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.
Key Concept

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.

Dawn Burns

Dawn Burns is an SAP-certified human resources senior consultant and Quality Assurance Manager and HR Consultant with Howrey LLP. She is a former SAP Human Resources instructor for SAP America and has more than 12 years of experience in human resources and information technology.

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Brad Walters

Brad Walters is a certified SAP HR consultant for Electronic Data Systems with more than nine years of SAP HR experience. His SAP work experience includes configuration and production support of PA/OM, Recruitment, Payroll, and ABAP development.

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Comments

2/25/2014 11:26:41 AM
Renee

Dawn/Brad,
This is great information. Will this also work if we pay our employees bi-weekly (26 pay periods), but want to charge health premiums 2X a month. This would result in employees NOT being charged health premiums for 2 of the 26 pay periods. Currently we charge employees each pay period, but would like to change.
2/25/2014 11:26:36 AM
Renee

Dawn/Brad,
This is great information. Will this also work if we pay our employees bi-weekly (26 pay periods), but want to charge health premiums 2X a month. This would result in employees NOT being charged health premiums for 2 of the 26 pay periods. Currently we charge employees each pay period, but would like to change.

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