What are the types of earning codes?

An earning code falls into one of six possible types: benefit, deduction, earning, payroll earning, pre-tax deduction, and tax. Because some of these codes can affect employee net pay, it is critical that you understand them. The table below describes each earning code type.

Type	Explanation
Benefits	Company-paid benefits include all benefits that your company tracks, such as company-paid insurance, vacation accruals, and uniform or clothing allowance. Benefits do not affect an employee’s gross pay, but if the benefit is taxable, the employee’s taxable earnings may be affected.
Deduction	Deductions are after-tax reductions in pay, such as loan payments, credit union payments, and employee insurance co-payments.
Earning	Miscellaneous earnings include any earnings that are not related to the number of hours worked, such as bonuses, car or parking allowances, and tuition reimbursement. Miscellaneous earnings may or may not be taxable. You add them to the employee’s gross pay and, if taxable, they affect the gross tax and net pay.
Payroll Earning	Payroll earnings include any earnings based solely on the number of hours an employee works, such as regular, overtime, double-time pay, and vacation taken.
Pre-Tax Deduction	This type includes any deduction that your company takes on gross pay before taxes, such as 401K and dependent care plans.
Taxes	Taxes include but are not limited to federal, state, and local taxes, FICA, and —in California— state disability insurance. This type also includes the employer portion of the Medicare tax (previously included as part of FICA).

Example

Bill earns $55,000 annually. As an exempt, full-time employee, he receives two weeks of vacation, nine paid holidays, and eight sick days annually. He also receives group medical insurance with a co-payment of $45.00 monthly. The company provides life insurance equal to his annual salary.

Bill also has taken advantage of the company-sponsored 401K plan, which deducts 3% from each check.

In this example, we have identified the following codes and the type for each.

Earning/deduction/benefit	Type	Sample code
Salary	Payroll Earning	REG
Vacation (taken)	Payroll Earning	VAC
Holiday (taken)	Payroll Earning	HOL
Sick (taken)	Payroll Earning	SICK
Medical insurance co-payment	Deduction	MINS
Life insurance over 50K	Benefit	LINS
401K	Pre-Tax Deduction	401K

Why are vacation, sick, and holiday shown as payroll earning types if they are company benefits? Although they are benefits, the employee receives them when entering hours. The company makes a cash payment in a payroll check, which affects gross pay. Only earnings or deductions can affect gross pay.

Hint: If you are using e-timecard standalone, e-timecard automatically creates earning codes for an employee if you set up the employee type standard codes. Or, you can create them manually on the Employee Earning Codes screen.