With pay items, you can customize how employees are paid. You can even change the name and disbursement type of many pay items to suit your needs.
What we'll cover
Go to Company, then Pay Items.
Hourly versus non-hourly
All pay items will be either hourly, or non-hourly. Choose "Non-Hourly" if you want to be able to enter specific amounts for that pay type when processing payroll. These are typically commissions, bonuses, or reimbursements.
There are 4 categories of pay items
W-2 Wage pay items allow you to pay someone a regular W-2 wage that you customize. For example, if one employee can perform one of two different jobs on any given day, and those jobs pay differently, you can name them accordingly. Once added to the employee, you can set different rates of pay for each. Every W-2 pay type you pay an employee will be consolidated in their W-2 at the end of the year.
You can also customize 1099 pay items. Contractors are generally paid flat amounts for completing an agreed-upon job, so these pay items are treated as non-hourly by default. If you have contractors that perform different jobs, customized pay items can help you easily identify the job someone is being paid for, and at the agreed upon rate for that contractor. Just like the W-2 pay types are included in the employee's W-2, all 1099 pay types a contractor received throughout the year get added together and will be consolidated into one 1099 at the end of the year.
Non-reported pay types allow you to give an employee funds without it being recorded for any tax or year-end reporting purposes, typically reimbursements for mileage or cell phone usage. When you use a non-reported pay item, it will not be included in W-2s or 1099s or any forms provided to employees. For your accounting records, these items are treated as an operating expense, not a payroll expense.
The Imputed/Other pay item section houses highly customized payroll items that we have built for your use as needed.
Some examples of imputed pay:
- Personal use of a company car
- Employee discounts
- Adding a domestic partner or non-dependent to your health insurance policy
- Adoption assistance in excess of the tax-free amount
- Care assistance for dependents exceeding the tax-free amount
- Group-term life insurance in excess of $50,000
- Educational assistance and tuition reduction
- Non-deductible moving expense reimbursements
- Gym memberships and fitness incentives
- 2% shareholder insurance
For example, Shareholder Insurance is a pay type designed for use by more-than-2% shareholders in an organization who have their insurance benefits paid for by the company. This pay item is labeled insurance because that is its most common use, but it can really be used for any taxable fringe benefit a more-than-2% shareholder receives. By using this pay type, the employees are paid an amount that is taxable only for purposes of Federal and State Income Tax.
Learn more about adding 2% shareholder benefits to W-2s.