Bonus Pay Run - How to Set Up & Process

Prerequisites

• Set up your employees' and company's basic information
• Activated & set up your employees for payroll
• Know how much your employees should receive for the bonus
• Know how to run a regular pay run

Setting Up for a Bonus Pay Run

If you have already set everything up for your bonus pay run, you can skip this section and go directly to the Processing a Bonus Pay Run section.

Creating the Bonus Payroll Category (Temporary or Variable Earning)

For more information on what a temporary payroll category means, please refer to this article.

1. Navigate to Payroll Setup > Payroll Categories
2. Click "+ New" to create a new payroll category.
3. Select 'Temporary Earning' as the type.
4. Enter all required fields. 
5. Select all applicable taxes on the right side.
6. Click the save button to save your new payroll category.
7. The system will ask you if you want to assign this new payroll category to all active employees. If you click "Yes", it will assign this payroll category to all active employees. If you click "No", you will need to manually assign this payroll category to all applicable employees. 

Assigning the Bonus Payroll Category to Applicable Employees

1. Navigate to Payroll Employees > Assign Payroll Category.
2. In the center dropdown field, select the employee you want to assign your bonus payroll category to.
3. Click "+ Add" to assign a new payroll category to the selected employee's master paycard. 
   
4. Select your bonus payroll category in the "Payroll Category" field. 
5. Enter the correct "Amount" that will be added to your employee's pay. You can also enter "0" for now if you want to manually adjust it later during your pay run.
6. Click the "•••" button and select the pay periods that this bonus will apply to. 
7. Click "Save" to save the selected pay periods. 
8. Click "Save" to save your changes to this employee's paycard. 
9. Repeat steps 2 through 8 for each employee. 

Processing a Bonus Pay Run

Now that everything is set up properly, you can run your bonus pay run! There are only two (2) steps of the payroll wizard that you need to pay special attention to. You can go through all other steps as normal.

Step 1: Select Your Pay Period

1. Navigate to Processing > Payroll Wizard.
2. Select the correct “Payroll Group”.
3. Select the correct “Payroll Process Period”.
4. Double-check to ensure that your “Payment Date” is correct.
5. Ensure that your bonus payroll category is selected at the bottom of the page
6. Click the save button to save the step in the payroll wizard.
7. Click “Complete” at the top-right of the wizard to confirm that you’ve completed this step.

Step 2: Process Payroll & Create Paycards

1. Select the employees you want to create a paycard for using the checkboxes.
2. Click “Process” to create paycards for the selected employees.
3. Click the document icon next to an employee that you want to enter a bonus for. If you did not set up an amount in the master paycard in the earlier sections, you will need to edit the paycard, since the default value will be $0.00.
4. Click “Edit” at the bottom of the paycard to edit it
5. Change the value for your bonus payroll category to the correct amount.
6. Click “Process” and verify that the employee’s paycard is accurate.
7. Exit the paycard to return to the payroll wizard.
8. Verify that the change in the employee’s paycard was saved by reopening the paycard.
9. Repeat steps 3 through 8 for each employee that you want to pay a bonus to.

Case Study: Impact on Taxes

There are three (3) ways to run a bonus run, all of which will impact the calculations of your taxes differently.

A. Running the bonus in the same payroll run with regular wages

You can include the bonus payroll category in the same pay run as your regular wages. This means you will only have one pay run for the selected pay period.

B. Running the bonus after regular payroll run was completed OR into a pay period that was already posted

You can include the bonus payroll category in a second pay run, after your regular wages pay run was completed, or any previously posted pay period. This means you will have two pay runs for the selected pay period.

C. Running the bonus before the regular payroll run

You can include the bonus payroll category in the first pay run, before you run your regular wages pay run. This means you will have two pay runs for the selected pay period. 

Warning: Taxes calculated in this method may not be calculated at all or may be higher.  

Frequently-Asked Questions (FAQs)

I have a payroll category that is a temporary earning, but no taxes are being deducted from the employee. Why?

If the bonus is entered into a pay period where there are no regular pays present, then Harmony doesn't have any regular wages to use in the calculation of the bonus. Therefore, the annual tax is being calculated ONLY on the bonus amount. Don't forget: 99% of the time, your bonus payments will likely be BELOW the employees' annual tax credits, so Harmony will see  this as the employee owing no taxes.

Bonus payments must be made to a pay period where a) the regular wages have already been paid to the employee, OR b) regular wages are also being paid at the same time as the bonus payment. 

I have a payroll category that is a temporary earning, but the taxes being deducted from the employee are way too high. Why?

Similar to the previous question, however, because the employee has no regular wage payroll categories included in the payroll you've chosen to process (e.g. you normally pay the employee Salary but have removed it from the 'active payroll categories' in the first step of the payroll wizard), then the system has no details on the regular payroll. Harmony will assume you've made an error and treat the bonus payroll category as a 'regular' payment type - so it ignores the 'tax as bonus' nature of the payroll category.