Earning code
An earning code is the configured category that tells payroll how one kind of pay behaves for tax, rate calculation, and reporting.
Two earning codes can share a label and still calculate differently. The configuration behind the code decides its behavior, not its name. A source code named “Bonus” may differ from the destination system’s standard bonus on taxability, overtime, and general ledger flow. Compare codes by configured behavior rather than by label. Tax treatment is set per tax type. Depending on the governing rule, a code can reduce federal taxable wages and still count toward Social Security.
What does each code configure?
An earnings catalog is one controlled vocabulary for compensation. Build it around consistent behavior, not one code per department or per manager’s preference. Historical codes may be duplicates, obsolete, or needlessly specific. Simplifying them has to preserve every required tax, payroll, accounting, and reporting distinction.
| SETTING | EARNING CODE | DEDUCTION CODE |
|---|---|---|
| Covers | Salary, regular hourly, overtime, bonus, commission, tips | Benefit premiums, retirement contributions, garnishments, loan repayments |
| Tax | Tax treatment, set per tax type | Pre-tax or after-tax |
| Amount | Rate or amount behavior | Flat amount, percentage, or table method; an annual limit or goal balance |
| Also carries | General ledger and time mapping, effective date, eligible employees, reporting | Priority when pay is short, arrears behavior, vendor, accounting mapping |
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.