Pay types designate which payroll taxes apply to all or part of an employee's wages. Assigning the correct pay type to an employee's record ensures that the appropriate payroll taxes are withheld in the correct amounts and reported to the Internal Revenue Service. As long as the employees are taxed the same, you can use the same pay type for multiple employees. However, if you want a different description to print on the pay checks, use different pay types. The pay type description prints on the pay stub for each employee.
Pay types also mark the accrual of vacation and sick time wages, and you can use pay types to designate whether or not employees are included in the Workers' Compensation Basis.
When setting up pay types, remember that pay type descriptions print on the employees' pay stubs, so be sure you have meaningful descriptions for all Pay Type categories. Pay type changes are global and affect every employee whose records are associated with that pay type.
To generate Forms W-2 at the end of the year, you must select the federal and state withholding fields for all employees (including clergy who may be eligible for special tax treatment.)
If you want vacation and sick time to accrue for the employees, you must select the Accrue Vacation, Accrue Sick, and Add to Worker's Comp Basis options.
Even if you enter vacation and sick time accrual information on the Time Off tab in the employee's record, the amounts do not accumulate as specified if you do not set up the employee pay type correctly.
In Payroll Define Lists, you can