Set Up Pay Component Groups to Calculate Disposable Income (USA)

Security: Set Up: Payroll (Calculations - Payroll Specific)
domain in the Core Payroll functional area.

Create earnings and deductions.

Before you process withholding orders, add earnings and nonstatutory deductions to the pay component groups Workday uses to calculate disposable income. Workday determines which pay component groups to resolve during processing based on:

Tax authority rules.

Order type.

Add earnings to Workday-provided pay component groups:

Access the

Edit Earning

task.

On the

Non-Effective Dated

tab, select the appropriate pay component groups in the

Groups

field.

Earnings	Pay Component Group
Earnings paid to employees on a regular basis, such as base pay and hourly pay.	Withholding Order (All): Periodic Earnings [USA]
One-time or occasional earnings for gifts and prizes.	Withholding Order (All): Monetary Gifts and Prizes [USA]
Lump sum earnings, such as a signing bonus. Applies to support orders only.	Withholding Order (All): Lump Sum Earnings [USA]

Add nonstatutory deductions to Workday-provided pay component groups:

Access the

Edit Deduction

task.

On the

Non-Effective Dated

tab, select the appropriate pay component groups in the

Groups

field.

Deductions	Pay Component Group
Deductions for disability plan contributions.	Withholding Order (All): Disability Insurance [USA]
Deductions for contributions to: Group Life Insurance Plan. Group Accident Insurance Plan.	Withholding Order (All): Group Life / Group [USA]
Deductions for loan repayments due to an employer.	Withholding Order (All): Loan Repayment to Employer [USA]
Deductions for mandatory contributions to federal or state retirement plans.	Withholding Order (All): Mandatory Retirement Deduction [USA]
Deductions for mandatory union dues.	Withholding Order (All): Mandatory Union Dues [USA]
Deductions for medical insurance contributions.	Withholding Order (All): Medical Insurance [USA]
Deductions for health savings account (HSA) contributions.	Withholding Order (All): Medical Savings Account [USA]
Deductions for 401K and other voluntary retirement plans.	Withholding Order (All): Retirement Plan Deductions [USA]

(Optional) For each tax authority, identify pay component exceptions for calculation of disposable earnings. To exclude or include exceptions when calculating disposable earnings for a withholding order, use the

Maintain Tax Authority Exceptions Pay Component Groups

task.

Example: Pennsylvania doesn't count workmens compensation payments as part of disposable earnings for creditor garnishments. Use the

Maintain Tax Authority Exceptions Pay Component Groups

task to configure this exception for Pennsylvania:

Payroll Tax Authority	Withholding Order Type	Exclude Pay Component(s)	Include Pay Component(s)
Pennsylvania	Creditor Garnishment (USA)	Workmens Comp Pay [USA]

With this setup, Workday doesn't include worker's compensation payments as income when calculating disposable income for creditor garnishments.

Workday withholds the correct amount from employee pay based on state and federal rules for calculating disposable income. To calculate disposable income, Workday references the calculation rule for each state. The rule controls:

Pay component groups and associated earnings to add to disposable income.

Pay component groups and associated mandatory deductions to subtract from disposable income.

States A and B calculate disposable income for a support order according to these rules:

State A	State B
+ Periodic Earnings + Monetary Gifts and Prizes - Federal Taxes - State Taxes - Mandatory Retirement Contributions - Medical Insurance - Mandatory Union Dues = Disposable Income	+ Periodic Earnings + Monetary Gifts and Prizes - Federal Taxes - State Taxes - Disability Insurance - Mandatory Union Dues = Disposable Income

Define Tax Authority Exceptions from Pay Component Groups (USA)

Steps: Create Deductions

Steps: Create Earnings