Understanding Profit Sharing Setup Example with Multiple Caps And Different Percentages

Let's say you need to set up an item or items in Workforce Planning that would calculate a different percentage of wages based on a salary threshold AND you need it to be delayed for the first two years of employment.

Here are the details for profit sharing:

• You want the employee to get 0% for the first 2 years of employment

• After the first 2 years, the employee gets 5% of the first $118,000 of wages earned

• For the wages earned above $118,000, the employee gets 10% up to a max of $256,000 in wages

Example Solution

1. Set up 3 compensation items as follows:

Comp Item #1
· % of Wages with Annual Cap
· % = 5
· Annual Cap = $5,900
· Account = Stat #1
· Wages = Appropriate Wage Items
Comp Item #2
· % of Wages with Annual Cap
· % = 10
· Annual Cap = $25,600
· Account = Stat #2
· Wages = Appropriate Wage Items
Comp Item #3
· % of Wages with Annual Cap
· % = 10
· Annual Cap = $11,800
· Account = Stat #3
· Wages = Appropriate Wage Items

2. Next, address the employment length requirement. To do this, create 3 more comp items, which will reference the statistical account value posted from the first 3 comp items.

Comp Item #4
· Tiers on Employee Attribute - Value in % of Wages
· Account = Profit Sharing GL Account
· Attribute = Derived Years mentioned above
· # tiers = 2
· Tier 1 = From 0 To 2 = 0%
· Tier 2 = From 2 To 99 = 100%
· Wages = Comp Item #1 Stat Account
Comp Item #5
· Tiers on Employee Attribute - Value in % of Wages
· Account = Profit Sharing GL Account
· Attribute = Derived Years mentioned above
· # tiers = 2
· Tier 1 = From 0 To 2 = 0%
· Tier 2 = From 2 To 99 = 100%
· Wages = Comp Item #2 Stat Account
Comp Item #6
· Tiers on Employee Attribute - Value in % of Wages
· Account = Profit Sharing GL Account
· Attribute = Derived Years mentioned above
· # tiers = 2
· Tier 1 = From 0 To 2 = 0%
· Tier 2 = From 2 To 99 = -100%
· Wages = Comp Item #3 Stat Account

This will post the proper net amounts.