Clarity - How to setup an advance pay

Problem:

I want to pay advances to your employees and be able to retrieve the advance through subsequent payrolls.

Solution:

In order to do this, you will need to set up two payroll categories, one earning category and one deduction category. The earning category will be used to pay the advance payment and the deduction category will be used to retrieve the advance payment during the regular payroll. 

Setting up the earning category for the advance payment

Steps:

1. From main menu, go to “Setup | Payroll Categories”.
2. From “Payroll Category Select” screen, click on the “Add…” button.
3. A pop up menu will appear. Click on “Earning”.

4. From “Payroll Category Edit” screen for an earning category and enter the followings:

   Item Number	Enter a unique payroll item number.
   Description	Enter a description such as “Advance Pay”.
   Abbreviation	Enter an abbreviation such as “Adv Pay”
   Type	Select “Regular” from the drop down list.
   T4 form assignment	Select “Not Reported” from the drop down list.
   RL-1 form assignment	Select “Not Reported” from the drop down list.
   T4A form assignment	Select “Not Reported” from the drop down list.

5. Uncheck all the boxes in “Subject to…” group box.

6. Click on “Save” button to save this new earning category.

7. You will be prompted by the following question, “Do you wish to assign this pay code to every active employee?”. If the advance pay applies to all active employees, click on “Yes” button otherwise click on “No” button.

Setting up the deduction category for retrieving the advance payment

Steps:

1. From main menu, go to Setup > Payroll Categories.
2. From “Payroll Category Select” screen, click on “Add…” button.
3. A pop up menu will appear. Click on “Deduction”.

4. From “Payroll Category Edit” screen for a deduction category and enter the followings:
   

   Item Number	Enter a unique payroll item number.
   Description	Enter a description such as “Advance Pay”.
   Abbreviation	Enter an abbreviation such as “Adv Pay”
   Type	Select “Regular” from the drop down list.
   T4 form assignment	Select “Not Reported” from the drop down list.
   RL-1 form assignment	Select “Not Reported” from the drop down list.
   T4A form assignment	Select “Not Reported” from the drop down list.

5. Uncheck “Two Tiered Calculation”.

6. Uncheck “Maximum Per Year”.

7. Check on “Reset at Yearend” If you want to reset it at year end, click on “Yes” button otherwise click on “No” button.

8. Uncheck “Deduct before Calculation Taxes” 

9. Click on “Save” button to save this new deduction category.

10. You will be prompted by the following question, “Do you wish to assign this pay code to every active employee?”. If the advance pay applies to all active employees, click on “Yes” button otherwise click on “No” button. 

Assigning the categories to an employee:

Do the following only if you said “No” to the question “Do you wish to assign this pay code to every active employee?” when setting up the earning and deduction.

Steps:

1. From main menu, go to Setup > Employees.
2. From “Select Employee” screen, highlight the employee that you want and click on “Edit” button.
3. From “Employee Edit” screen, click on the “Pay Card” tab. You will see a list of categories on the left hand side.
4. Scroll down until you find your newly added earning and put a checkmark to the box next to it. Next, scroll down until you find your newly added deduction and put a checkmark to the box next to it.
5. Click on “Save” button to save the changes. The new categories will now appear when you process a timesheet for the employee.
6. Repeat this for each employee who will have advance pay.

Processing the advance pay:

You would process the advance pay run in the same way as you process the regular payroll run. Only when you select a pay period for your advance pay, from “Select Pay Period” screen make sure that you only have the earning “Advance Pay” checked. And when you are editing the timesheet, enter the advance payment amount to the earning “Advance Pay”.

Processing the regular pay:

When you process the regular payroll run, make sure the earning “Advance pay” is unchecked and the deduction “Advance recovery” is checked in the “Select Pay Period” screen.

When editing the timesheet, enter the normal regular wages as usual then enter the advance payment amount that the employee received in his/her advance pay into the deduction “Advance Recovery”. This deduction will reduce the net pay since the employee already received that amount in the advance pay.