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Employee Expense Reimbursement with Payroll

Tracking expenses that employees have incurred for the company can easily be accomplished by using an earning code to record the employee expenses. Recording the expenses within Avanti enables the employee expenses to be entered directly from Avanti and reimbursed automatically during payroll processing.

Expense Reimbursement Earning Code

The expenses to be reimbursed will be recorded using an earning code, which will allow expenses to be entered as dollar amounts directly for the employees.

The earning code will be setup to record the expense reimbursements as non-taxable dollar amounts that are not income (because the employee is not earning money here, only being reimbursed for the expenses they incurred).

Create a new Earning Code

  1. Open Canadian Payroll > Employer Payroll Tables > Earning Codes and create a new Earning Code by pressing Insert.

  2. Enter the Code and Full Name to use for the Earning Code.

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  3. Open the Earning Data tab and setup the following options:

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    1
    Short Name

    Enter the Short Name that will appear on the pay statements.

    2
    Tax Group = 99 No Tax

    Exclude the earnings from income tax calculations.

    3
    Earning Type = Other

    Should not record the expense reimbursement as income.

    4
    Enable Active for Off Cycle

    Allows the expense reimbursements to be paid on off-cycle pay runs.


  4. Note:

    The earning code should not be included on tax slips. The tax slip boxes should be disabled by default so no changes should be required (see below).

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  5. Save and close the new expense reimbursement earning code by pressing OK now.

Now that an earning code has been created it can be used by a payroll manager to enter the expense reimbursements directly using a payroll data batch, or the earning code can be enabled on the Self Service Portal to allow managers and employees to enter their own expense reimbursements.

Important:

Expense Reimbursements are not income, and extra care must be taken to ensure that benefits and deductions are setup correctly so that company paid benefits are calculated correctly. This will be outlined below.

The expense reimbursement earnings will be included within the default accumulator Use All Earnings. This will cause problems for any benefits or deductions that are setup to use this accumulator.

This can be fixed in two steps:

  1. The accumulator will need to be changed on the benefit codes for company paid benefits. An existing accumulator (A1 or A2) may be suitable, or a custom one can be setup for this purpose.

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  2. The earning codes required for calculating the benefit amount will need to be added to this accumulator, taking care to ensure that the expense reimbursement code is not added to this accumulator.

J
Jack is the author of this solution article.

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