Setting Up the PAYROLL Module Slideshow 7A
Contents • Payroll Concepts: Review 3 • The PAYROLL Module: Overview 7 • Setting the PAYROLL Module to READY 8 1. Set the PAYROLL Module Defaults 9 • Names 9 • Additional Payroll 10 • Incomes 11 • Deductions 12 • Taxes 13 • Entitlements 14 • Remittance 15 • Job Categories 16 2. Set Link Accounts 17 3. Enter Employee Information in Employee Ledger 18 4. Set PAYROLL to READY 23 Slideshow 7A
Payroll Concepts: Review Gross Earnings Before learning Sage 50 Accounting payroll procedures, it would be best to review some relevant payroll concepts. Let us first discuss how to determine net pay for each employee: Click and study the notes on GROSS EARNINGS at the right. Click to continue. Net Pay = gross earnings – payroll deductions Gross Earnings • Gross earnings represent the total compensation earned by the employees. • Basically there are three types of compensation that constitute gross earnings: • Wages – usually paid to an hourly employee. They are determined by multiplying the hourly rate by the number of hours worked. • Salary – fixed compensation, usually set at a per annum basis, paid at regular periods as agreed upon between the employer and the employee, or as per company policy. • Commission/bonus – compensation based on performance. It is usually set as a percentage of sales.
Payroll Concepts: Review (continued) Payroll Deductions Click and learn about Payroll Deductions at the right. Click to continue. Payroll Deductions • Mandatory deductions consist of: • Canada Pension Plan (CPP) or QPP (in Quebec) • Employment Insurance (EI) • Personal income tax • Other deductions may be: • Extended medical plans • Union dues • Voluntary deductions may be: • Purchase of Canada Savings Bonds. • Life insurance premiums. • Payment of merchandise purchased from the company. • Charitable donations. • Payroll deductions information (table) available from the Canada Revenue Agency web site: http://www.cra-arc.gc.ca/tx/bsnss/menu-eng.html
Payroll Concepts: Review (continued) Employer Payroll Costs Click and study Employer Payroll Costs at the right. Click to continue. Employer Payroll Costs • CPP • Employer must match each employee’s CPP contribution. • EI • Employer is required to contribute 1.4 times each employee’s EI deductions. • Workplace Safety and Insurance Board (WSIB in Ontario) • Employers pay a specified percentage of their gross payroll to provide supplemental benefits for workers who are injured in the workplace. The employer’s premium depends on the industry sector and the employee’s insurable earnings.
Payroll Concepts: Review (continued) Paid Benefits Paid benefits, referred to in Sage 50 Accounting as Employee Entitlements, vary from one company to another. Canada Revenue Agency guidelines will help you determine which benefits are taxable and which are not. Click and study the notes on paid benefits. Click to continue. Paid Benefits (Employee – Additional Benefits) Employees may have the right to receive compensation for future benefits when certain conditions of employment are met. Such benefits may include: • Paid vacation • Sick pay benefits • Paid holidays • Vehicle and/or clothing allowance • Professional development
PAYROLL Module: Overview Payroll Entries: Manual Accounting vs. Sage 50 Accounting Study the manual entries for an employee whose basic wage is $1,000.00 plus 4% Vacation Pay ($40.00). There are 3 entries: Click. Entry 1 is to record the payroll cheque information. Click. Entry 2 is to record the payroll benefit company expenses. Click. Entry 3 is to record other benefit company expenses. Click. When you print a payroll cheque for an employee, Sage 50 Accounting combines all three entries in one journal entry. Click to continue.
Setting the PAYROLL Module to READY The PAYROLL Module keeps track of employees’ personal information, compensation arrangements, hours worked, government deductions, etc. The Sage 50 Accounting contains tax tables and formulas that allow you to calculate wages and government deductions (source deductions). For a fee, you can get updated tables and formulas based on information from Canada Revenue Agency through Sage 50 Accounting web site www.na.sage.com/sage-50-accounting-ca. In Sage 50 Accounting, you can print payroll cheques, T4 slips (summary of employees’ earnings/deductions for tax purposes) and employee-related reports. You will find step-by-step instructions in your text. The next slides will give an overview. Click and study each step in setting the PAYROLL Module to READY. Click to continue. Steps in Setting the PAYROLL Module to READY: • Set PAYROLL System Settings. • Names • Additional Payroll • Incomes • Deductions • Taxes • Entitlements • Remittance • Job Categories • Set up linked accounts. • Enter payroll information for each employee. • Set PAYROLL to READY.
Setting the PAYROLL Module to READY When converting PAYROLL into Sage 50 Accounting, whether converting from a manual system or from another computerized system, you need to balance all payroll earnings, deductions, and liability accounts in the old General Ledger system. It also involves setting up the proper company records in Sage 50 Accounting. Step 1: Set the PAYROLL Module Defaults The PAYROLL module defaults provide information about the way employees are paid. Names In this window, you can change the name of the provincial payroll tax, workers' compensation, payroll entitlements, user-defined expenses, and the Additional Information boxes in payroll. Click INCOMES & DEDUCTIONS and study typical Name entries. Click to continue.
Step 1: Set PAYROLL Module Defaults(continued) The Income chart specifies the linked accounts and the names by which the accounts will appear on payroll documents. They define the types of income paid by the company other than regular wages (in blue). Notice the names changed for Incomes 1-3. Click. Sage 50 Accounting provides up to 20 linked accounts for deductions. The sample company uses four deductions. Names need to be defined before you can proceed to set the PAYROLL module to READY. Click. Additional Payroll The sample company uses only the Worker’s Comp. field. Study the other fields available. Click to continue.
Step 1: Set PAYROLL Module Defaults (continued) Incomes It is best to set up NAMES first before setting up Incomes. In this screen, you will specify type, unit of measure and method of calculation for each type of income. The column is checked if you calculate Income before the column deductions. Click. Study the explanation of some of the important terms on the Income Settings screen. Click to continue. Benefits refer to taxable benefits such as car allowance, educational benefits, etc. Hourly Rate – rate paid for regular work. This default can be changed to: Differential Rate – rate paid to employees for working shifts or higher job classifications. Reimbursement refers to repayment of company-related expenses, such as travel. It is not subject to any taxes.
Step 1: Set PAYROLL Module Defaults (continued) Deductions Notice that Pension deduction can be entered as an amount or automatically calculated according to percentage of gross income. Click. Read the explanation on how each of the items with check marks in this column are calculated. Click. Click TAXES on the left panel. Check this box if you calculate the deduction after calculating tax. Leave the box unchecked if you deduct the amount before calculating tax. Deductions are monies withheld on employee paycheques. Depending on the deduction, some or all taxes may have to be calculated before the deduction is subtracted from the payroll cheque. There are no pre-defined deductions in Sage Simply Accounting, so you need to check with your federal and provincial authorities to determine which deductions you need to define and which taxes apply to specific deductions.
Step 1: Set PAYROLL Module Defaults (continued) PAYROLL Settings: Taxes Click each setting under Employer Tax Expenses starting from EI Factor for new Employees: to show the explanation. Click ENTITLEMENTS on the left panel. The name of the Workers' Compensation Board rate varies from province to province. In Ontario, it is WSIB (Workmen’s Safety Insurance Board). This tax covers employer contributions to provincial work-related employee disability programs. Check with your provincial authority to determine the default rate you should be using. Depending on the nature of the employee's work, this rate can change. You can set individual rates in employee records. Current federal government law requires employers to contribute to Employment Insurance (EI) based on the employee’s EI payroll deduction times this factor. You need to get this rate from the CRA and manually calculate employee and employer amounts. Depending on how your company is set up, this factor can be lower for some employees. You can set individual factors in employee records. There are also some circumstances in which you do not need to calculate EI for an employee (for example, if the employee is related to the company owner). EHT (Ontario only) refers to Employee Health Tax. The employer is exempt from this tax if the payroll does not exceed $400,000 for the current year. (Quebec only) This refers to the multiple of Québec Health Services Fund premium that the employer must pay.
Step 1: Set PAYROLL Module Defaults (continued) Entitlements Entitlements are a way for you to track time off that employees are entitled to. You can create up to 5 default entitlements that will apply to all new employees. If you want to add a newly-created entitlement to an existing employee record or change parts of an entitlement for specific employees, you can do so in the employee records. Entitlements do not affect your books in any way, they are intended strictly for keeping track of time. When you are processing a paycheque for an employee, you can review, edit, and release time on the Entitlements tab. Because entitlement time calculations are based on days, the numbers in the paycheque window represent days. Entitlements are defined in company-wide settings, can be individually edited in employee records, and are calculated when you process a paycheque. Click. Click REMITTANCE to continue.
Step 2: Set Up LINKED Accounts(continued) Remittance Read the instructions on top of the page (arrow pointing below). This feature calculates the amount of remittance due to the specified Remittance Vendor for the previous month. Click to view an explanation for Remittance Vendors and Remitting Frequency. Read When you process PAYROLL, tax and other deductions are withheld from employee paycheques. These payroll deductions are owed to the government tax authorities responsible for collecting them and to specific vendors providing services to employees. In Sage 50 Accounting, they are referred to as remittance vendors. Each remittance vendor will advise you of which amounts must be paid, and the date and frequency of payments (Remitting Frequency). If you've linked the remittance vendor to the appropriate payroll payable account, Sage 50 Accounting keeps track of the amount owing. Click to continue.
Step 1: Set PAYROLL Module Defaults (continued) Job Categories Job categories are a convenient way to track payroll-related revenues and expenses and identify employees who submit time slips. For example, if you create a Sales category and assign this category to all your salespeople, you can track their revenues on sales invoices. You can assign an employee to a job category in their record or you can assign multiple employees to categories in the Settings > Payroll - Job Categories window. The default is <none>. If you have employees assigned to a job category that includes salespeople, you can select one of these employees to be the primary salesperson for each of your customers. Click to continue. Read
Step 2: Set up Linked Accounts Linked accounts reduce the amount of time you spend assigning amounts to your accounts whenever you process a transaction. For example, whenever you make a sale, the amount your customer owes you increases, the quantities in inventory decrease, and Sage 50 Accounting automatically records any sales taxes, freight charges, and early-payment sales discounts in the proper accounts. These are the options for LINKED ACCOUNTS: Study the Incomes page and the explanation at the bottom. Click Deductions below and then continue by clicking the other options. Click to continue. Payroll Linked Accounts – User-Defined Expenses Payroll Linked Accounts – Expense Groups Payroll Linked Accounts - Taxes Payroll Linked Accounts - Deductions Payroll Linked Accounts - Income Monies deducted for these items are automatically tracked in the LINKED ACCOUNTS Study the LINKED ACCOUNTS on the Income page. Payroll cheques will be credited from the BANK ACCOUNT defined as the Principal Bank and employee advances (if any) will be applied against the account defined in the Advances & Loans box. Vacation Pay is automatically accumulated in the account entered in the Vac. Owed box. User-Defined Expenses and Payable accounts would be used when the company pays for various benefits (insurance, dental benefits, etc.) and/or any payment adjustment. The Payroll Expense Groups would be used when you want to report the same employees expenses at different locations, job categories, different administration departments, etc. The Payment Adjustment accounts would be used for minor discrepancies in amounts.
Step 3: Enter Employee Information in Employee Ledger Before the PAYROLL module can be used, employee personal information must be set up and historical data for each employee should be entered. Study a typical Payroll Ledger at the right. Some of the tabs may not be relevant when converting PAYROLL at the beginning of the year. Study the Personal page now and then click each TAB name below from top to bottom. Click the numbers on each page in proper order and study the corresponding explanation. Taxes Income Deductions WSIB & Other Expenses Entitlements Direct Deposit Memo Additional Info T4 and RL-1 Reporting Click to Continue Basic Personal Amount (Federal and Provincial) is the amount of personal exemption, the amount of personal income not subject to taxes Additional Federal Tax – If the employee so desires, he or she may request the employer to deduct additional income tax each pay period. The percentage of additional Federal Tax deduction is entered here. Note: The Additional Quebec Tax box is greyed out because Ontario has been selected in the Tax Table Box. Non-Indexed Amounts – additional amounts that can be claimed by the particular employee. Personal Page Taxes Page Tax Table - The employer is responsible in calculating and submitting the CPP contributions, EI premiums, and income tax deductions based on the tax tables released by the Canada Revenue Agency. The calculation of the company’s share of CPP and EI are also based on these tax tables. Sage 50 Accounting calculates all of these according to the province where the employee is employed. It is therefore necessary to enter the correct province in this box. Deduct EI – A check mark in this box indicates that the employee is eligible for Employment Insurance benefits. Rate – Current Federal Government law requires the employer to contribute to Employment Insurance based on the employee`s EI payroll deduction times the rate entered here. Deduct CPP/QPP– A check mark in this box indicates that the employer would deduct CPP/QPP contributions. However, the check mark will be removed if the employee was receiving a disability pension and works on a full or part-time basis. It also applies to employees who are receiving Canada Pension. Note: The Deduct QPIP box is greyed out because Ontario is entered in the Tax Table box. • YTD Amount - Sage 50 Accounting automatically updates the YTD amount for the tax items in this box whenever a pay cheque for the employee is posted. The note below (see red arrow) is updated every pay period. • Click INCOME at the left. OtherIndexed Amounts is the amount of additional Federal Tax Credits that can be claimed by the particular employee.
Step 3: Enter Employee Information in Employee Ledger (continued) Continue clicking the remaining tab names. Click the numbers (if any) in chronological order and study the related information. Income Deductions WSIB & Other Expenses Entitlements Direct Deposit Memo/Additional Info T4 and RL-1 Reporting This indicates that this employee is paid bi-weekly (52 weeks/26=2) Income Page The amount of payroll loan to be repaid by the employee. When it is first entered, it is considered a historical amount. As the employee repays the loan, the YTD amount changes. This is the accumulated amount of Vacation Pay owed to the employee. • This is the hourly wage rate paid to the employee in the current calendar year. This number will show as a default when you enter the payroll employee details at a payroll run. This is the normal weekly hours of the employee. This shows as a default when you enter the payroll details for the employee at a payroll run. This is the hourly wage rate paid to the employee for each hour of overtime. This is the YTD amount received by the employee for the current year. This is automatically updated at each pay period. This is the rate on which vacation pay for the employee is based. Net Pay is automatically calculated and entered in this box. • The box for Retain Vacation is checked to accumulate vacation pay for the employee. It accumulates week by week until the employee takes a vacation. • Click DEDUCTIONS at the left panel to continue. This is the YTD overtime pay received by the employee for the current year.
Step 3: Enter Employee Information in Employee Ledger (continued) Deductions WSIB & Other Expenses Entitlements Direct Deposit Memo/Additional Info T4 and RL-1 Reporting Entitlements Page On this page, you would record the entitlements (like sick days) an employee receives, and the number of hours in a work day. Click Direct Deposit. Deductions Page WSIB & Other Expenses Page Notice that the deductions are entered either in percentage or in particular amount per pay period. The USE (leftmost) column allows specific deductions for particular employees. The YTD amounts are also shown (rightmost column). Click WSIB & Other Expenses. When a new employee ledger is created, the WSIB current rate is automatically entered as a default. When the WSIB rate changes, you need to update the rate in every employee’s ledger. Click Entitlements.
Step 3: Enter Employee Information in Employee Ledger (continued) Direct Deposit Memo/Additional Info T4 and RL-1 Reporting A check mark in this box indicates that this employee’s net pay should be deposited directly to her bank; therefore, the bank details should be entered below. Read this. Direct Deposit Page To use Sage 50 Accounting Direct Payments, you would create a payment or receipt within Sage 50 Accounting. The software uploads the payment or receipt file to your Sage 50 Accounting Direct Payments Online Account which sends the payment/receipt data to the company bank. The bank then processes the payment to the recipient's bank account or sets up acceptance of payment from a customer's account. You therefore need to make necessary arrangements with your bank and the employees’ banks. Click to continue.
Step 3: Enter Employee Information in Employee Ledger (continued) Continue clicking the remaining tab names. Additional Info T4 and RL-1 Reporting Memo Page – You may enter personal information such as emergency name(s) and number(s) to call, etc. Click ADDITIONAL INFO at left. Additional Info Page You may use the various fields to record additional information such as wage increase dates, performance review reference, etc. If relevant, you may choose to display information when the employee is selected in a transaction by checking the relevant box (see red arrow). Click T4 & RL-1 Reporting above. T4 & RL-1 Reporting YTD EI Insurable Earnings for the current year. Pensionable earnings recorded under the CPP Plan for the current year. The Registered Pension Plan no. registered with the Federal Government. Click to continue.
Step 4: Set the PAYROLL module to READY. As in other modules, it is important to back up your data before setting the PAYROLL module to READY. Click PAYROLL now. Sage 50 Accounting will check the PAYROLL database file of the company and display an error report, if any. You are required to correct the error before Sage 50 will allow you to set the PAYROLL module to READY. Study the sample report at the right. Click. Assuming you do not have any error, or after you have corrected your error(s), you will receive this message. At this point, you have another chance to backup your company files if you have not done it yet. Your PAYROLL module will then be ready for processing transactions. Click PROCEED. Your PAYROLL Module is ready to use.
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