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Tutorials & Videos > FAQ Tutorials > Payroll > Process Bonus Checks





How do I Process Employee Bonus Checks?

Year-End is a common time for employers to give bonuses to their employees. Since bonus pay is treated as taxable income, bonus checks should be processed in the Payroll application.

Although you can increase the employee's regular paycheck to include the bonus amount, most churches prefer to write a separate bonus check.

This Step-By-Step tutorial guides you through setting up a "Bonus" pay distribution for processing bonus checks. This is done if you want the expense for the bonus checks to be distributed to a different expense account than what is specified on the Salary/Hourly(Regular Wages) compensation distribution.

If you want to process the bonus checks through the same account number specified on Salary/Hourly(Regular Wages), then proceed to the Run the Bonus Payroll Checks section.

This Section Includes:

Set Up the Compensation Information

Run the Bonus Payroll Checks

Set Up the Compensation Information

1.          From the Payroll menu, select Modify -> Compensation Information.

2.          Click the Search button.

3.          Click the Edit  icon next to the Bonus compensation.

4.          Click the Add New Distribution icon-link.

5.          Type a description in the Name field or keep the default set to "Bonus".

NOTE: The description entered here appears on the check stub or voucher.

6.          Click the Edit  icon next to the Regular Pay pay type.

7.          Enter the Fund, Department, and Account number for the Regular Pay and then click the Update button.

8.          Repeat the process to assign the Social Security and Medicare accounts and then click the OK button when finished.

9.          Click the Update button to save the compensation.


Run the Bonus Payroll Checks


1.          From the Payroll menu, select Manage -> Payroll Processing.

2.          Select the All Employees option and then click the Search button. (If the Filters box does not appear, you can click the blue Filters bar to expand the Filters box.)

3.          Click the Edit  icon next to an Employee name.

4.          Delete all Compensations, Deductions, and Non-Cash compensations.

NOTE: Deleting information on the Payroll Processing page only changes the information for this payroll run and not the information stored on the employee's record.

5.          Click the  Add New Compensation icon-link.

6.          Select the Bonus Compensation and the Bonus Distribution from the drop-down lists. (This is the distribution that you set up earlier in this tutorial.)

NOTE: If you did not setup a Bonus pay compensation, you can use a "Salary/Hourly(Regular wages)" compensation.

7.          Select the # Pay/Year, Pay Type, and Classification fields as "1 for Bonus Pay", "Regular", and "Salaried". Enter the gross pay in the Pay Rate field and then click the Update button when finished.


How to calculate a specific Net Amount for a Bonus Check

Example: (rates subject to change)

To give a net amount (e.g. $100) as a bonus, divide the net amount by a conversion number (e.g. 0.7035) to calculate the Pay Rate.

$100 divided by 0.7035 = $142.15


How the conversion number is calculated

1. Total all the taxes (Federal 22% + Social Security 6.2% + Medicare 1.45% = Total Taxes 29.65%).

2. Subtract the total taxes from 100% (100% - 29.65% = 70.35%).

3. Move the decimal point over two spaces to convert the percentage to a decimal value (70.35% = 0.7035).


NOTE: The conversion number is different depending on the tax rates and if your state/local taxes are withheld from your bonus checks.


8.          Review the bonus check information and then click the Update button to save your changes.

9.          The Bonus Check appears on the Payroll Processing page. Review the Compensation, Taxes, and Net amounts. Enter other employee bonus checks as appropriate. When you are finished, click the Process Payroll button and process the checks as you normally would.