You can configure deductions so that users in the Payroll feature can add manual deduction entries (for example, quick entries) to create and recover arrears for unscheduled deductions.
Default Behavior
The following is the default behavior when you created a manual deduction entry (for example, a quick entry) in Payroll for a deduction code that has arrears enabled: If you create the entry in addition to the regularly scheduled amount that is due for that deduction, the amount of the entry always goes towards paying off the existing arrears.
For example, say an employee has $10 automatically deducted from every pay for maintenance fees, and the employee has existing arrears balance of $100 for that same deduction. Now, say you were to create a quick entry in the current pay run to collect an additional $25 for this deduction. As a result, a total of $35 is collected for this deduction ($10 in scheduled deductions plus a $25 quick entry).
Because the $10 that the application automatically deducts from the employee's pay covers the scheduled amount owed for the pay run, the application automatically applies the quick entry of $25 toward the arrears, bringing the balance down to $75.
While this is the desired functionality in cases where you want to pay off an employee's existing arrears, it didn’t cover cases where there were new unscheduled amounts owing.
Using the same example, say the employee owes a new $25 late penalty for the same maintenance deduction. In this case, you would want the unscheduled quick entry deduction to cover the new late penalty without reducing the arrears amount of $100.
Continuing this example, if the employee does not have enough pay to cover either the scheduled $10 or the new $25, it would be desirable to add both of these amounts to the arrears balance, or $10 + $25 = $135. However, with the default behavior, the application only adds the scheduled amount to the arrears balance amount, or $10 + $100 = $110.
Using another example, say an employee does not have a scheduled deduction for the maintenance fee and has no existing arrears for it either. Now, say the employee leaves the organization, but owes $30 in new maintenance fees that you need to collect from the employee's last pay.
With the default behavior, if you create a $30 quick entry to collect this amount, the employee's arrears for the maintenance deduction enters a positive balance of $30. In this way, the employee is given a credit of $30 for this maintenance fee deduction. However, the desired result would be for the $30 to go towards the new maintenance fee, and for the arrears balance to remain at zero.
Enable Impromptu Arrears for Manual Deduction Entries
You can enable functionality to cover the case where new unscheduled amounts are owing. This includes configuration in the Deductions tab of Payroll Setup > Earnings and Deductions, and a setting in the Quick Entry and Checks sub-tabs of Payroll.
Configure Functionality in Deduction Definitions
To enable this functionality:
- Go to Payroll Setup > Earnings and Deductions and click the Deductions tab.
- Select an existing deduction definition that has arrears enabled, or add a new deduction definition to the list.
- In the General tab, when the deduction already has the Allow Arrears checkbox selected (for an existing deduction), or if you select the Allow Arrears checkbox for a new deduction, the application displays the Arrears section that contains the Allow Impromptu Arrears checkbox.
When the Allow Arrears checkbox is cleared, the Allow Impromptu Arrears checkbox is hidden. The Allow Impromptu Arrears checkbox is cleared by default. When you select this checkbox, it gives Payroll users the option to create and recover arrears for unscheduled amounts for this particular deduction. This is shown in the next section of this topic.
When you select the Allow Impromptu Arrears checkbox, the application displays the Debit Arrears by Default checkbox, which is otherwise hidden. The Debit Arrears by Default checkbox is also cleared by default. When you select this checkbox, the application creates and recovers arrears for unscheduled amounts as the default behavior when Payroll users create an entry for this particular deduction. This is also shown in the next section of this topic.
Important: When you select the Allow Impromptu Arrears checkbox for a deduction code, the system will attempt to collect the full outstanding balance from the next available net pay. This applies to deductions that have been zeroed-out, unelected, or end-dated in the past. Even when a check template is configured to exclude deductions, any deductions configured the Allow Impromptu Arrears checkbox selected still attempt to recover the full outstanding arrears balance. This is different from scheduled arrears-enabled deductions, which do not try to recover arrears in check templates configured to exclude deductions.
As a result, selecting the Allow Impromptu Arrears setting in deduction definitions can impact customers with benefit plans that carry arrears. When employees move from one plan level to another, the Benefits-to-Payroll interface can end-date one Payroll deduction code and establish another. If there was any arrears balance on the old code that is end-dated, the system will attempt to recover those overdue amounts as soon as the Allow Impromptu Arrears setting is enabled in the deduction configuration.
For example, an employee no longer has a scheduled deduction for the Dental 1 deduction code, but has an existing arrears balance of $100 for this deduction. Say you enable the Allow Impromptu Arrears checkbox for this deduction code. As a result, in any pay run where the employee has available net pay, the application attempts to collect as much of the $100 arrears as possible until it is paid off.
The Allow Impromptu Arrears checkbox does not impact existing behavior for how the application collects arrears for scheduled arrears-enabled deductions. Arrears for scheduled arrears-enabled deductions is collected as follows:
- Scheduled arrears-enabled deductions that have an arrears multiplier defined collect the multiplier amount.
- Scheduled arrears-enabled deductions with no arrears multiplier defined attempt to recover the full outstanding balance.
In either case, the application collects arrears regardless of how the Allow Impromptu Arrears setting in deduction definitions is defined.
Scheduled arrears-enabled deductions will stop collecting arrears upon becoming unscheduled (if they reach an end-date, are unelected, or get zeroed-out by being paid off). Meanwhile deductions with the Allow Impromptu Arrears setting enabled will continue collecting arrears for unscheduled deductions.
Settings for Impromptu Arrears Collection for Checks and Quick Entries
The following areas of the Data Entry and Pay Run Management tabs of Payroll include the Debit Arrears setting:
- The Quick Entry sub-tab includes the Debit Arrears setting:
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- The Checks sub-tab includes the Debit Arrears setting in the Deductions section that you can expand at the bottom portion of the screen:
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In order to use the Debit Arrears column, the entry must be for a deduction code that has the Allow Impromptu Arrears setting enabled in the Deductions tab of Payroll Setup > Earnings and Deductions. If a deduction does not have the Allow Impromptu Arrears setting enabled in its deduction definitions, the Debit Arrears column is set to No, and is non-editable.
Moreover, if you enabled the Debit Arrears by Default checkbox for the deduction in the Deductions tab of Payroll Setup > Earnings and Deductions, and you create an entry using the deduction, the Debit Arrears column is set to Yes by default. However, you can set it to No. This allows organizations to always create entries for collecting unscheduled arrears.
When you select the Debit Arrears column for a deduction entry, the following occurs:
- The amount that you are able to deduct from the employee's pay via the deduction entry does not decrease the employees existing arrears balance (which you can review in the employee profile). Conversely, if you clear the Debit Arrears by Default checkbox, the amount that you are able to deduct from the employee's pay does decrease the employee's existing arrears balance.
- If funds aren’t available to deduct all or part of the amount of the check or quick entry, this outstanding amount is added to the employee's existing arrears balance. Conversely, if you clear the Debit Arrears by Default checkbox, the amount that you are able to deduct is not added to the employee's existing arrears balance.
For example, an employee has a deduction with arrears enabled where:
- The application deducts $10 from every pay to cover the scheduled amount owing.
- The employee has an existing arrears balance of $100 for this deduction.
- You also want to deduct an additional $25 in new late fees in the current pay.
To deduct $25 in late fees, you can create a quick entry for $25 for which you can select the Debit Arrears by Default checkbox. When you select this checkbox, and the employee has enough pay in the current run to cover both the $10 scheduled payment and the additional $25 late fee, then the existing arrears balance isn’t affected and remains at $100. This is because the additional $25 is intended to pay a new fee, and not the employee's existing arrears balance, and the $10 amount is intended to pay the scheduled amount owing.
Whereas, if you create a quick entry that has the Debit Arrears by Default checkbox cleared, the $25 goes towards the employee's existing arrears, bringing the balance down to $75.
Continuing this example, if you select the Debit Arrears by Default checkbox for the entry, and the employee does not have enough pay in the current run to cover the $10 regular payment and the $25 late fee, the arrears balance moves up to $135 ($100 + $10 + $25).
Whereas if you clear the Debit Arrears by Default checkbox for the entry in the same scenario, the arrears balance only increases to $110 ($100 + $10) and the $25 is ignored from the balance of the arrears.
This functionality is the same when you select the Replace checkbox for quick entries or check entries. Using the same example as above where the employee has $100 in existing arrears, consider that instead of adding a $25 quick entry in addition to the $10 regular payment, you replace the regular $10 payment with a $25 quick entry. If you create a $25 quick entry with the Replace checkbox and the Debit Arrears by Default checkbox selected, the following occurs:
- The system subtracts the $10 that is due for this month from the $25 that you entered.
- The system applies the remaining $15 to new fees (such as late charges) and the arrears balance remains at $100. Whereas, if you clear the Debit Arrears by Default checkbox, the system applies the remaining $15 to the arrears balance, bringing it to $85.