Lesson 45-- Payroll Setup

Goldenseal payroll software includes a full-featured payroll system that handles all types of deductions, withholdings, insurance and taxes.

Payroll integrates with the other parts of the Goldenseal accounting software-- the information that you enter for payroll is also used to calculate job costs and time and materials billing.

Since payroll can be very complex, this manual will cover it in two separate lessons. This lesson shows you how to set up payroll for your local conditions, and the next shows you how to run payroll on a weekly basis.

Payroll Overview

Before you begin to use payroll, you need to set up the following lists:

Benefits-- Create benefit items and benefit packages, and assign a benefit package to each employee.
Labor Billing Rates-- Create labor billing rates to calculate the cost of labor for time and materials billing and job costs.
Payroll Taxes-- Create or import tax items, tax tables and tax packages, and assign a tax package to each employee. HINT: Goldenseal already includes current tax tables for each state and Canadian province. All you need to do is import them into your company file.
Vacations-- Create vacation items and vacation packages, and assign a vacation package to each employee.
Wage Schedules-- Create standard wage schedules and sales commissions, and assign them to each employee. You can also assign different wage rates to each employee.

You also need to set up two types of accounts:

Employee Accounts-- Create an account for each employee. You'll assign each employee billing rates, a wage schedule, a benefit package, a tax package and a vacation package. You will also fill in the number of exemptions, and other tax withholding information that applies to the taxes that you pay.
Other Cost Accounts-- Create an account for each tax agency.

This lesson will cover each of these items.

Benefit Items

Use benefit items for medical coverage, pensions, retirement contributions and other employee benefits. Benefits can be employee deductions, employer expenses, or payments made directly to employees.

To create a new Benefit Item, follow these steps:

Choose Payroll Setup from the Costs menu, then choose Benefit Items from the submenu.
Click the New button.
Enter information about the benefit.

Benefit Packages

Use benefit packages to assign specific benefits to each employee.

To see the items included in a Benefit Package, follow these steps:

Choose Payroll Setup from the Costs menu, then choose Benefit Packages from the submenu.
Click on a package, then click the Edit button.
You'll see a list of all benefit items. Only those items that have a check mark will be included in this package.

Assigning Benefits

To assign benefits to an employee, follow these steps:

Choose Employees from the Accounts menu.
Find the employee account.
Enter a benefit package into the Benefit Package field.

If an employee receives different benefits for different types of work, follow these steps:

Create a wage schedule for each type of work (see page 335).
In each wage schedule, turn off the Use Employee Benefit Package checkbox, and enter the benefits that apply to that type of work.
When you enter labor hours, assign the appropriate wage schedule to that work. The listed benefits will also be applied to that work.

Commission Rates

If you pay a sales commission to employees, enter one or more Commissions-- they are similar to wage schedules.

To enter a commission, follow these steps:

Choose Payroll Setup from the Costs menu, then choose Commissions from the submenu.
Click the New button.
Enter information about the commission.

Using Commissions

To assign a commission to an employee, enter it into the Commission field in the employee account record.

To assign a commission for sales in a sales branch, follow these steps:

Choose Income Setup from the Income menu, then choose Sales Branches from the submenu.
Click on a sales branch, and click the Edit button.
Enter the commission rate into the Commission field.

Labor Billing Rates

Use Labor Billing Rates to calculate the amount you charge for time and material billing of labor, or labor job costs.

To create a labor billing rate, follow these steps:

Choose Billing Rates from the Options menu, then choose Labor from the submenu.
You'll see a list of billing rates. Click the New button.
Enter information about the billing rate.

Billing Calculations

When you set up labor billing rates, you can use several different calculation methods:

Flat Rate-- A fixed dollar rate is used.
Variable Rate-- A different dollar rate is used for each employee.
Pay Rate-- The employee's basic pay rate is used.
Pay Rate Plus Percentage-- The employee's basic pay rate is used, plus an additional 'burden' percentage to cover employer taxes.
Net Cost-- The employee's total payroll cost is used, including employer taxes, insurance, and benefits (see page 199).
Net Cost Plus Percentage-- The employee's total payroll cost is used, including employer taxes and insurance, plus a percentage to cover employer costs not included in tax items or benefit items.

Tax Items

Create a tax item for each item that you withhold from employee payroll, and for each employer tax or insurance that is based on payroll.

HINT: Goldenseal already includes the correct setup for US and Canadian federal taxes, and taxes for all states and provinces (see page 161). You'll only need to modify tax items or tax tables if the withholding rate changes, or if you want to add additional withholding for items such as union dues.

To create a tax item, follow these steps:

Choose Payroll Setup from the Costs menu, then choose Tax Items from the submenu.
Click the New button.
Enter information about the new tax item. You can set up the calculation method for the item, and who receives payment for it.

HINT: Check the Reference manual for more about Tax Items.

Tax Cutoffs

Goldenseal automatically computes year to date figures for each deduction, and stops deducting those items that cut off at a certain amount.

Tax Tables

Tax tables compute federal, state and provincial tax withholding. They usually use a 'step table' with different rates for different wage amounts. Tax Tables are always based on the formula method for computing taxes (not the multiple-page 'lookup tables' used for manual computation).

HINT: You'll probably never need to create a new tax table.

To update a tax table from a state tax booklet, follow these steps:

Choose Payroll Setup from the Costs menu, then choose Tax Tables from the submenu.
Click on the tax that has changed, then click the Edit button.
Check the tax booklet. If the amount of an exemption has changed, change the numbers on the left side of the window.
Check the withholding 'step table' in the booklet. If the cutoff amounts, base amounts or percentages have changed, enter new values into the table on the right side of the window.

Tax Packages

Use Tax Packages to assign specific taxes to each employee.

Some states require multiple tax packages as a way to assign taxes for each marital status.

You may also need to use more than one tax package if different employees have different withholding items-- for example, if only some employees pay union dues, if some get EIC payments, or if you have employees that live in different states.

To see the tax items that are included in a tax package, follow these steps:

Choose Payroll Setup from the Costs menu, then choose Tax Packages from the submenu.
Click on a package, then click the Edit button.
You'll see a list of all tax items. Only those items that have a check mark will be included in this package.
To add a tax item to this package, click on it until there is a check mark to its left. To remove an item from this package, click on it until it has no check mark to its left.

Category Taxes

Worker's Comp insurance and Disability insurance sometimes use different rates for the same employee when they do different types of work. For example, in some states the worker's compensation rate is more expensive when an employee does work that is considered more dangerous.

To set the rates for each type of work, follow these steps:

Choose Category Setup from the Costs menu, then choose Category Systems from the submenu.
Click on the name of a category system, then click the Edit button.
In the list of categories, type the rate for each category into the Comp Rate or Tax Rate column. NOTE: You may need to adjust your category system so it matches the tax rate classifications for your state or your insurance company.
If you also use subcategories, click in each category, and enter rates into each of its subcategories.

Vacation Items

Use vacation items for vacations and holidays. To create a new vacation item, follow these steps:

Choose Payroll Setup from the Costs menu, then choose Vacation Items from the submenu.
Click the New button.
Enter information about the vacation or holiday.

Vacation Packages

Use Vacation Packages to assign specific vacations and holidays to each employee. To see the items in a vacation package, follow these steps:

Choose Payroll Setup from the Costs menu, then choose Vacation Packages from the submenu.
Click on a package, then click the Edit button.
You'll see a list of all vacation items. Only those items that have a check mark will be included in this package.

Wage Schedules

Wage schedules are used to set the pay period, payday, and other basic payment information.

HINT: If you use the same pay period for all employees, you can use just one wage schedule (even if they each have a different wage rate).

To create a new wage schedule, follow these steps:

Choose Payroll Setup from the Costs menu, then choose Wage Schedules from the submenu.
Click the New button.
Enter information about the new wage schedule.

HINT: If you use different pay periods, you may want the name to describe the pay period-- for example, 'monthly salary' or 'hourly paid weekly'.

Pay Period and Paydays

Choose the interval to use for pay periods-- you can select weekly, biweekly, monthly, or some other payment interval.

Also choose the way to calculate paydays. Payday can be on a fixed weekday (either one week or two weeks after the close of the pay period), or it can be a fixed number of days before or after the close of the pay period.

Enter a Base Period date-- the start date for any pay period.

Goldenseal will then calculate all pay periods and paydays for the current year, and display them in the table at right.

Wage Rate Amounts

Goldenseal gives you two ways to handle the wage rate amount in each wage schedule-- you can use a variable rate (different for each employee), or a fixed rate (the same for everyone).

To use a variable rate, turn on the Use Variable Rate checkbox. Each employee will receive a different wage rate. Enter the wage rate amount into the Wage Amount field in the Employee account.

HINT: Turn the checkbox on if you pay employees with the same pay periods and overtime rates, but use different wage rates.

To use a fixed rate, turn the checkbox off, and enter the wage rate amount into the Rate field. Goldenseal will pay all employees that use this wage schedule at exactly the same rate.

HINT: Turn the checkbox off if you have standard wage schedules that are the same for all employees.

Owners and Salaried Employees

If the company owner is paid via regular draw checks, create a Wage Schedule for the owner, and enter the wage type that best describes the payments. Use Owner Hourly for payments per hour worked, Owner Salary for regular amounts, and Owner Draw for irregular amounts.

If some employees are paid a regular amount each period no matter how many hours they work, create a Wage Schedule for them and enter Salary as the wage type.

Wage-Based Benefits and Taxes

If each employee receives the same benefits and pays the same taxes for all the work they do, turn on the checkboxes for Use Employee Benefit Package and Use Employee Tax Package. In that case, Goldenseal will use the information that you entered into the employee account.

If employees receive different benefits or pay different taxes for different types of work, turn off those checkboxes, and enter a benefit package or tax package into each wage schedule. That way you can control the rates that are used for each item of work, when you enter labor hours.

Assigning Wage Schedules to Employees

To assign a wage schedule to an employee, follow these steps:

Choose Employees from the Accounts menu.
Find the employee record.
Click the Payroll Setup button.
Enter the wage schedule into the Wage Schedule field.
If the Wage Schedule uses a variable rate, enter this employee's rate into the Wage Amount field.

HINT: You can assign only one variable rate to each employee. If you pay more than one wage rate to an employee, you will need to create more than one Wage Schedule for them, and turn off the Variable Wage Rate option for all but one of them.

Other Cost Accounts

Create other cost accounts for each tax or insurance agency that collects taxes or withholding. If you pay more than one tax to the same agency, you only need one account. For more about other cost accounts, see page 228.

Finishing Up

In this lesson you have learned how to set up for payroll. It's complicated!

Maybe you'd be better off to just fire all your employees. Nobody would steal your pencils then, and you could take a nap or eat chocolate any time of day without being disturbed.

Speaking of chocolate, our manual-writing staff is definitely addicted. Have you ever thought about sending them some?