Some organizations contract with service providers to pay their employees sick pay so that when employees are off sick, they are paid by the provider instead of their employer. These payments are referred to as third-party sick pay. You must enter third party sick pay entries in Dayforce as adjustments to ensure that taxes are calculated, remitted, and reported properly.
Before You Begin: This feature is available for US pay groups only.
The Third Party Sick Pay button is located in the Adjustments sub-tab toolstrip in both Payroll > Data Entry and Payroll > Pay Run Management.
The application only displays the Third Party Sick Pay button when you load a pay run for a US pay group.
The sub-tab that you are working in, either Pay Run Management or Data Entry, determines whether you can create third party sick pay entries for a single loaded pay run or for several pay runs. This topic describes the process in the Pay Run Management tab. In the Pay Run Management tab, you can only create adjustments for the specific pay run that you've loaded.
Note: For information specific to creating third party sick pay adjustments in the Data Entry tab, see Third Party Sick Pay (Data Entry Tab).
When you click Third Party Sick Pay in Data Entry > Pay Run Management, the application displays the Third Party Sick Pay Adjustment dialog box for creating the sick pay adjustment and calculating taxes. Here you can select employees with the Active or Inactive employment status from the US pay groups to which you have access. You can only create one adjustment transaction for one employee at a time.
Next, you need to select an option in the Third Party Sick Pay Provider field. The list of available third party sick pay providers is defined in Payroll Setup > Third Party Payees.
Note: The Tax Treatment field is read-only. Taxation is defined based on the Tax and Compliance rule selected when the earnings are configured as either taxable or non-taxable in Payroll Setup > Earnings and Deductions.
After you make a selection in these fields, the Add button in the Earnings section of the dialog box becomes active, and you can add one or more sick pay earning entries to the adjustment. When you add an earning, the application displays the Employee Taxes and Employer Taxes sections below the Earnings section.
The Code drop-down list in the Earnings section only displays earning codes that are configured with the sick or disability pay taxability. You can edit the Job Assignment, Work Location, and Legal Entity fields as well. This means that you can select a location and job assignment to update the legal entity, or you can select a legal entity to update the job assignment and location.
When calculating taxes, you must manually enter employee tax amounts based on the third party sick pay statement that you received and then click Calculate at the bottom of the dialog box to automatically generate employer taxes. You can also expand or collapse the sections in the dialog box, as needed.
You can edit the fields for the tax entries that the application generates. You can add more employee taxes, as needed, but employer taxes can only be deleted or edited.
When you click OK, the application closes the dialog box and updates the Adjustments tab with the adjustment and its tax and earning entries. At this point, the Employee Name, Employee No., Third Party Sick Pay Provider, and Tax Treatment fields are non-editable.
While you can add and edit earning entries, the application cannot recalculate the taxes. If you want to recalculate the taxes, you must delete the adjustment and Third Party Sick Pay to create one.
When you have finished editing the adjustment, click Save to complete the transaction. After saving, you can still edit earning and tax entries for the adjustment.
Note: The Third Party Sick Pay button opens the dialog box for creating new adjustments. You cannot edit an existing adjustment from the list by selecting it and clicking this button.