Benefits and Deductions Overview

The Effective Date determines when the deduction or garnishment begins.

The deduction applies to the first payroll processed after the effective date — if the effective date falls mid-pay period, the deduction does not apply to that pay period.

Deductions and garnishments are not applied retroactively, and historical payroll before the effective date is not adjusted.

Expiration settings determine when a deduction or garnishment stops.

The End deduction field includes:

• Once total amount paid – Ends automatically when the total owed amount is deducted.

• On expiration date – Ends on the selected expiration date.

• Continue until updated – Remains active until manually updated.

When the expiration date is reached, the deduction is removed from payroll runs with a pay period on or after that date.

Deductions and garnishments calculate on the first payroll processed after the effective date.

They apply to:

• Regular payroll

• Bonus-only payroll

• Final paychecks

• Off-cycle payroll runs (if eligible earnings are present)

• Garnishment calculation depends on disposable earnings.

• If an off-cycle payroll includes only non-garnishable earnings, such as excess tips, the garnishment does not calculate.

• If eligible wages or bonuses are included, the garnishment calculates.

Most deduction types can be applied only once per employee.

The following types may be applied multiple times:

• Dues

• Emergency Savings Account

• Garnishment

• Loan Repayment

• 401(k) Loan Repayment

• Roth 401(k)

• Other Post-Tax Deduction

• Uniform

• Miscellaneous

• Fringe Benefit Offset

• Employee Meal

The 401(k) and Roth 401(k) deduction types include an Amount type option of Percentage.

When Percentage is selected:

• The system displays a Limit type field.

• A Limit value field appears.

When using the Percentage method, a maximum dollar contribution may be set.

Limit types include:

• None — No limit.

• Limit $ amount each payroll payment — Limit applies per paycheck.

• Flat $ amount monthly — Limit applies to all paychecks within the month combined.

When a limit type other than None is selected, additional optional fields appear:

• Employee dollar limit

• Employer dollar limit

Variable method deductions are used when the amount or frequency changes from pay period to pay period.

When the Method is set to Variable:

• The deduction amount must be entered manually each time it applies.

• The amount may be imported as a one-time deduction or added during deduction editing.

• The default amount is $0.00.

• The deduction is not included in pay run calculations unless a variable amount is entered.

• Variable deductions are always post-tax.

Deduction Types That Support Variable Method

• Dues

• Other Post-Tax Deduction

• Employee Meal

• Instant Deposit Fee

• Union Dues

• Employee Uniform

• Miscellaneous

• Fringe Benefit Offset

• Net Adjustment

Disposable earnings determine how much income is available for garnishment.

Step 1: Identify Earnings Subject to Garnishment

The following are included:

• Cash wages paid by the employer

• Employer-reported tip credit amounts

State rules may vary.

For example, Colorado includes customer-paid tips in disposable earnings, while most other states follow federal law and exclude them.

Step 2: Subtract Required Taxes

Subtract the following from gross earnings:

• Federal income tax

• State income tax

• Social Security

• Medicare

• Other mandatory taxes

The remaining amount is disposable earnings.

All garnishments follow three core rules:

1. A protected portion of earnings must remain.

2. Garnishments follow legal priority order.

3. Legal limits cap the total withholding amount.

Automatic Enforcement

Child support:

• Federal and applicable state limits are enforced automatically.

Other garnishments:

• Federal limits are enforced automatically.

• State limits must be configured manually as a percentage of disposable earnings.

When the Order Exceeds Legal Limits

The system never deducts more than:

• The legal maximum, or

• The employer-configured limit

The lower amount applies.

Example scenario:
  If a garnishment order requires $500:

• Legal maximum is $100.

• Employer-configured limit is 10 percent of disposable earnings ($50).

The system deducts $50 because it is the lower amount.

R365 follows federal and applicable state legal requirements when multiple garnishments are active.

Priority Framework

1. State-specific rules (if applicable)

2. Federal rules (if no state rule applies)

Child Support

Child support follows different priority rules than other garnishment types and generally takes priority over other garnishments.

If multiple child support orders exist:

• State rules determine how orders are applied.

• Orders may be prorated.

• Orders may be split evenly.

• Date of receipt does not determine priority.

If a bankruptcy order or federal tax levy conflicts with a child support order, review the order and contact the issuing agency.

Creditor Garnishments

For creditor garnishments:

• Date of receipt determines calculation order.

• Earlier orders are paid first when funds are limited.

Example scenario:
  If two creditor garnishments require $100 each and only $125 may be withheld:

• The earlier order receives $100.

• The remaining $25 applies to the second order.

Under the Consumer Credit Protection Act (CCPA):

Included as earnings:

• Cash wages paid directly by the employer

• Employer tip credit amount

Not included as earnings:

• Tips exceeding the tip credit

• Tips exceeding wages paid directly by the employer when no tip credit applies