Reconciling Payroll when using a Payroll Service
Comparison of
payroll processing options, in-house vs. payroll service
Deductions/expenses:
employer managed vs. payroll service managed
P/R Service
Disbursements button
Employee Deductions and Additional Employer Expenses
tab
Payroll Reconciliation has been modified to reconcile a posted payroll period to a report or statement provided by a payroll service. This document outlines the setup and reconciliation features that relate to the implementation of payroll reconciliation when using a payroll service.
When reconciling in-house payroll, individual employee checks, along with total deductions are reconciled to posted earnings. Employee checks post individually to the payroll checking account.
When reconciling with a payroll service, the disbursement (or disbursements) to the payroll service, deductions, and employer expenses are reconciled to posted earnings. The disbursement (or disbursements), rather than employee checks, is posted to the payroll checking account.
The following table illustrates how payroll processing with a payroll service differs from in-house processing.
|
Process |
In-house |
Payroll service |
|
Payment |
Individual checks to each employee from employer’s payroll account |
One or more payments from employer’s payroll account to the payroll service covering wages, taxes, deductions managed by the service, and possibly fees on or around the check date. Note: sometimes the services fees, and possibly taxes, are paid by a separate bank draft, possibly drawn at a later date. Fees may be drawn weekly or monthly. |
|
Employer Taxes / Contributions |
Managed/paid by employer |
Taxes are typically managed/paid by payroll service, other contributions could be managed by either |
|
Employee Taxes / Deductions |
Managed by employer |
Some managed by employer, some managed by payroll service |
While all deductions/expenses are employer managed when using in-house payroll, these responsibilities may be assumed in whole, or in part, by a payroll service.
The following table illustrates the effect of employer and service managed deductions/expenses when reconciling with a payroll service.
|
Deduction or expense? |
Managed By |
Reconciliation processing |
|
Deductions |
Employer |
The payroll service will credit these items back to the employer. The amounts for these items will be entered into Payroll Reconciliation. Payroll Reconciliation will post general ledger entries for these items using the liability (or asset) account assigned. |
|
Deductions |
Service |
These items are unnecessary during payroll reconciliation. If entered, they will be considered informational only, and will be ignored by SuccessWare21®. |
|
Employer expenses |
Employer |
The payroll service will not bill these items to the employer, or will credit them back to the employer. The amounts for these items will be entered into Payroll Reconciliation. Payroll Reconciliation will post both expense and liability entries to general ledger for these items using accounts assigned when setting up deductions. |
|
Employer expenses |
Service |
The payroll service will bill these items to the employer, and they will represent part of the total fees to the payroll service. Payroll Reconciliation will post only the expense entries to general ledger for these items using the a expense account assigned when setting up deductions. |
Use the following procedures to set up SuccessWare21® to reconcile payroll using information provided by your payroll service.
(For more information on Payroll Setup, click here.)
If you use an outside payroll service, check the check box labeled ‘Use P/R Service’. Enter the name of your payroll service. This is used as the default Pay To for the posted check or debit. Select whether you want reconciliation to automatically post the disbursement(s) as miscellaneous payments to the account register. The recommended value is checked, but you may wish to manually make the payment if you require a system printed check, or if you want to track the payment with accounts payable reporting. Select whether payment is made to the payroll service using either check or debit.
Select this button and enter (or modify) your deductions and expenses to indicate whether they are employer managed. The active entries entered here are the items that will show up on the Deductions/Expenses page of payroll reconciliation. The value of IsEmployerManaged will affect the calculations for balancing the reconciliation, as well as how values are posted to the general ledger.
Select this button and make an entry for each of the disbursements you make to your payroll service. Only include disbursements that correspond with your payroll period(s). For example, do not include a monthly fee, if your payroll period processing is weekly. A fee like this would be entered into SuccesWare21® separate from payroll reconciliation.
Select whether or not you will be importing disbursement information from a data file provided by the payroll service. Using a sample import data file, setup your reconciliation import filters. For detailed information about setting up reconciliation import filters, click here.
(For more information on Payroll Reconciliation, click here.)
Disbursements to the payroll service for the current payroll period are entered here. Enter the amount of the disbursement(s) and a reference or check number. You can also modify the date of the disbursement(s), if different from the payroll check date.
Note: If you have a Checks tab instead of a Disbursements tab, then the payroll period had probably been created prior to configuring payroll for payroll service reconciliation. The period can be changed by right clicking, and selecting “Reconcile with my P/R service” from the popup menu.
Enter the amount of any employee deductions, and company expenses. If you need to make any changes to the list of available items, use the Deductions, Etc. button on the G/L tab of Payroll Setup.
Review the information presented in this tab before posting the reconciliation. Posted wages and reconciled wages should balance if all items have been entered correctly. If posted and reconciled wages do not balance, review your entries for accuracy - make sure that the wages reported by the payroll service match what you posted for the period and make sure all deductions and company expenses have been entered correctly, including whether they are employer managed, or not.
Reconciled wages are calculated based upon the following formula:
Reconciled wages = Total disbursements – total company expenses + employer managed deductions and expenses.