Calculation support for miscellaneous post-tax deductions

Today we’re excited to roll out support for miscellaneous post-tax deductions!

Like the name suggests, these deductions are withheld from an employee’s after-tax wages. They are distinct from benefits like 401(k) and HSA contributions, which should be configured as employee benefits. Examples of miscellaneous post-tax deductions include:

• Repaying a loan from an employer
• Collecting employee union dues
• Collecting charitable contributions
• Settling an overpayment to an employee

Creating post-tax deductions

To create a post_tax_deduction for an employee, start by specifying the effective_start and description, used to describe the deduction on payrolls and paystubs. In the miscellaneous nested object, specify the details used for deduction.

{
    "employee": "emp_bvNhcPxrbvRqgyCrlUcj",
    "description": "Union dues",
    "effective_start": "2020-01-01",
    "miscellaneous": {
        "amount": "10.00",
        "total_amount": "50.00"
    }
}

In this example, $10.00 will be deducted from the employee’s wage on all payrolls after the effective_start date of January 1, 2020 until the total_amount of $50.00 has been collected. Afterwards, this post-tax deduction will no longer apply to the employee. To manually control when a deduction applies to an employee, you can set an effective_end date, which will block collecting for the deduction on payrolls after the end date.

Miscellaneous post-tax deductions can also be configured with a per pay period deduction percentage instead of a deduction amount. In this example, 25% of the employee’s gross earnings will be deducted from after-tax wages until $100.00 has been deducted. They can also be configured without a total_amount.

{
    "employee": "emp_bvNhcPxrbvRqgyCrlUcj",
    "description": "Union dues",
    "effective_start": "2020-01-01",
    "miscellaneous": {
        "percent": 25.0,
        "total_amount": "100.00"
    }
}

Applying post-tax deductions

Post-tax deductions are automatically applied to a payroll when you approve or preview it. In the case that the deduction is configured with a total_amount and the per pay period deduction would result in collecting a cumulative amount above that total, we will withhold only the remaining amount.

An employee can have more than one post-tax deduction applied during a pay period.

If the amount of post-tax deductions exceeds an employee’s after tax wages, we will apply miscellaneous post-tax deductions in ascending order by the deduction’s date of creation and exclude those that result in a negative employee net pay.

For example, if an employee has an after-tax wage of $80.00 and the following effective miscellaneous post-tax deductions, only the deduction amount from ptd_hcPxrbeojjf020323 of $50.00 would be applied.

[
    {
        "id": "ptd_hcPxrbeojjf020323",
        "employee": "emp_bvNhcPxrbvRqgyCrlUcj",
        "description": "Christmas charity donation",
        "effective_start": "2019-12-15",
        "effective_end": null,
        "miscellaneous": {
            "amount": "50.00",
            "percent": null,
            "total_amount": "100.00"
        }
    },
    {
        "id": "ptd_Qre494rrjiejf03sd3",
        "employee": "emp_bvNhcPxrbvRqgyCrlUcj",
        "description": "Union dues",
        "effective_start": "2020-01-01",
        "effective_end": null,
        "miscellaneous": {
            "amount": "35.00",
            "percent": null,
            "total_amount": "35.00"
        }
    }
]

Displaying post-tax deductions

To display information about skipped deductions to the user, you can use the newly added warnings array field on the payroll item.

For visibility and reporting, applied post-tax deduction amounts are included on individual payroll items’ post_tax_deductions array, payroll totals summary field, and employee paystubs.

Note: Miscellaneous post-tax deductions are not intended for configuring garnishments. Support for calculating and remitting garnishments is coming soon!