What Is a Post-Tax Deduction?
A post-tax deduction is money withheld from an employee's pay after taxes are calculated. It reduces the employee's net pay but does not change their taxes.
Common post-tax deductions include:
- Repaying a loan or cash advance from your company
- Union dues
- Charitable contributions
- Employee contributions to a company event
Which Deduction Type Should I Use?
| If you need to withhold... | Use this deduction type |
|---|---|
| Child support | Child support |
| Any other wage garnishment from a court or agency order | Miscellaneous garnishment |
| Anything else, such as a loan repayment, union dues, or a charitable contribution | Deduction |
This article covers Deductions. For garnishments, see the related articles at the end.
Before You Begin
Set up the deduction before you run the payroll it should apply to. A deduction is only included on payrolls previewed or approved after it is saved.
Decide ahead of time:
- A description you will use consistently for this kind of deduction across all employees
- Whether to withhold a flat dollar amount or a percentage of gross wages each pay period
- Whether there is a total balance to collect, such as the full amount of a loan
- Whether there is a yearly cap
- The first pay date the deduction should apply, and the last one if it has an end date
Set Up a Deduction for an Employee
- In Arcoro Payroll, go to the People tab and select the employee.
- Select the Benefits & Deductions tab.
- Select Add Deduction.
- Complete the fields below.
- Click Save.
Field Reference
| Field | Required? | What to enter |
|---|---|---|
| Description | Yes | A name for the deduction. It appears on the employee's pay stub and as a column in payroll reports. |
| Amount | One of these two | A flat dollar amount to deduct each pay period. |
| Percent | One of these two | A percentage of total gross wages to deduct each pay period. |
| Total Amount | No | The total to collect, such as the full balance of a loan. The deduction stops once this is reached. |
| Annual Limit | No | The most to deduct in a calendar year. Resets each January 1. |
| Start Date | Yes | The date the deduction starts. If it falls within the pay period being processed, the deduction applies to that payroll. |
| End Date | No | The last date the deduction applies. Leave blank for deductions that continue indefinitely. |
Enter either an amount or a percent, not both. If you enter both a total amount and an annual limit, the deduction stops as soon as either is reached.
Use the same description for the same kind of deduction across all employees. Each unique description creates its own reporting column and pay stub line, so "Loan" and "Loans" would show up as two separate columns.
Common Setups
Most deductions fit one of four patterns. Find yours below and fill in the fields as shown.
| Scenario | Amount or Percent | Total Amount | Start Date | End Date |
|---|---|---|---|---|
| One-time: a single deduction, such as a company event contribution | The full amount | Same as Amount | The pay date it applies | Same as Start Date |
| Recurring for a set period: such as a holiday donation from November through December | Per pay period amount | Leave blank | First pay date | Last pay date |
| Ongoing: such as union dues | Per pay period amount | Leave blank | First pay date | Leave blank |
| Paid over time: such as repaying a cash advance | Per pay period amount or percent | The full balance owed | First pay date | Leave blank |
One-time deduction example. To deduct $50 from an employee once on the 2/7/2025 pay date, enter $50 in both Amount and Total Amount, and set both Start Date and End Date to 2/7/2025.
Paid over time example. To collect a $1,000 cash advance at 10% of gross wages per pay period, enter 10 in Percent and $1,000 in Total Amount, and leave End Date blank. The deduction stops on its own once $1,000 is collected. This works well for hourly employees whose pay changes each period, since you cannot predict the payoff date.
Manage, Change, or End a Deduction
Changes only affect future payrolls. Past paid payrolls and payrolls already approved stay as they are.
Update a deduction. Edit the deduction to change the amount, percent, limits, or dates. You can change every field except the employee.
Change the amount for one payroll only. Use the deduction override in payroll to change the amount for a single payroll without affecting future payrolls. You can also enter a negative amount to refund an employee who was over-deducted on earlier payrolls. The year-to-date total for that deduction cannot go below $0.
End a deduction. Enter an end date to stop the deduction. If you entered a total amount, the deduction ends on its own once that amount is collected.
Delete a deduction. Only delete a deduction that was created by mistake. Deleting removes it permanently from future payrolls. Past payrolls, reports, and pay stubs are not affected. If a deduction simply no longer applies, enter an end date instead.
FAQs
- What happens if an employee doesn't have enough net pay to cover all deductions?
Garnishments are applied first, starting with child support. Deductions are then applied oldest first, by the date they were created. Any deduction that would bring net pay below $0 is skipped for that payroll, and a warning appears on the employee's payroll item.
- Can an employee have more than one deduction?
Yes. An employee can have any number of deductions active at the same time.
- Is a percent deduction based on gross or net pay?
Gross. A percent deduction is calculated on the employee's total gross wages for the pay period.
- Does a deduction affect the employee's taxes?
No. Post-tax deductions are taken after taxes, so they reduce net pay only.
- What if I set up a deduction after a payroll was approved?
It will not apply to that payroll. It applies to payrolls previewed or approved after it is saved.