Set up pay types
Pay types define the individual components of an employee's compensation. This article explains how to create and configure pay types in OnePayroll.
Tip
If you generated setup data from the Contoso Coffee Payroll Demo Dataset (see Getting started), approximately 95 core pay types are already configured, including common earnings, taxes, deductions, and employer contributions. With the US localization, approximately 60 additional US-specific pay types are included. Review and customize the existing pay types rather than creating them from scratch.
Prerequisites
Before creating pay types, make sure you have:
- GL accounts set up in your chart of accounts for payroll postings (expense accounts for earnings, liability accounts for deductions and contributions).
- Pay units configured if you use rate-based pay types.
- An understanding of which categories each pay type belongs to.
Create a pay type
- Search for Pay Types and open the page.
- Select New to create a new pay type.
- Fill in the following fields:
| Field | Description |
|---|---|
| No. | Enter a unique code (up to 10 characters) for the pay type, such as REG for regular pay or OT15 for overtime at 1.5x. |
| Description | Enter a clear description, such as "Regular Pay" or "Overtime 1.5x". |
| Category | Select the category: Earnings, Employee Deductions, Employer Contributions, Hypothetical, or Heading. The category determines how this pay type participates in payroll calculations. |
- Configure the GL accounts:
| Field | Description |
|---|---|
| Account No. | The GL account where the pay type amount is posted (debit). For example, a salary expense account for earnings or a tax payable account for deductions. |
| Balance Account No. | The balancing GL account (credit). For example, an employee payables account for earnings or a cash account for deductions. |
- If the pay type is rate-based, configure the pay unit and factor:
| Field | Description |
|---|---|
| Pay Unit | Select the pay unit that determines the unit of measurement for rates (for example, hourly, annual). |
| Pay Factor | Enter the multiplier applied to the base rate. Use 1 for standard rates, 1.5 for time-and-a-half, 2 for double-time, and so on. |
| Unit of Measure | Select the unit of measure code. |
| Rounding Method | Select a rounding method if the calculated amount should be rounded. |
- Configure benefit liability (see Benefit liability fields below).
Benefit liability fields
Each pay type has ten boolean fields labeled Benefit Type 1 Liable through Benefit Type 10 Liable. These fields determine which benefit types include this pay type's earnings in their calculation base.
For example, if Benefit Type 1 represents health insurance and you want health insurance to be calculated on regular pay, turn on Benefit Type 1 Liable on the regular pay type. If you don't want health insurance calculated on bonus pay, leave Benefit Type 1 Liable turned off for the bonus pay type.
Example pay types
Earnings
| No. | Description | Category | Pay Factor | Account No. |
|---|---|---|---|---|
REG |
Regular Pay | Earnings | 1.0 | Salary Expense |
OT15 |
Overtime 1.5x | Earnings | 1.5 | Overtime Expense |
OT20 |
Double Time | Earnings | 2.0 | Overtime Expense |
BONUS |
Bonus | Earnings | 1.0 | Bonus Expense |
Employee deductions
| No. | Description | Category | Account No. |
|---|---|---|---|
FIT |
Federal Income Tax | Employee Deductions | Federal Tax Payable |
SIT |
State Income Tax | Employee Deductions | State Tax Payable |
HLTH |
Health Insurance | Employee Deductions | Benefits Payable |
401K |
401(k) Contribution | Employee Deductions | Retirement Payable |
Employer contributions
| No. | Description | Category | Account No. |
|---|---|---|---|
ERMCH |
Employer 401(k) Match | Employer Contributions | Retirement Expense |
ERHLTH |
Employer Health Insurance | Employer Contributions | Benefits Expense |
Hypothetical
| No. | Description | Category |
|---|---|---|
HTGRS |
Hypothetical Gross | Hypothetical |
Hypothetical pay types are calculated but don't affect actual pay. They're used as inputs for other calculations, such as benefit rate lookups.
Modify a pay type
- Search for Pay Types and open the page.
- Select the pay type to edit.
- Update the fields as needed.
Important
Changing a pay type's Category or GL accounts after payroll has been processed may affect historical reporting. Make changes with care and consider the impact on previously posted entries.
Best practices
- Use clear codes. Choose meaningful pay type codes (like
REG,OT15,BONUS) rather than generic numbers. - Use descriptive names. Write full descriptions so that all users understand each pay type's purpose.
- Map GL accounts carefully. Verify that each pay type posts to the correct expense or liability account before processing payroll.
- Set benefit liability intentionally. Review which pay types should be included in each benefit type's calculation base.
- Use pay factors for rate variations. Rather than creating separate rate calculations, use the pay factor to handle overtime multiples (1.5x, 2.0x).