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Available for the following user access levels: Admin
Employee deductions are configured on individual employee profiles and apply automatically to each pay run. This guide explains how to add and configure employee deductions, including new percentage-based calculation types and rules for T4 reporting.
This article explains how to:
- Understand deduction calculation types
- Add a deduction to an employee profile
- Configure calculation types, rates, and maximums
- Manage recurring deductions in open pay runs
- Ensure accurate Union Dues T4 reporting
Getting started
When setting up deductions, you can select from four distinct calculation types depending on your needs:
The table below describes each deduction calculation type, how it works, and an example of how it is applied.
| Calculation Type | How it works | Example |
| Fixed amount | A set dollar amount is deducted every pay period, regardless of earnings. | $50 every pay run. |
| % of gross earnings | A percentage of total gross pay. | 3% of $1,000 gross = $30. |
| % of pensionable earnings | A percentage of CPP-eligible earnings (earnings from pay categories not flagged as CPP exempt). | 5% of $800 pensionable = $40. |
| % of Selected Income Type | A percentage of earnings from specific income type categories configured on the deduction category. Only earnings tagged with those categories are included. | 3% of (Hourly Pay + Commission) where both income types are tagged with categories selected on the deduction category. |
Important
For deduction categories with a pre-configured Calculation basis, the Calculation type selector is automatically locked when you assign that category to an employee. You cannot switch between Fixed and % of Selected Income Type at the employee level.
Follow these steps to add a new recurring or one-off deduction to an employee's profile:
- Go to People > People List and open the employee's profile.
- Select the Pay Details tab, then go to the Pay & Compensation section.
- Under Other Pay Run Inclusions, click + Add deduction.
- Choose a deduction category from the dropdown. The available calculation type and default rate may be pre-set by the category.
- Review or set the calculation type and amount or rate.
- Optionally set a per-pay-run maximum, effective date, frequency, and notes.
- Click Save to apply your changes.
How the Calculation type and rate are determined depends on whether the selected deduction category has a pre-configured basis:
- No pre-configured basis (Custom category type): Choose any calculation type (Fixed, % of Gross, % of Pensionable, or % of Selected Income Type) and enter the amount or rate manually.
- Pre-configured basis (e.g. Union Dues set to % of Selected Income Type): The Calculation type selector is locked to match the category. The rate pre-fills with the category's default percentage rate.
Overriding the default rate (% of Selected Income Type categories)
When a category has a default percentage rate, that rate is pre-filled for the employee. To use a different rate for this employee only:
- Check the Override rate for this employee checkbox.
- Enter the rate to apply to this employee.
A note shows the category's current default rate for reference. Employees with an overridden rate are not automatically updated if the category's default rate changes later—those employees are flagged for separate review when the default is updated.
Income type categories (read-only)
When a deduction category uses % of Selected Income Type, the income type categories that form the calculation basis are displayed as read-only labels on the employee deduction form. These are set at the business level on the deduction category and cannot be changed at the employee level.
Per-pay-run maximum
For any percentage-based deduction (% of Gross, % of Pensionable, or % of Custom basis), you can set a maximum dollar amount per pay run. When the calculated amount exceeds this cap, the deduction is reduced to the maximum for that pay run. The capped amount—not the uncapped amount—counts toward any lifetime maximum.
Example: 10% of gross with a $20 per-pay-run maximum and a $1,000 lifetime maximum. If gross is $500, the calculated amount is $50, but only $20 is deducted that pay run, and $20 (not $50) counts toward the lifetime total.
Notes
Add optional free-text notes to a deduction. Notes appear on the pay run inclusion line and remain editable even when the rest of the deduction line is locked in an open pay run.
Maintain
Once a recurring deduction appears in an open pay run, most fields are locked to prevent inconsistency between the employee records and an in-progress pay run. A recurring deduction icon on the pay run line shows a tooltip: "This is a recurring deduction."
Field lock behavior by deduction type:
- Fixed amount (recurring): Deduction category is locked. Dollar amount and Notes remain editable.
- % of Gross / % of Pensionable / % of Selected Income Type (recurring): All fields (including the calculated dollar amount) are locked. Notes remain editable.
To correct a locked deduction line in an active pay run, choose one of two options:
- Update the recurring deduction on the employee's profile, then exclude and re-include the employee in the pay run.
- Delete the locked line and add a one-off manual deduction for that pay run only.
Further information
Union dues deductions—whether fixed or percentage-based—are automatically reported in T4 Box 44. The Box 44 total equals the sum of all union dues deducted across every pay run in the tax year. If no union dues were deducted during the year, Box 44 is left blank.
To ensure correct T4 reporting, make sure the deduction category is set to Union Dues as the category type.