Setup Considerations: Earning and Deduction Limits
You can use this topic to help make decisions when planning your configuration and use of earning and deduction limits. It explains:
- Why to set them up.
- How they fit into the rest of Workday.
- Downstream impacts and cross-product interactions.
- Security requirements and business process configurations.
- Questions and limitations to consider before implementation.
Refer to detailed task instructions for full configuration details.
Although it's possible to use earning and deduction limits in Payroll for France, these are rarely used in France.
What They Are
Limits enable you to define when Workday stops processing earnings and deductions based on a maximum value that you can configure.
Business Benefits
Limits:
- Make it easier for you to comply with regulatory requirements by stopping contributions automatically, such as for retirement or health saving deductions.
- Reduce manual effort required to adjust the workers' net pay for those requirements by enabling you to configure employer and employee limits.
- Provides you with greater control and flexibility by enabling you to apply them on 1 or more pay components.
Use Cases
You can configure limits on pay components such as:
- Charitable contributions (CAN, UK, USA).
- Combined employer and employee contribution amounts.
- Flexible spending account contributions (CAN, USA).
- Health saving account (HSA) contributions (USA).
- Loan repayments.
- Retirement plan contributions such as a 401(k) (USA) and RRSP (CAN).
- Transportation reimbursements.
You can also configure limits on related calculations, such as:
- A 415 wage limit for retirement accounts (USA).
- For taxable and nontaxable redundancy earnings (UK).
- for the year's maximum pensionable earnings (CAN).
Questions to Consider
Questions | Considerations |
|---|---|
What types of earnings and deductions do you need to limit? | For Payroll for Canada, the UK, and the U.S., Workday delivers legislative limits in tax tables that you can use when configuring earnings and deductions. Examples:
You can also use these calculations to build your own limits, such as to process employer contribution matches for retirement accounts. Inactive pay components and manual payments don't contribute to limits. Limits for position-based pay components apply to each position. |
How many earnings or deductions do you want to limit? | You can configure limits that consider 1 earning, or multiple using pay accumulations.
Example: You can build limits on a retirement plan deduction to consider:
You can also configure limits on related calculations, such as to define wage limits. |
Which periods do you want to apply limits to? | Limits always apply to a balance period such as year-to-date. You can use Workday-delivered balance periods or create your own to build limits over specific pay periods. Example: You can use a balance period for the current year based on payment dates for statutory limits that reset each tax year.
When you use the current period as the balance period, Workday applies all amounts towards the period limit. Example: You configure a limit per period on an earning. A worker has retro differences processed in the current payroll for the same earning. Workday applies both the retro earning and the current earning towards the limit. |
Who do you want to apply limits for? | When you configure limits, they apply to all workers eligible for the earning, deduction, or related calculation. You can define overrides for workers and pay components to:
Example: You hire a worker midyear and want to account for what they already contributed to their retirement account in their previous job. You can configure an override for that worker to ignore the limit applied for all other workers and use a memo deduction instead. When you configure multiple limits on pay components, Workday applies the override against all limits. Example: You configure an elective deferral annual limit and an annual contribution limit on an employee retirement deduction. When you define an override limit for a worker who has that deduction, Workday overrides both related calculation limits. |
Do you use Benefits? | You can configure certain limits in Benefits or Workday Payroll depending on how you implement benefit plans:
|
Recommendations
- Use Workday-delivered calculations as limits before creating your own, as Workday maintains the delivered regulatory amounts, such as for:
- Balance periods.
- Retirement plan limits (CAN, UK, USA).
- Use lookup tables to store and maintain limits to reduce manual updates.
- Configure a new effective date when updating limits on pay components because limits are specific to periods of time. When you don’t add a new effective date, Workday applies the limit to the current pay period. Example: The current pay period is December and you want to configure a limit starting next year. When you don't add a new effective date and process payroll for December, Workday applies the limit to December.
- Build calculations on pay components instead of using limits so that Workday evaluates separately on on-cycle, off-cycle, and retro results in the current period.
Requirements
For Payroll for Canada and the U.S., map earnings and deductions to plans and other sources, such as compensation or benefit plans, or time tracking totals. When you have multiple benefit plans with different limits, don't map the benefit plans to the same deduction. Mapping 1 plan to 1 deduction ensures accurate limit calculations. Verify the accuracy of your statutory calculations because Workday doesn't deliver all regulatory limits. Examples:
- For Payroll for Canada, Workday delivers limits for RRSP retirement plans, but doesn't deliver limits for noncash gifts workers can receive in a year.
- For Payroll for the U.S., Workday delivers limits for 401K retirement plans, but doesn't deliver IRS transit limits.
For Payroll for the UK, map earnings and deductions to plans or other sources for the value that the pay component calculates, such as compensation or benefit plans.
Limitations
Workday doesn't support all types of worker data in custom Payroll calculations so you can't configure limits based on those types. Example: You can't configure limits based on union membership types.
For Payroll for Canada, when companies merge or go through acquisitions, Workday doesn't carry over amounts contributing to regulatory limits. You can enter these amounts manually.
For Payroll for the U.S., Workday doesn't deliver limit calculations for HSA contributions that prorate for a midyear switch from family to single coverage. You can configure payroll limit overrides to account for the proration.
Tenant Setup
For Payroll for the U.S., you can access the
Edit Tenant Setup - HCM
task to include additional HSA coverage target options. You can then select the family or employee limit as the IRS limit for those additional targets.No impact for Payroll for Australia, Canada, France, or the UK.
Security
Domains | Considerations |
|---|---|
Set Up: Payroll (Calculations - Payroll Specific)
| Enables users to create and edit pay components, and access reports to review:
|
Set Up: Payroll (Taxes View)
| Enables users to view Workday-delivered tax data including:
|
Worker Data: Payroll (Limit Overrides)
| Enables users to view and maintain payroll limit overrides for workers. |
Business Processes
No impact.
Reporting
Reports | Considerations |
|---|---|
All Balance Periods
| Enables you to view Workday-delivered balances that you can use to build limits. |
All Calculations
| Enables you to view calculations that you can use before you build custom limits. |
All Deductions
| Enables you to view limits configured for each deduction. |
All Earnings
| Enables you to view limits configured for each earning. |
All Pay Accumulations
| Enables you to view limits configured for each pay accumulation. |
All Pay Component Related Calculations
| Enables you to view limits configured for each pay component related calculation. |
All Payroll Tax Data
| For Payroll for Canada and the U.S.:
Enables you to view Workday-delivered regulatory wage and payment limits. |
All Payroll Withholding Order Data
| Enables you to view Workday-delivered calculation rules for calculating withholding orders, including:
|
Integrations
You can use these web services to mass load or retrieve limit overrides:
- Get Payroll Limit Overrides
- Put Payroll Limit Override
Connections and Touchpoints
Features | Considerations |
|---|---|
Benefits | You can map benefit plans to pay components, enabling you to configure limits on mapped pay components. Workday only transfers information from Benefits to Payroll and not the other way around.
Coordinate with your Benefits department to ensure consistency with limits and prevent over contributions. |
Payroll history | When you run the Run History Pay Calculation task, Workday calculates gross and net amounts and bypasses limits. |
Retro pay calculations | You can limit retro pay calculations based on:
When you calculate payroll for a target period, Workday includes retro differences in the current earning or deduction. When the differences exceed a limit you configured on the pay components, Workday reduces the total retro difference for the recalculated periods to that limit. When you suspend retro results, Workday still applies those results in limits you recalculate for prior periods in retro, including results for Fair Labor Standards Act calculations for Payroll for the U.S. You can create memo pay components to offset results you want to suspend to resolve discrepancies between retro and pay results. When you suspend retro results, Workday still applies those results in limits you recalculate for prior periods in retro. You can create memo pay components to offset results you want to suspend to resolve discrepancies between retro and pay results. |
Workday offers a Touchpoints Kit with resources to help you understand configuration relationships in your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.