Set Up Flexible Benefit Deductions with Deduction Models
- by Dawn Burns, QA Manager, Howrey LLP
- Brad Walters, Sr. Consultant
- July 15, 2006
You can use a benefit deduction model for benefit plans such as medical, dental, and life insurance to vary the frequency of deductions.
Base your deduction model on the frequency of deductions and what percentage you want to take out each period.
Most employees have some type of deduction coming out of their checks. The payroll department is responsible for taking the correct deduction amount. By using a benefit deduction model, the payroll department can ensure the deduction comes out at the appropriate time. Although SAP Payroll courses reference this topic, many users are unfamiliar with how simple it is to set up.
A standard payroll cycle run processes benefit plan payments and deductions every payroll period. However, if you have plans for which payroll does not process deductions for some employees in every payroll period, you can assign a deduction model to the plan and specify for which employees this is valid. For example, your company may require that payroll take medical deductions out of only one pay period each month although the employee is semi-monthly. This type of scenario may occur due to a union negotiation. Using benefit deduction models for your benefit plans helps streamline your configuration.
Say the union employees are paid semi-monthly so that they have a total of 24 pay periods in a year. It would be difficult to configure the system to automatically deduct the appropriate amount for each pay period because they only have the deduction one time per month. You could use a deduction model to set up the frequency of the deductions so that you only take certain deductions 12 times per year. If you did not use a deduction model, you would have to refund people 12 times per year, creating unnecessary work.
If you have 24 pay periods in a year and you always pay 50 percent in period one and 50 percent in period two, setting up a deduction model involves little configuration. However, real life often presents more involved situations, so we’ll show you a more complex example. We’ll present the example of taking a union deduction from the first pay period of each month.
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