Processing bonus checks in payroll

Bonus checks are often paid at the end of the year and tend to require a little extra attention. While some employers deduct withholding taxes from the bonus, others choose not to withhold the Federal or State taxes. Also, seldom are scheduled deductions taken from the checks.  Here’s how to process bonus checks without deducting withholding taxes nor scheduled deductions:

NOTE: It is best to run a bonus checks separately from the regular payroll run to avoid potential confusion.

1. Confirm the ‘Earning Type’ used for the bonus check  is set to ADD and not REPLACE (for salaried employees).
2. Enter the bonus amount in Daily Work/Transactions for both hourly and salary employees, print the journal, then post.
3. Calculate bonus checks using “Pay Code” (Pd Code) 6 which will not take any scheduled deductions.  Be sure to not check the box to include Salaried Employees.  This will prevent the salaried amount from being calculated in the check and make the Bonus amount be the only amount the Salaried Employee is paid.  You will probably want to not calculate sick and vacation time either.
4. Once the bonus checks are calculated, enter “Manual Checks”, pull up each check and zero out the FWH (Federal) and SWH (State) withholdings.
5. Continue processing the checks as you normally do.