Sample Deduction Formula

July 2003


Using formulas in the OSAS system for payroll deductions can be a very powerful and useful feature.  The best teacher is a specific example.  This example illustrates using a formula to take a percentage of disposable earnings (gross earnings less federal and state taxes) and also shows the use of an optional cap or limit on the deduction.  Please be careful when setting up deduction formulas so that you test and check your results.


Setting up the Deduction

In Payroll – Codes Maintenance – Deductions, you can establish the deduction number for the garnishment:


*-------------------------------- Deductions ---------------------------------03

|                                                                              1

|                               Deduction Codes                                1

|                                                                              1


|   No  Description     Emplr? Liab Acct    Accr Ded Acct Def Comp Calc On     1

|    1  Medical Ins      NO    535000                       NO     Gross Pay   1

|    2  Dental  Ins      NO    535000                       NO     Gross Pay   1

|    3  United Way       NO    204000                       NO     Gross Pay   1

|    4  Credit Union     NO    999900                       NO     Gross Pay   1

|    5  Dues             NO    999900                       NO     Gross Pay   1

|    6  401K             NO    205000                       YES    Gross Pay   1

|    7  IRA Plan         NO    200000                       NO     Gross Pay   1

|    8  Parking          NO    801000                       NO     Gross Pay   1

|    9  Cash Advance     NO    101000                       NO     Gross Pay   1

|   10  Stock Plan       NO    205000                       NO     Gross Pay   1

|   11  Uniform          NO    801000                       NO     Gross Pay   1

|   12  Garnishment      NO    801000                       NO     Net Pay     1

|                                                                              1

|                                                                              1

|                                                      Deduction (012 of 012)  1


|     Enter = edit, Append, Formula, Exclude earning codes, Copy Deduction     1

*- Company H -------------- Quick ----------------------------------- Verify -05


In this example, deduction number 12 is the garnishment we are working with.  NOTE: If you are going to use calculations such as tax withholdings in your formula as I am in this example, then you must set the Calc On to NET PAY.  Net pay deductions are calculated after the taxes are withheld while Gross Pay deductions are calculated prior to taxes being done.  You can use an existing deduction code if you like for this formula and simply change the setting from Gross to Net.


After establishing the deduction code, with the prompt > on the left side pointing to your deduction, press the letter F to go to the formula screen.  By pressing the F while next to your deduction, the system automatically names the formula for you.  You should keep the name provided by the system.


*---------------------------- Formula Maintenance ----------------------------03

|  Formula ID   PD012H__.RTN                                                   1

|  Description  Percentage of Disposable                                       1

|  Factor 1        10.0000  Factor 2     99999.0000  Factor 3         0.0000   1

|  Factor 4         0.0000  Factor 5         0.0000  Factor 6         0.0000   1


|  Variable        Formula                                                     1

|  LI001           TOTEARN-FEDWITH-STATEWITH                                   1

|  LI002           LI001*FC1/100                                               1

|  LI003           IF(FC2<LI002) TH (FC2) EL (LI002)                           1

|  LI004           IF (LI003<0) TH (0) EL (LI003)                              1

|                                                                              1

|                                                                              1

|                                                                              1

|                                                                              1

|                                                                              1

|                                                                              1

|                                                                              1

|                                                                              1

|                                                                              1

|                                                   Formula Line (001 of 004)  1


|                Enter = edit, Append, Header, Create program                  1

*- Company H -------------- Quick ----------------------------------- Verify -05


Note that in this example, factor 1 at the top of the screen is set to 10.0000.  This represents the default percentage for the calculation of the garnishment as being 10%.  Note that whole numbers are used and not decimals.  My choice to use whole numbers will effect the formula since my formula will then need to divide by 100 at some point to convert this number into a percentage.  You may use any default percentage you desire.  I will show later how to override the factors for an individual employee.


My intention is to build flexibility into the formula, and I will use Factor 2 at the top of the screen as a place to set an upper dollar limit or cap on the deduction amount.  The default setting of 99999 is set sufficiently high as to have no limit by default, but this limit can be set individually in the employee’s file by overriding the factors, thus making it personal to the individual if there is a cap amount.


You may copy the formula as you see it above.  The only letter O is found in TOTEARN on line 001 while all the rest of the round things are zeros.  Refer to your OSAS Payroll User’s manual if necessary for more details on entering the formula.  You append one line at a time, <PgDn>, then append the next line.



This line takes the employees total earnings for the period, then subtracts all the federal income, social security, and medicare taxes, then subtracts the state withholdings.


LI002  LI001*FC1/100

This line takes the result of line one, then multiplies it by factor 1, then divides by 100 so as to treat factor 1 as a percentage.  This line will then represent the percentage calculation amount of the deduction.


LI003  IF(FC2<LI002) TH (FC2) EL (LI002)

This line checks to see if factor 2 is less than the percentage of earnings calculated on line 002.  The result of this test is that line 003 will contain either the percentage calculated on line 002 or the dollar value in factor 2, whichever is SMALLER.  This basically establishes the cap, but remember we set the default cap to be $99999.


LI004  IF (LI003<0) TH (0) EL (LI003)

This line is a standard line I use in most formulas.  It is intended to eliminate the possibility of accidentally generating a negative deduction.  A negative deduction could be calculated if for some reason negative earnings were entered.  By having this Iine in my formula, I have decided that when there are negative earnings, I don’t want any deduction amount calculated.


So my generic formula is set with a default withholding percentage of 10% and a cap of $99999 on the deduction amount.  In practice, you may make these defaults anything you wish.


Setting up the Employee Scheduled Deduction and Overriding Factors

By using factors in the formula, we add a lot of flexibility because factors can be overriden on an individual basis.  So the same generic formula and deduction number can be used for different employees, and each can have their own percentage and cap.


To override the factors in the formula for a specific employee, you go to Payroll – File Maintenance – Employees.  Say YES to the salary information screen, get to the window that has the scheduled deductions for this employee.  When you define the deduction for this employee, you should use F as the setting (compared to the usual Y).  The deduction line for this employee will look like:


          >  12 Garnishment     FFFNN       .00        .00


The F says to use the formula associated with this deduction.  It is useful to note that you can still use this same deduction number for other employees with garnishments and use the Y to take a fixed dollar amount.  You are always limited, however, to only using a given scheduled deduction code number once per setup for an employee.  So you can not use deduction code 12 as both a formula deduction and a fixed amount deduction for the same employee.  You would need to use two separate deduction codes in this case.  For example, some authorities allow you to withhold a separate fee for processing the deduction.  This fixed fee would have to be on another deduction code.  (Or a creative type may want to build it into the formula!)


When you have the prompt > pointing to the scheduled deduction in the employee’s file, you will have the option of pressing the letter C to change the factors.  Pressing the C will bring up a window that allows you to define the factors for this employee.


*---------------------------- Salary Information -----------------------------03

| Employee ID   BOU001    Bourne, Linda C                                      1


| --- Pay Information ---    |          --- Scheduled Deductions ---           |

| Dept              500      |   No Description     12345    Amount    Balance |

| Labor Class          Prs   |    1 Medical Ins *------ Factor Entry --------* |

| Corporate Officer?    NO   |    6 401K        | Override Factors?      YES | |

| Seasonal Employee?    NO   |    3 United Way  | Factor 1           20.0000 | |

| Type (H or S)          S   |    4 Credit Union| Factor 2          125.0000 | |

| Exempt?               NO   |   10 Stock Plan  | Factor 3            0.0000 | |

| Adjust to Minimum?    NO   |    2 Dental  Ins | Factor 4            0.0000 | |

| Group Code (0-9)       1   1   12 Garnishment | Factor 5            0.0000 | |

| Pay Periods/Year      12   1                  | Factor 6            0.0000 | |

| Check Location             |                  *----------------------------* |

| Earning Code         SAL   |                                                 |

| Salary            813.05   1                                                 |

| Hourly Rate       10.170   1                                                 |

| Override Pay         .00   |                          Deduction (007 of 007) |

| Status         Full-time   6-------------------------------------------------*

| Sick Accrual Code     XX   |     Sick Hours Remaining          96.000        |

| Vac Accrual Code      XX   |     Vacation Hours Remaining     107.000        |

- Verification ----------------------------------------------------------------|

|                            Press <PgDn> to proceed                          |1



In the factor window, you say YES to override factors, then you can enter the custom factors for this employee.  You must enter settings for both factors used in the formula if you are going to override either of the factors.  In this example, this employee will have 20% of disposable earnings calculated as the deduction with a cap of $125.  If you do not override the factors for a given employee, then the default factors defined in the deduction formula will be used.


See how powerful this formula can be?  Each employee can have their own settings, yet the same formula is used for all employees who have a garnishment based on disposable earnings (gross – taxes), and the same deduction code can be used for fixed amount deductions simultaneously for separate employees.


When you try this formula, always check your edit register or use the manual checks function in payday work to view the effected employee(s).  You can always override the deduction amount using the manual checks function prior to printing the checks if you need to.


For more information about formulas and a list of the available variable names that you can use in your formulas, please consult the payroll user’s manual appendix.