Lesson 3.7: Pay Types

FastFund Payroll allows you to define different Pay Types to accurately track and categorize the various wages paid to your employees. Using specific pay types ensures that different earnings—such as regular salaries, overtime, bonuses, or sick leave—are itemized correctly and listed separately on both employee paychecks and management earnings reports.

FastFund provides several default pay types right out of the box, including Regular, Overtime, Premium, Vacation, Sick, Bonus, and Piece Work. However, you have the flexibility to create custom pay types to meet your organization’s specific compensation structures.

[INSERT SCREENSHOT: The ‘Pay Types’ list window showing the default pay types, their classifications, and their inactive status]

Pay Type Classifications Every pay type in the system must be assigned to one of two primary classifications:

• Hourly/Salary: This classification is based on either a standard hourly wage or a fixed salary amount per pay period. It is used for standard wages, overtime, vacation, and sick pay.
• Piece/Quantity: This classification is based on a fixed monetary rate multiplied by the number of units completed. It is ideal for piecemeal payroll, shift work (e.g., medical shift nurses), stipends, or flat-amount bonuses.

How to Create a New Pay Type

1. From the horizontal Main Menu, select Lists.
2. Under the DATA section in the vertical task menu, click on Pay Types.
3. Click the New + icon to open the data entry screen.
4. Enter a unique Name for the pay type (e.g., “Year-End Bonus”).
5. Select the appropriate Classification (Hourly/Salary or Piece/Quantity) from the drop-down menu.
6. Enter a brief Description of the pay type.

[INSERT SCREENSHOT: The ‘Add a new Pay Type’ window displaying the Name, Classification, and Description fields, along with the Tax Exemptions grid at the bottom]

Tax Exemptions A critical feature of the Pay Type setup is the ability to define tax exemptions. At the bottom of the setup screen, you will see a grid listing all the payroll taxes your organization is subject to (which you configured in Lesson 3.4).

If you check the Exempt box next to a specific tax, the wages paid under this pay type will be excluded from the taxable wages for that specific tax calculation. This is particularly useful for specialized nonprofit scenarios, such as clergy pay or specific non-taxable allowances. Internal Control Rule: If you are uncertain whether a specific type of pay is exempt from federal, state, or local taxes, you should consult with a payroll authority, the IRS, or your local tax jurisdiction before marking it as exempt.

Editing, Deleting, and Inactivating Pay Types To edit a pay type, simply click its name from the list, make your changes, and click SAVE. However, there are strict rules regarding modifying or removing pay types that have already been used:

• Tax Exemption Lock: Once a pay type has been used in a posted payroll batch, you cannot change its tax-exempt status. Changing it would compromise the integrity of historical payroll data. If a tax status was set up incorrectly, you must inactivate the pay type and create a new one.
• Deleting: You can only delete a pay type if it has never been used. If it has no transaction history, the red DELETE button will be active. If the button is grayed out, it means there is posted history attached to it.
• Inactivating: If a pay type has been used but is no longer needed (e.g., a discontinued stipend), you must check the Inactive box. Inactive pay types will no longer appear as options when entering payroll batches, but they will remain in the database for historical reporting.