Deductions are amounts that are subtracted from employees' gross pay during the calculation of net pay in Dayforce. Deductions can be pre-tax or post-tax.
For example, an RRSP contribution that is subtracted before tax is calculated on an employee’s wages is a pre-tax deduction that lowers the amount of pay an employee is taxed on. A post-tax deduction, on the other hand, could be a payment for an insurance plan or for a gym membership that is deducted after tax has been subtracted from an employee’s pay.
As each deduction is subtracted, Dayforce maintains a running tally, or remaining net pay amount. After all applicable amounts have been subtracted from the employee's pay, Dayforce creates a final net pay amount for the employee's earning statement.
There are four types of deductions that can be configured:
- Deductions that allow partial payments: Deductions configured to allow partial payments. Dayforce only deducts what an employee can pay, if the employee does not have enough pay to cover the entire deduction. For example, if an employee has a deduction of $100 a month, but only has $90 in earnings left after taxes and other deductions have been deducted, Dayforce deducts $90. If a deduction is configured so that it does not allow partial payments, Dayforce deducts nothing.
- Deductions that can go into arrears: Deductions configured to allow arrears. Dayforce calculates whether the employee has enough pay to cover the entire deduction and carries forward any unpaid amount, attempting to deduct the amount in the next pay period.
- Declining balance deductions: Deductions configured to allow declining balances on amounts that employees actively owe. As a rule, these are configured for an employee in the Payroll > Payroll Elections screen of People. Dayforce calculates the deduction against an outstanding balance that the employee owes, such as a $1,000 computer loan that the employee pays off at $100 a pay check.
- Payee deductions: Deductions that are meant to be paid to a third-party payee, such as RRSP deductions, gym membership fees, or health insurance fees.
Workflow for Creating and Configuring Deductions
Configuring deductions involves the following general process:
- Create deduction definitions.
- Configure parameters of the deduction to determine how Dayforce calculates the deduction.
- If necessary, select the payee that receives the deduction payment.
- Assign deductions to employees. For details, see "Overview of Adding Deduction and Earning Elections" in the Payroll Administrator Guide.