USA Payroll Expenses, Components, Structures

I am a little confused as to how the payroll works within ERP Next.

First, I should state that we use a third party system to run our payroll and its wonderful. But we need to track our costs (MFG industry, so labor costs are a big deal here) in the ERP and trying to set up ERP Next for this has been a task to say the least. We are a manufacturing company that typically uses HOURLY PAY that is paid weekly. We are located in the US so we have FUTA, SUTA, as well as our payroll taxes, withholdings, garnishments, and health insurance. This is all done for us already and the setup for ERP Next is a little vague for me.

I am not completely understanding the Salary Component, Salary Structure, Salary Structure Assignment setup. From what I am reading in regards to my issue, I think we need to focus on Timesheets for hourly pay. However, this brings in the components, structures, etc and salary slips as well. I feel like there are so many pieces to generate this and I am not even sure what to use, let alone how to set it up.

For just basic federal income tax, I tried using the Income Tax Slabs, creating one for Single and one for Married Filing Jointly as they are different brackets here in the USA. This took a very miniscule amount of tax out which was not correct. Either the slabs are not generating, they need lots of conditions and formulas of which I have no experience in creating, or I am missing something in a component, structure or assignments.

I have tried to find videos or documents but most of this seems to be geared toward other foreign currencies and regulations. Can anyone with a company located in the USA that has mainly hourly employees give any advice on how they set up their payroll?

Any advice would be greatly appreciated.

I have several US customers who do their own payroll and I can advise on setting it up, but I wouldn’t recommend using ERPNext for calculating your payroll.
Since you’re soliciting any advice, here’s what I would actually advise: Outsource the compliance risk, pay the insurance premium to reduce that compliance risk and use ADP, Paychex or whomever. It’s a commoditized service and the cost per-paycheck is generally cheaper than being wrong.

Thanks for the answer. We do use Paychex and that is all fine.

However, we also want to use ERP to track costs much more efficiently. I am not so concerned about ERP Next processing the payroll but in order to use timesheets and job cards (MFG module) and all of these items that we need to track, don’t I need to set up payroll so it understands how to allocate these costs correctly?

On the extremely outdated software we have now, we just use the Cash Requirements from Paychex to make our manual journal entries for payroll. ERP Next isn’t even equipped to handle that through default as there are no payroll accounts other than the payables which is fine because I can create these. No problem there.

Where I am having the disconnect is how to make sure that the right costs are being tracked to the right projects, accurately. Since each employee has a different hourly rate, we want ERP to allocate this through the manufacturing module.

I am assuming that I have to create these salary structure assignments for each employee so that their respective rates can be tracked accordingly and allocated to each corresponding project. This is where I was stumbling over the component, structure, assignment, timesheet, salary slip, job card, etc debacle. I am not sure how it all comes together.

I agree 100% with @tmatteson it’s not worth the risk for SMB businesses. I think that is why most of the small accounting firms we worked with in the past have stopped offering it as a service.

No that’s not what I mean. We do not need to actually process the payroll through ERP Next. We get that done elsewhere.

What I need is to be able to track my hourly employees by time spent on each project. It seems like there is a process to get that integrated. I have seen people talking about using Timesheets and Salary Slips, but I would need to setup the components, structure, assignments, etc in order for that to work, correct?

This is the meat of the question and is at least one book’s worth of an answer. Timesheets and job cards have to be aggregated, without overlap into your hourly reporting out to Paychex. Paychex should then return a journal entry to you with the correct classifications.

Alternatively, you can track all of your labor costs in a provisional accrual style - this offers immediate costing (particularly inventory) visibility and allows you to reconcile/net against your Paychex JE to replace it with actual/ improved data.

Automating this can be done, but despite there being good literature on it, there isn’t a standard or GAAP-preferred way of accomplishing this.

Reach out directly if you want to have a conversation; I’ve got a project just like this in development.

Thanks! That is what I am getting at. I was afraid there would be overlap. My Chief Technology Officer wants everything to be in and done through ERP so we can easily track literally everything. But I just hit a snag with trying to figure out how to set this up effectively. I will reach out to with some more concrete information soon. Thanks so much.