Payroll for Microsoft Office Accounting 2009 uses payroll codes to represent all employee payments and deductions as well as other types of payroll transactions, such as payroll liability payments and statutory payment recoveries. Each payroll code is associated with an account in your company's nominal ledger (or with a payroll supplier, in some cases), and you assign payroll codes to individual employees as appropriate. For example, you can link a payroll code for overtime pay to a specific expense account and then assign the payroll code to your employees when they work overtime.
Accounting 2009 includes numerous predefined payroll codes that cover common types of pay, such as salary, hourly pay, holiday pay and commission. You can also create custom payroll codes to meet your unique business needs. To view the predefined payroll codes (and any custom payroll codes that you create), on the Employees menu, click Manage Payroll Codes. The Manage Payroll Codes dialog box opens displaying a list of all payroll codes.
Before you can assign a payroll code to employees, the payroll code must be marked as active and linked to an account in the nominal ledger or to a payroll supplier. All of the predefined payroll codes that are included with Accounting 2009 are active by default and are already assigned to accounts in the nominal ledger or to suppliers.
About nominal ledger and payroll supplier accounts
When a payroll code is linked to a nominal ledger or payroll supplier account, all transactions for the payroll code are posted to that account. The type of account that you select for a payroll code depends on the type of transaction the payroll code represents:
- Expense account—Payroll codes that represent employee payments, such as salary and hourly wages, bonuses and commissions, are typically associated with expense accounts in the nominal ledger.
- Payroll supplier or payroll liability account—Payroll codes that represent payroll liabilities to be paid for legislative deductions, court orders, pension schemes and other payroll liabilities are typically associated with payroll suppliers. Accounting 2009 automatically associates these payroll suppliers with payroll accounts-payable accounts in the nominal ledger.
Certain types of employee deductions, or payments that you make on behalf of employees, such as payments for health club dues, can either be assigned to a payroll liability account or to a payroll supplier, depending on your company's business practices. If you have a question about which type of account to use, contact your accountant.
When you set up your company in Accounting 2009, the system automatically creates standard nominal ledger accounts for your business. You can also set up custom accounts. For more information, see About the Chart of Accounts.
Managing payroll codes
You manage payroll codes by creating new payroll codes, editing the settings for existing payroll codes or deleting payroll codes that don't suit your business needs. For more information, click an item in the following list:
Creating payroll codes
You can add a new payroll code to address a unique business need.
When you add the new code, you must define several details about it, such as whether it is a payment to an employee, such as a clothing allowance, or a deduction from the employee's wages, such as voluntary charitable giving.
You must also define whether a payment will be affected by Pay As You Earn (PAYE) tax and National Insurance contributions (NICs), or whether a deduction will be made before or after PAYE tax and NICs are taken. In most cases, taxable payments are subject to both PAYE tax and NICs, and deductions are subject to NICs; however, there may be cases in which only one legislative deduction is applicable.
For more information, see Add a new payroll code and About tax settings for new payroll codes.
Editing payroll codes
When you edit a payroll code, you can rename, assign it to a different account in the nominal ledger or change its tax settings. You can also make a payroll code permanant—that is, set the payroll code to be automatically assigned to an employee in every pay period. For example, if an employee regularly receives a commission, you might make the Commission payroll code permanent. You can also specify that the amount associated with the payroll code be carried forward from pay period to pay period.
If you have a payroll code that you are no longer using, you can deactivate it to prevent the payroll code from being assigned to employees inadvertently. If you decide you want to use it later, you can activate the payroll code again.
Payroll codes that represent basic pay types, such as Salary and Hourly Pay, and payroll codes that are linked to legislative rules, such as PAYE and NI Employee, cannot be modified or deleted. Other predefined payroll codes can be modified on a limited basis. If you cannot edit a setting for a particular payroll code, that setting will be unavailable in the Edit Payroll Code dialog box.
For more information, see Edit or remove a payroll code.
Deleting payroll codes
You can delete a payroll code to remove it from the system. If you delete a payroll code and then decide you want to use it, you must add the payroll code as a new payroll code.
Payroll codes that represent basic pay types, such as Salary and Hourly Pay, cannot be deleted. Also, after you assign a payroll code to an employee and use it in payroll calculations, you cannot remove the payroll code.
If you are no longer using a payroll code that cannot be deleted, you can deactivate the payroll code to prevent it from being assigned to employees inadvertently. For more information, see Edit or remove a payroll code.
Assigning payroll codes to employees
You can assign payroll codes to employees on either a permanent or one-time basis:
- You assign permanent payroll codes to employees by using the Payroll Details tab of the Employee form for each employee. A permanent payroll code is automatically reassigned to the employee in every pay period. For more information, see Create an employee record.
- You assign payroll codes for one-time payments or deductions when you process payroll. For example, you can assign a bonus to an employee by selecting the employee in the Payroll Summary dialog box, and then clicking Edit Pay Details. If a payroll code is not set up to be permanent, you must assign it to the appropriate employees for every pay period in which it figures into employee pay. For more information, see Prepare payroll payments.
Payroll for Accounting 2009 also automatically assigns the payroll code that represents the employee's primary pay—Salary or Hourly Pay—when you add payroll details to the Employee form for each employee. In addition, you do not need to assign payroll codes for legislative deductions, such as PAYE and NICs, directly to employees. Payroll for Accounting 2009 assigns those payroll codes automatically as appropriate when you calculate pay.