Payroll Companies and Payroll Clearing Settings

This article is an overview of how Payroll Companies and Payroll Journal Entry Clearing Settings are configured for Workforce. 

Payroll Company Setup

Payroll Companies are used only within Workforce and represent the company associated with a single EIN for the purpose of Payroll processing. Within Workforce, Payroll Companies are associated with Payroll Batches, Employee distributions (direct deposit, check, pay card), and tax reporting. 

Payroll Company details are managed by R365. For assistance with adjusting the details for a Payroll Company, please contact R365 Support.

Many of the pages within Workforce display only a single Payroll Company at a time. The displayed Payroll Company can be changed using the Payroll Company drop-down.

Legal Entities

Typically, each Payroll Company is paired with a single Legal Entity in Accounting. This results in Payroll Batches, Employee distributions, and tax filings that are grouped at the Legal Entity level. Employees who work at multiple Locations will receive one Paycheck per Legal Entity associated with their work Locations.

Payroll Common Payer

When multiple Legal Entities within Accounting process Payroll under one EIN, a single Legal Entity is configured as a Payroll Common Payer in Accounting, then paired with a single Payroll Company. This results in Payroll Batches, Employee distributions, and tax filings that are grouped at the Payroll Common Payer Level. When an Employee works at multiple Locations, they will receive one Paycheck for each Payroll Common Payer associated with the Legal Entities associated with their Work Locations. 

Learn more about Payroll Common Payers here. 

Paycheck Runs and Payroll Journal Entries

The Payroll Clearing setting in System Preferences determines how Paycheck Runs and Payroll Journal Entries are grouped on creation when a Payroll Batch is approved.

The Payroll Clearing setting also determines if Estimated Payroll Journal Entries are cleared individually or as a group. Estimated Payroll Journal Entries are created per Location when the DSS for a Location is polled. When an actual Payroll Journal Entry is created, the estimate is cleared. Learn more about Estimated and Actual Payroll Journal Entries here. 

For organizations using per location payroll clearing, the header location of the payroll journal entry will match the location of the paycheck run.

The Per Location and Per Legal Entity options cannot be used with a Payroll Common Payer setup. The per Payroll Common Payer option must be used when a Payroll Common Payer setup is in place.

Employee Earnings at Multiple Locations

Depending on the selected setting—Per Location, Per Legal Entity, or Per Common Payer—paychecks and journal entries are generated differently to ensure accurate payroll and financial reporting.

Per Location

Under the Per Location payroll clearing option, the paycheck run and journal entry are created based on the following prioritization logic:

1. Primary Location Prioritization:

   • If all worked locations are within the same legal entity as the employee's primary location, the paycheck run and journal entry are created for the primary location.

   • All earnings across locations within that legal entity are included in this single paycheck run and journal entry.

2. Multiple Legal Entities:

   • If the employee works in locations across different legal entities, the paycheck run and journal entry are created for the location with the most earnings within each legal entity.

     • All earnings across locations within that legal entity are included in this single paycheck run and journal entry.

   • In this case, the employee will have a separate paycheck run and journal entry for each legal entity worked. This will result in multiple payments, paystubs, and W-2 forms for the employee.

Per Legal Entity

Under the Per Legal Entity setting, paycheck runs and journal entries are created for each legal entity where the employee worked.

1. Primary Legal Entity Prioritization:

   • If all earnings are within the employee’s primary legal entity, the paycheck run and journal entry are created for the primary legal entity.

   • All earnings across locations within that legal entity are included in a single paycheck run and journal entry.

2. Multiple Legal Entities

   • If the employee works across different legal entities, the system creates a separate paycheck run and journal entry for each legal entity worked.

   • The header location for each journal entry is assigned based on the legal entity and follows these rules:

     • If the employee has a synced job, the location tied to the job is used.

     • If no job is assigned, the primary location within that legal entity is used.

   • In this case, the employee will have a separate paycheck run and journal entry for each legal entity worked. This will result in multiple payments, paystubs, and W-2 forms for the employee.

Per Payroll Common Payer

Under the Per Common Payer setting, paycheck runs and journal entries are consolidated for legal entities within the common payer relationship.

1. Within the Common Payer Relationship:

   • All earnings within legal entities associated with the common payer are combined into a single paycheck run and journal entry.

   • The employee’s primary legal entity is prioritized if they work there.

2. Outside the Common Payer Relationship:

   • If the employee works in a legal entity that is not part of the common payer hierarchy, a separate paycheck run and journal entry are created for that legal entity.

   • In this case, the employee will have a separate paycheck run and journal entry for each legal entity worked outside of the common payer relationship. This will result in multiple payments, paystubs, and W-2 forms for the employee.