a certain city or county.

Subject To Select the appropriate check boxes to indicate which taxes a calculation is subject to. Typically, calculations that are set up as employee paid deductions are subject to taxes, while employer costs are not subject to any taxes.

Use in Paygroup Benefits

Select to allow you to include the calculation for a paygroups benefit package.

Display on Check Select to include the calculation on the paycheck stub.

Disposable Earnings

Select to indicate that the deduction is discretionary and calculates as part of the net amount. For example, a 401k deduction for an employee is a discretionary deduction and you should select the Disposable Earnings check box. Even though the amount of the employee’s paycheck will not include the amount of the 401k deduction, the starting net amount will include the 401k deduction.

Default to New Employees

Select to include the payroll calculation in the group of calculations defaulting to the Calculations tab when creating a new employee record.

Union Select the specific union to assign to this calculation. The program will include the payroll calculation totals assigned to the union when printing a union report.

Benefit Select the type of benefit for this calculation.

Window Item Description

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NOTE: A payroll calculation using calculation type 1-Deduct from Employee does not allow entry of the posting accounts. Instead, Sage Master Builder refers to the posting accounts assigned to the employee position. When you calculate timecards, Sage Master Builder looks at the employee position to determine where to post labor expenses.

Setting up Pre-Built Payroll Calculations

WARNING: Once a calculation is set up, the option to select the pre-built calculations is no longer available.

Sage Master Builder comes with a set of standard payroll calculations. We recommend that you create these standard payroll calculations first before you manually set up additional payroll calculations.

You can only create the pre-built standard calculations for a new company that does not already have the calculations set up. Review the standard calculations after you set them up and modify them as necessary to ensure they meet your regional requirements.

Menu Path—(5-3-1) Payroll Calculations

W-2 Box Enter a specific W-2 box number in which you want the amount of the calculation to be printed.

W-2 Code Enter the special Box 12 W-2 code required for this calculation.

Window Item Description

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Set Up the Pre-Built Payroll Calculations

1. Open 5-3-1 Payroll Calculations.

2. Select Options > Create Standard Calculations.

NOTE: You can delete unused calculations, except for the Advances Withholding calculation, which is required.

3. Read the first confirmation message that appears, and then click OK. And another message appears.

4. Read the second confirmation message and then click OK.

5. In the data control bar, press F5 and the selection list opens with the payroll calculations.

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Menu Path—(5-3-1) Payroll Calculations

Activity 3—Create a Simple Payroll Calculation

TIP: Type (EE) in the description to designate the employee’s portion and type (ER) to designate the employer’s portion.

1. Open 5-3-1 Payroll Calculations.

2. In the data control bar, enter 25.

3. In the Description box, enter Charity Donation (EE) .

4. Accept the default, 0-None, in the Tax Type box.

5. In the Calc type box, select 1-Deduct from Employee.

6. In the Calc Method box, select 11-Per Pay Period.

Scenario Your company has created a benefit that allows an employee to make an after-taxes donation to a local charity via a payroll deduction. You must set up a new payroll calculation for the employee’s portion. You will not enter a default rate or maximum as this will be entered on the individual employee’s record. A new general ledger account must be created in the liability range of accounts for use in this calculation. Because your company has an internal numbering system, you will use 25 for the employee calculation. You will use 2313 for the new general ledger account.

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7. Accept the remaining defaults for Based On, Default Rate, Default Max, and Max Type boxes.

Menu Path—(1-7) General Ledger Accounts

Create a New General Ledger Account

1. In the Credit Acct box, press F6 and the 1-7 General Ledger Accounts window opens.

2. In the data control bar, type 2313.

3. In the Short Name and Long Name boxes, type Charity Donations.

4. In the Subsidiary box, select 1-Subaccounts.

5. Select File > Save and the window closes.

Complete the Setup of the New Payroll Calculation

1. Select the Emp# as Subaccount check box.

2. Accept the remaining defaults in the window.

3. Select File > Save and the window closes.

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Menu Path—(5-3-1) Payroll Calculations

Activity 4—Create Employer Payroll Calculation

1. Open 5-3-1 Payroll Calculations.

2. Type 26 in the data control bar and enter the following information.

Scenario Your company will be matching 50% of each participating employee’s charity donation up to $1500 per year. You must set up an employer’s calculation. Because your company uses an internal numbering system, you will use 26 for the employer’s donation matching calculation.

Window Item Value or Description

Description Charity Donation (ER)

Tax Type 0-None

Calc Type 3-Employer Cost

Calc Method 7-%Other Calculation

Based On 25-Charity Donation (EE)

Default Rate 50

Default Max 1500

Max Type 8-Dollars/Year

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Create an Advanced Payroll Calculation

Menu Path—(5-3-1) Payroll Calculations

1. Select the following information:

2. Select File > Save.

Window Item Value

Job Acct 5403-D/L Benefits

Shop Acct 5603-Shop Benefits

Ovh Acct 6403-O/H Benefits

Admin Acct 7403-Admin Benefits

Credit Acct 2313-Charity Donations

Emp# as Subaccount Select

Display on Check Select

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Menu Path—(5-3-1) Payroll Calculations > Options

TIP: When adding a new calculation specific to an employee, make sure to go into the employee’s file (5-2-1 Employees) and update their calculations.

When you create a new payroll calculation or change a rate or maximum on an existing calculation, it is not reflected on the 5-2-1 Employee window until the employee update process is finished.

Update the employee’s record by opening the 5-3-1 Payroll Calculations window and determine the best method using the following table.

CommandUpdate Default Rate and Maximum Update Maximum Only

ALL Employees Updates all employee records, regardless of the employee’s status.

Updates all employee records, regardless of the employee’s status with only the maximum.

‘Current’ Employees Updates employee records assigned status 1-Current.

Updates employee records assigned status 1-Current with only the maximum.

Employees with this Calculation

Updates employee records that contain the payroll calculations on the Calculations tab in the employee records.

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WARNING: Do not select the ALL Employees under the Update Default Rate and Maximum option unless you are certain you want the action to affect all employees. For example, if you change a union vacation calculation and select ALL Employees, your office staff all receive union vacation.

Certain payroll calculation rates will most likely change every year and affect all employees. An example is the FICA amount. You can change the rate on the calculation and update all employees within the 5-3-1 Payroll Calculations window using the Update Maximum Only option.

NOTE: The Update Maximum Only option can also be used with calculations such as 401K or pension.

Menu Path—(5-3-1) Payroll Calculations > Options

Activity 5—Change Default Max and Update Employee Records

1. Open 5-3-1 Payroll Calculations.

2. In the data control bar, click the down arrow and the lookup window opens.

3. Select calculation 1- Social Security and the window closes.

Scenario It’s the beginning of the new calendar year and you have a new rate for Social Security, $106,800. You must change the rate on the payroll calculation, both for the employee and employer, and update all employee records.

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4. Type 106800 in the Default Max box.

5. Select File > Save and the window closes.

Update all employees’ records

Menu Path—(5-3-1) Payroll Calculations

1. Select File > Recall.

2. Select Options > Update Employees > Update Maximum Only > ALL Employees with this Calculation.

3. Click Yes to update all employee records.

4. Click OK to acknowledge the message confirming the number of employee records that were updated.

5. In the data control bar, click the down arrow and the lookup window opens.

6. Select calculation 8-Employer Social Security and the window closes.

7. Repeat steps to change the Default Max and update the employees’ records.

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Set Up Payroll Management Sage Master Builder

Verify the Employee Records

Menu Path—(5-2-1) Employees

1. Open 5-2-1 Employees.

2. In the data control bar, type 1 and the record for Robert Smith appears.

3. Click the Calculations tab.

4. Notice that rows 1 and 8 show the amount in the Maximum column as 106,800, which is the amount by which you updated the payroll calculations.

General Notes About Setting Up Payroll Calculations in Sage Master Builder

When you add a new calculation for a specific employee, be sure to update that employee’s calculations in the 5-2-1 Employees window.

Wage attachments need a different calculation based on the different calculation methods, such as a set dollar amount or a percent of net pay. Set up at least two calculations for wage attachments and garnishments.

If a new rate or maximum on a calculation affects all employees, be sure to change the rate or maximum and then update all employees.

NOTE: Remember the Sample Company has a good sampling of payroll calculations.

26 © 2011 Sage Software, Inc.

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Set Up Payroll Management

Summary

You have practiced skills for setting up basic payroll in Sage Master Builder. You should be able to:

Perform the basic steps to set up and use payroll.

Set up employee positions.

Set up workers’ compensation codes.

Set up payroll calculations.

Evaluate the Course

You will receive an e-mail survey for you to evaluate the class. Please complete the survey to provide us feedback about how to improve this course.

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28 © 2011 Sage Software, Inc.