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Administrator Guide
Last Updated: 2025-01-24
Process a Manual Payment for Third-Party Sick Pay (USA)

Process a Manual Payment for Third-Party Sick Pay (USA)

Set up the third-party sick pay earning.
Set up W-2 provider for third-party sick pay.
Security: Process:
Off Cycle (Manual Payment)
 domain in the Core Payroll functional area.
Process a manual payment to record third-party sick pay when the third party withholds employee taxes, and they transfer liability for the employer taxes to you.
  1. Access the
    Run Manual Payment for Worker
     task.
  2. Select
    Third Party Sick Pay
    .
    Workday selects the
    Create Additional Payment
     field automatically.
  3. Select the
    Period
    ,
    Pay Group Detail
    , and
    Worker
    .
  4. From the
    Reason
     field, select a valid reason, such as
    Third Party Sick Pay
    .
  5. Select a
    Sub Period Target Date
     and a
    Payment Date
     within the same year.
  6. Enter a valid priority, such as
    1
     in the
    Priority
     field.
  7. Enter the third-party sick pay amount minus the employee taxes in the
    Net Pay
     field.
  8. In the
    Input
     section, enter
    Gross Wages
    ,
    Subject Wages
    ,
    Taxable Wages
    , and
    Amount
     on separate rows.
    Pay Component
    Worktags
    Type
    Value
    Enter each employee tax and the third-party sick pay on separate rows.
    Enter the worktags for state and local tax authorities. Workday enters the federal worktags automatically.
    Select:
    • Gross Wages
    • Subject Wages
    • Taxable Wages
    • Amount
    Verify that the third-party payment amount minus the taxes equals the net amount.
  9. Use the
    Run Pay Complete
     task for the manual payment.
Workday calculates employer taxes and updates accounting. The journal lines on payroll actuals only reflect employer paid taxes and not employee taxes.
Processing third-party sick pay only records worker payments for reporting and accounting. It doesn't generate payments to the workers.
When you don’t select the
Third Party Provides W-2 for Sick Pay
 field on the
Edit Company Federal US Tax Reporting
 task, Workday creates W-2 data for workers with third-party sick pay when you run the
Create W-2 Data
 task.
When you select the
Third Party Provides W-2 for Sick Pay
 field on the
Edit Company Federal US Tax Reporting
 task, Workday displays the
W-2/W-2C Recap Count
 when you run the
Create W-2 Data
 task.
Your employee at Global Modern Services, Steve Morgan, received 1000 USD in sick pay from his insurance company. After taxes of 276.50 USD, his net pay is 723.50 USD. The third party is providing the W-2s, but transfers the liability for the taxes to Global Modern Services.
You enter 723.50 USD in the
Net Amount
 field for the manual payment and enter the third-party sick pay and tax values in the
Input
 section.
Pay Component
Worktags
Type
Value (USD)
Medicare
Federal: Federal
Amount
30.00
Federal Withholding
Federal: Federal
Amount
150.00
State Withholding (Work)
State: California
Amount
50.00
OASDI
Federal: Federal
Amount
46.50
Third Party Sick Pay
Amount
1000
The third party provides the W-2s, so Workday:
  • Calculates the third-party sick pay employer taxes.
  • Displays the
    W-2/W-2C Recap Count
     on the
    Create W-2 Data
     task.
If your company provides the W-2s, use the same settings on the manual payment. Only the reports produced change. Example: Workday produces W-2s instead of a recap.