How to add custom earnings in Console

Custom earnings are types of employee compensation that fall outside standard predefined categories, such as regular wages, overtime, bonuses, and commissions. Companies set up custom earnings to manage specific or unique payroll scenarios.

Examples of custom earnings include:

When using custom earnings, consider:

Custom earnings treated like regular wages are included in standard payroll tax calculations.

Example:

Jude is a part-time hourly employee at a 24/7 service center. Every other week, Jude takes an evening On-call shift. Jude's employer pays On-call earnings similarly to regular wages, ensuring they are included in Jude’s standard payroll tax calculation. Using a distinct On-call earning type helps the employer forecast staffing needs.

Custom earnings similar to bonuses, commissions, or severance payments may be taxed as supplemental wages at a flat 22% federal tax rate.

Example:

Marley, a sales representative in the automotive industry, earns commissions classified by vehicle type (Luxury Commission, Standard Commission, Entry Commission). Marley's employer applies the IRS-recommended supplemental tax rate of 22% for federal income taxes on these earnings.

The IRS permits employers to provide tax-free educational reimbursement up to $5,250 annually. Amounts exceeding this limit must be reported on Form W-2.

Example:

Jane works in a medical office and receives a custom earning called Tuition Reimbursement to assist with education in a relevant field. Since Jane’s reimbursement does not exceed the IRS's annual $5,250 limit, no additional taxation or W-2 reporting is required.