The settings on a pay period group (PPG) have several impacts on employee pay. One of the more complex settings is the Calculate Salary Percent field.
What is Salary Percent?
Why is the Salary Percent different in some pay periods?
What does the Calculate Salary Percent option do?
Salary Percent on each pay period
Pay frequency
Use Case 1: Stipends
Use Case 2: Bi-Weekly Pay with 27 Pay Periods
What is Salary Percent?
Each pay period in the group has a value in the Salary Percent column. This number represents the percentage of a yearly salary wage paid out in this pay period. The default percentage is calculated automatically by dividing 100% by the number of pay periods selected.
Example: A PPG with 10 periods will show each pay period with 10%.
This field only affects payroll items with the algorithm Salary.
Why is the Salary Percent different in some pay periods?
The Salary percent field accepts up to five digits after the decimal. Often, 100% is not evenly divisible by the number of pay periods in the group, so the hundred-thousandth place (fifth digit) will be higher in some pay periods than others. The higher numbers are always placed in the latest pay period.
Example: A PPG with 12 pay periods cannot evenly divide 100% by 12. 100 / 12 = 8⅓, or 8.333333333… repeating. As a result, you will end up with
- Eight pay periods with a Salary Percent of 8.33333
- Four pay periods with a Salary Percent of 8.33334
(8 x 8.33333%) + (4 x 8.33334%) = 100%.
What does the Calculate Salary Percent option do?
Each pay period group has an option underneath the Description called Calculate Salary Percent with two options to choose from:
- Based upon number of selected pay periods
- Based upon ___ pay periods
Based upon number of selected pay periods is selected by default and should be used in most cases. In either case, the Calculate Salary Percent field has a value that performs two functions:
- It changes the calculated Salary Percent on each pay period to be 1/[value]th
- It changes the pay frequency used for federal and state calculations
Salary Percent on each pay period
Example: A PPG has 12 pay periods. When Based upon number of selected pay periods is selected, the Calculate Salary Percent value is 12. This means each pay period represents 1/12th of salary and gets a value of 8.33333 or 8.33334.
Example: A PPG has 12 pay periods. When Based upon ___ pay periods is select and a value of 10 is entered, the Calculate Salary Percent value is 10. This means each pay period represents 1/10th of salary and gets a value of 10.
Pay frequency
State and federal tax withholding are calculated using an estimated annual taxable income. That value is calculated anew on each payroll by taking the taxable income on that individual run and multiplying it by the pay frequency.
Example: A PPG has 12 pay periods. When Based upon number of selected pay periods is selected, the Calculate Salary Percent value is 12. An employee whose taxable pay on a payroll run was $3,000 will have an estimated annual taxable income of $36,000 ($3,000 x 12).
Example: A PPG has 12 pay periods. When Based upon ___ pay periods is select and a value of 10 is entered, the Calculate Salary Percent value is 10. An employee whose taxable pay on a payroll run was $3,000 will have an estimated annual taxable income of $30,000 ($3,000 x 10).
Use Case 1: Stipends
Without the option to change the pay frequency, stipends that are paid out only once a year but at various points throughout the year for different employees could be difficult to set up. You would have to choose between:
a) Creating a pay period group with many pay periods, but the pay frequency would be larger than reality and cause extra tax withholding.
or
b) Creating a separate single-pay-period PPG for each time that a stipend might get paid out.
But by changing the pay frequency, you can get the best of both worlds:
- Set up a PPG with a full year’s worth of pay periods, for the maximum flexibility to pay out a stipend at any time, and
- Set the pay frequency to 1 so that the pay frequency will not overcalculate their estimate annual taxable income
The effect on the Salary Percent field should not matter because you would not add positions with a Salary item to this PPG.
If some stipends are paid twice a year (e.g. split between the beginning and end of a season), then you might want to create separate “Stipend - 1 pay” and “Stipend - 2 pays” PPGs.
To set up a stipend PPG with a pay frequency of 1 that can be paid out at any time throughout the year:
- Go to Financials Main > Payroll > Pay Period Groups
- Create
- Enter a Description
- Select the pay periods that run from 7/1 to 6/30
- If you have multiple sets of pay period groups, pay attention to the fact that the latest pay period end date must be a maximum of 366 days after the earliest pay period start date.
- In the Calculate Salary Percent field, select Based upon ____ pay periods
- Enter 1 into the empty field
- The Salary Percent on each pay period will be 100
- Save
Use Case 2: Bi-Weekly Pay with 27 Pay Periods
Bi-Weekly pay traditionally has 26 pay periods per year. However, because a full year is not evenly divisible by 2 weeks, some years will have 27 pay periods. This happens approximately every 12 years.
If the fiscal year will have 27 pay periods, but the contract should still be divided by 26 periods, you will need to add all 27 pay periods to the Pay Period Group, but use the “Calculate Salary Percent” field to
To set up the bi-weekly pay period group with 27 pay periods:
- Go to Financials Main > Payroll > Pay Period Groups
- Create
- Enter a Description
- Select the 27 pay periods that run from 7/1 to 6/30
- The default Salary Percent on each pay period will be 3.7037 or 3.70371 (~1/27th)
- In the Calculate Salary Percent field, select Based upon ____ pay periods
- Enter 26 into the empty field
- The Salary Percent on each pay period will be 3.84615 (~1/26th)
- Save