Worker and position payroll tasks

Applies To: Microsoft Dynamics AX 2012 R3, Microsoft Dynamics AX 2012 R2

This topic describes how to set up workers and positions for payroll.

Before you can pay a worker, you must set up payroll information about the worker’s position, taxes, and benefits. This information is used when you generate pay statements for the worker.

In addition, if contribution and deduction amounts are changed on a benefit, that change must be made for each worker who is enrolled in that benefit. For more information, see Payroll data updates.

The following illustration shows the steps that you must follow to set up payroll details for positions and workers. The numbers correspond to the procedures later in this topic.

What do you want to do?

Understand the bigger process

Review the prerequisites

1. Add payroll details to positions

2. Add earning codes to worker position assignments

3. Set up worker tax regions

4. If required: Change worker residency

5. Assign default tax regions

6. Set up worker tax codes

7. Enroll workers in benefits

8. Set up payroll information for benefits

Next step

Technical information for system administrators

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Understand the bigger process

The following illustration shows the relationship between this topic and the overall process of setting up Payroll for the first time.

For an overview of the process see Setting up payroll: Basic topics.

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Review the prerequisites

The following table shows the prerequisites that must be in place before you start.

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1. Add payroll details to positions

You must specify payroll details and add them to a position before you can generate payroll for the position.

To add payroll details to a position, follow these steps:

1. Click Payroll > Common > Positions > Positions.

2. Double-click a position to open the Position form.

3. On the Action Pane, click Edit.

4. On the Payroll FastTab, enter this information.

   Field	Description
   Pay cycle	Select the pay cycle that specifies the payroll calculation frequency and pay date for the position.
   Work cycle	For non-exempt positions only, select the work cycle that specifies the work periods for the position. Some earnings, such as the regular-rate-of-pay premiums that are required by the Fair Labor Standards Act (FLSA), are based on work periods and not pay periods. For exempt positions, leave this field blank. Warning For workers who have more than one position, make sure that all positions that are assigned to the worker have the same work cycle.
   Paid by	Select the legal entity that is responsible for making the payroll payments for this position. The legal entity that is responsible for paying for the position must be assigned to the position before you can assign worker tax codes to workers. Note You can use the Worker form to assign default tax codes for each position. For more information, see Worker (form).
   Annual regular hours	Enter the number of regularly paid hours that the position is expected to have each year. This is used to determine salary adjustments. For example, you might enter 2080 for a regular salaried worker, which equals 40 hours each week. If a worker has eight hours of sick time, the difference of 32 hours can be automatically calculated.
   Workers' compensation	Click Add and select a compensation state and a compensation code. Repeat these steps for any additional workers’ compensation benefits.
   Earnings	The fields in this group interact in these ways to determine how earnings are generated and shown on earnings statements: If neither Generate salary nor Generate earnings from schedule is selected, base earnings statement lines for the position aren’t generated. Only the recurring earnings that are specified in the Worker form are generated. If Generate earnings from schedule is selected and Generate salary is not selected, this information applies: A schedule is required. You can select from among the calendars that have been created for the legal entity that is selected in the Paid by field. A default earning code is required. A day-by-day breakout of earnings for the position is shown in the worker’s earnings statement. This set of selections is usually used for hourly workers. If Generate salary is selected and Generate earnings from schedule is not selected, this information applies: A default earning code is required. The worker is paid the standard position salary amount for each pay period, and a single line is included in the earnings statement. The line will have the date of the last day in the pay period. Note If earnings statement lines were entered manually before the earnings were generated, the salary could be split across more than one line. The total of the manually entered lines and the single generated line is always the standard salary amount. This set of selections is usually used for salaried workers. If both Generate salary and Generate earnings from schedule are selected, this information applies: A schedule is required. You can select from among the calendars that have been created for the legal entity that is selected in the Paid by field. A default earning code is required. The worker is paid the standard position salary amount for each pay period. A day-by-day breakout of earnings for the position is shown on the worker’s earnings statement. This set of selections is usually used for salaried workers when you want a day-by-day breakout of their time. For example, this might be useful if a worker’s time is associated with a project two days out of five.

5. On the Labor union FastTab, select the union agreement.

Repeat these steps to set up payroll details for additional positions.

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2. Add earning codes to worker position assignments

If a worker receives recurring earnings or an earning rate that differs from the default earning code, you must assign an earning code to the worker to make sure that earnings are generated correctly. For more information, see Generate earnings.

To assign an earning code to a worker, follow these steps:

1. Click Payroll > Common > Workers > Workers. Double-click a worker.

2. On the Payroll earning codes FastTab, click Add to add an earning code to the worker.

3. Select the position that the earning applies to.

4. Select the earning code.

5. If necessary, change the default amount of the earning code. This value should be appropriate for the rate basis that is displayed.

   The rate basis is assigned in the Earning codes setup form. For more information, see Earning code and earning code group tasks.

6. Select the frequency that the earning is received. For information about how to set up frequencies, see Payroll calculation frequencies tasks.

   Note

   If you are setting up an earning code that is based on hours or pieces, the Frequency field isn’t available. Earnings that are based on hours are generated based on the Generate salary and Generate earnings from schedule selections in the Position form. Earnings that are based on pieces are entered manually.

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3. Set up worker tax regions

When you assign a tax region to a worker, all worker tax codes that apply to the worker are set up automatically. All parameters for the worker tax codes are set to their default values. We recommend that you review the worker tax codes for each worker to make sure that they are accurate. For more information, see Tax information tasks

To set up tax regions for workers, follow these steps:

1. Create a list or spreadsheet that contains the following information for each worker that you’re setting up tax regions for:

   • The city and state where the worker claims residency

   • The city and state of each location where the worker works

   In addition, for some states, you need the school district and municipality that are associated with the residence or work locations. Consult the state tax office to determine whether you need this information.

2. Click Payroll > Common > Workers > Workers. Select a worker. On the Action Pane, on the Payroll tab, click Worker tax regions.

3. Click New.

4. In the Tax region field, select the tax region where the worker claims residency, or the tax region where the worker can work.

   The first tax region that is assigned to a worker is designated as the worker’s resident tax region. You can change the worker’s residency at any time. For more information, see “If required: Change worker residency” in this topic.

   Most workers have only one worker tax region. A worker who resides in one tax region and works in another tax region has two worker tax regions. A worker who works in multiple locations has multiple tax regions.

   In most cases, the worker tax codes that are required for this tax region are automatically assigned to the worker when you close this form. If the worker isn’t assigned to a position, or if the worker’s position isn’t assigned to a legal entity for payroll, the tax codes are assigned later, when the position and legal entity are assigned.

5. If required by the state that the tax region is in: Select a school district and municipality. If you use both fields, you must select a school district before you can select a municipality.

   Consult the state tax office to determine whether this information is required. If it isn’t required, leave these fields blank.

Repeat these steps to assign additional tax regions to the worker. When you finish, close the form.

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4. If required: Change worker residency

The first tax region that is assigned to a worker is designated as the worker’s resident tax region. A worker can have only one resident tax region at a time. If you know that a worker’s resident tax region will change in the future, you can set up a new resident tax region to take effect on a specified date. The current resident tax region automatically expires when the new one takes effect.

To change the tax region where a worker claims residency, follow these steps:

1. Click Payroll > Common > Workers > Workers. Select a worker. On the Action Pane, on the Payroll tab, click Worker tax regions.

2. Click Maintain residency.

3. Click Add.

4. In the Tax region field, select the tax region where the worker claims residency. In the Effective field, select the date when the residency becomes effective.

   You don’t have to enter an expiration date for the current resident tax region. When you set up a new resident tax region with a new effective date, the expiration date is automatically adjusted for the previous resident tax region.

5. Close the form. If a message is displayed that states that effective dates for one or more records will be adjusted by the change, click Yes.

6. Verify that the Resident check box for the correct tax region is selected, and then close the form.

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5. Assign default tax regions

Tax regions are geographic areas in which a specific set of payroll taxes applies. Tax regions generally correspond to the cities or towns where your workers reside or work. A worker tax region is a tax region that has been assigned to a specific worker. A default tax region is a worker tax region that is used to generate earnings for a specific position that worker holds.

A default tax region is required for each position that a worker holds. The default tax region is used to generate earnings for a worker’s position. Therefore, if you don’t assign a default tax region to the worker’s position, earnings can’t be generated for the position. To pay the worker, you would have to enter the earnings manually, and then manually enter the tax region on each earning statement line.

If a worker’s position requires different tax regions at different times, you still must select a single default tax region for the position. If necessary, you can change the tax region on individual earning statement lines after you generate earnings for the position.

To assign a default tax region to a worker, follow these steps:

1. Click Payroll > Common > Workers > Workers. Select a worker. On the Action Pane, on the Payroll tab, click Default tax region.

2. A position can be assigned to only one default tax region. To change the default tax region for a position that already has a default tax region, select the position, and then click Delete.

   Changes to the default tax region go into effect immediately.

3. To assign a default tax region to a position, click New.

4. In the Position column, select a worker position. One default tax region must be specified for each position that is assigned to the worker.

5. In the Tax region column, select the default tax region for the selected position.

   Note

   If the worker tax region that should be specified for the position isn’t included in the list, close this form and use the Worker tax region form to assign the tax region to this worker. Then, return to this form to assign the default tax region.

Repeat these steps to assign additional default tax regions to the worker’s positions. When you finish, close the form.

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6. Set up worker tax codes

You can manage a worker’s tax options, such as filing status or total allowances, in the Worker tax codes form.

You don’t have to create or assign the worker tax codes because the codes are automatically created and assigned to the worker when you create worker tax regions. At first, all worker tax code parameters are set to their default values. We recommend that you review the worker tax codes for each worker to make sure that they are accurate. For more information, see Tax information tasks.

To set up tax codes for workers, follow these steps:

1. Create a list or spreadsheet that contains the values of the tax options for all the tax codes that are assigned to each worker whose tax codes you are setting up. These values are different for each tax code. The information is typically collected on IRS Form W-4 or a similar form for the state.

2. Click Payroll > Common > Workers > Workers. Select a worker. On the Action Pane, on the Payroll tab, click Worker tax codes.

   Tip

   When the Worker tax codes form opens, the tax codes that are effective on the current date are displayed. To view the tax codes and tax code parameters that were or will be effective on a particular date, click the button next to Current records, enter a date, and then click Apply.

3. Select a legal entity.

   The tax code parameters change to those that are associated with the selected legal entity. Each tax code that is assigned to the worker must be set up for each legal entity.

4. In the Tax code column, select a tax code.

5. Review each tax code parameter. If the tax code parameter grid is empty, use the form-level Legal entity field to select a legal entity.

   To change a value, follow these steps:

   1. Click Maintain versions.

   2. Select the parameter to change.

   3. In the Effective field, enter the date when the new parameter value takes effect.

   4. In the Value field, select the new parameter value.

   5. Repeat these steps to change additional parameter values.

   6. When you finish, close the form.

   Tip

   You can also change the value of the parameter directly in the grid. When you do this, the date is stamped on the new version of the tax code parameter, but the time isn’t. As a result, the first change that you make in a day creates a new version of the parameter. If you change the value later in the same day, the new change overwrites the previous change without creating a new version of the parameter. Only the last change is saved in the date-effective version.

Repeat these steps to configure additional tax codes. If the worker has positions in more than one legal entity, make sure that you set up the worker tax codes for all applicable legal entities.

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7. Enroll workers in benefits

Go to Key tasks: Determine benefit eligibility and perform all of the tasks. These tasks include enrolling workers in benefits.

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8. Set up payroll information for benefits

Payroll information for a benefit isn’t available if the Payroll impact field in the Benefit elements form is set to None for the benefit plan.

For more information about how to set up a benefit, see Benefit setup tasks. For more detailed information about the fields that are used in this task to set up a benefit for a worker, see Maintain benefits (form).

To set up payroll information for benefits, follow these steps:

1. Click Payroll > Common > Workers > Workers. Select a worker, click Personal information, and then click Benefits.

2. Select a benefit from the list of benefits that the worker is enrolled in.

3. Click the Payroll details FastTab. The fields on this FastTab vary, depending on how the Payroll impact field in the Benefit elements form is set.

4. Enter this information:

   • Paid by – The legal entity that pays for the selected benefit for this worker. This is usually the same legal entity that the worker is employed by and that pays for the worker position. For more information, see Positions (form).

   • Position – Leave this field blank, except when the total costs for the benefit must follow a specific position. Union dues are an example of a benefit that would be assigned to a position.

     If you select a position, the benefit calculations are based only on the earnings from the position. If you don’t select a position, the deductions and contributions for the benefit are calculated, based on all the worker’s earnings. The amounts are split between all the positions that the employee is currently assigned to. The distribution for the deductions and calculations uses the same distribution as the earnings for those positions.

   • Calculation priority – The order that deductions and contributions for the selected benefit are calculated in, relative to other benefits.

     The deductions and contributions for the benefit that has the lowest calculation priority number are calculated first, starting with 0. When multiple benefits have the same number, the calculations for those benefits are completed in alphabetical order.

     The calculation order is important when the result of the calculation for one benefit is used in the calculation for another benefit. This is especially likely for garnishments and tax levies. Your legal advisors should help you determine the correct calculation priority for all benefits.

   • Deduction priority – The order that deductions for the selected benefit are made in, relative to other deductions.

     The deduction for the benefit that has the lowest deduction priority number is made first, starting with 1. When multiple benefits have the same number, the deductions for those benefits are made in alphabetical order.

     Your legal advisors should help you determine the correct deduction priority for all benefits.

     The default value for this field is set up in the Benefit elements form. For more information about this field, see Benefit elements (form).

   • Rate source, Basis, and Deduction – The basis option and the deduction amount are used together to calculate the amount of the payroll deduction for the benefit.

     The default values for these fields are set up in the Basis and Amount or rate fields in the Benefits form. For information about how these fields interact, see Benefits (form).

     The Rate source field determines whether these fields are changed to match the default values when the benefit rates are updated from the benefit.

     • If you select Benefit, the deduction amount and basis for the worker are updated automatically when you click Update benefit rates in the Benefits form.

     • If you select Custom, the deduction amount and basis for the worker aren’t changed when you click Update benefit rates in the Benefits form. Select this option when the contribution for a worker is specific to that worker, such as when contribution amounts have been grandfathered in for some workers after a rate change.

     Note

     For garnishments and tax levies, the rate source for deductions is always Custom. For other benefit types, the default value in the Rate source field is Benefit.

     The Rate source field and the Update benefit rates button aren’t available in versions prior to cumulative update 7 for Microsoft Dynamics AX 2012 R2.

   • Rate source, Basis, and Contribution – The basis option and the contribution amount are used together to calculate the amount of the employer contribution for the benefit.

     The default values for these fields are set up in the Basis and Amount or rate fields in the Benefits form. For information about how these fields interact, see Benefits (form).

     The Rate source field determines whether these fields are changed to match the default values when the benefit rates are updated from the benefit.

     • If you select Benefit, the contribution amount and basis for the worker are updated automatically when you click Update benefit rates in the Benefits form.

     • If you select Custom, the contribution amount and basis for the worker are not changed when you click Update benefit rates in the Benefits form. Choose this option when the contribution for a worker is specific to that worker, such as when contribution amounts have been grandfathered for some workers after a rate change.

     Note

     For contributions, the default value in the Rate source field is Benefit.

     The Rate source field and the Update benefit rates button aren’t available in versions prior to cumulative update 7 for Microsoft Dynamics AX 2012 R2.

   • Notes – If you change the default values for any payroll fields in this form, it is a best practice to enter an explanation in this field.

5. Click the Payroll limits FastTab. The FastTab might contain a set of payroll limits for contributions, for deductions, or for both, depending on the value in the Payroll impact field in the Benefit elements form.

6. Enter this information for deductions:

   • Limit amount – The maximum amount that can be deducted from a worker’s pay for the selected benefit. If there is no maximum amount, leave this field blank.

     Warning

     The Remaining field displays the amount that can be deducted for the benefit in future pay periods before the end of the limit period is reached. The amount is automatically updated during each pay run. You can also manually change the amount. Because no change history is kept, we recommend that you don’t enter or change the value in this field.

   • Limit period – The period that the deduction limits apply to. For example, if the limit amount is 1200.00 and the Limit period field is set to Year, when the cumulative deductions for the benefit reach 1200.00, no additional deductions are allowed for that benefit for the rest of the year.

     The last day of the current limit period is displayed in the Limit end field. When the current limit period ends, this value in this field is automatically reset to the end of the new limit period.

     Note

     The limit period is based on the calendar. For more information, see Benefit elements (form).

7. Enter this information for contributions:

   • Limit amount – The maximum amount that can be contributed by the employer for the selected benefit. If there is no maximum amount, leave this field blank.

     Warning

     The Remaining field displays the amount that can be contributed for the benefit in future pay periods before the end of the limit period is reached. The amount is automatically updated during each pay run. You can also manually change the amount. Because no change history is kept, we recommend that you don’t enter or change the value in this field.

   • Limit period – The period that the contribution limits apply to. For example, if the limit amount is 1200.00 and the Limit period field is set to Year, when the cumulative contributions for the benefit reach 1200.00, no additional deductions are allowed for that benefit for the rest of the year.

     The last day of the current limit period is displayed in the Limit end field. When the current limit period ends, the value in this field is automatically reset to the end of the new limit period.

     Note

     The limit period is based on the calendar. For more information, see Benefit elements (form).

Repeat these steps to set up payroll information for additional benefits. When you finish, close the form.

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Next step

If your Payroll setup plan includes entering beginning balances for deductions, benefits, and taxes, see Payroll beginning balance tasks.

After you have completed the basic setup of the Payroll module, advanced setup tasks might be required. For more information, see Setting up payroll: Advanced topics.

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Technical information for system administrators

If you don't have access to the pages that are used to complete this task, contact your system administrator and provide the information that is shown in the following table.

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Find form help

Maintain benefits (form)

Find related tasks

Tax information tasks

Benefit setup tasks

Garnishment and tax levy setup tasks

Garnishment and tax levy enrollment tasks