First you need to set up a User Defined Field (Payer>Payer Edit>User Defined Fields) called XSICK. This field is setup as an template. To access the example, double-click on the first blank line on the User Defined Fields screen. Click Templates, highlight Third Party Sick Pay, click Select, click Apply and then click OK to add the settings for this field. When you add the employees check, enter the sick pay amount in this field.
What is Third Party Sick Pay?
Third party sick pay is an insurance disability benefit that provides payment to employees if they have lost wages because of extended absences, either caused by illness or a non-work-related injury. The payments themselves are typically a percentage of the employee’s gross pay. Colloquially, third party sick pay is known as short-term disability.
In most cases, a Third Party Administrator, generally an insurance company, will issue sick pay in place of lost wages. In rare cases, companies may decide to manage third party sick pay internally. In either case, the coverage is typically part of an employee’s benefits package.
Third party sick pay is considered earned income if the employee receives it within six months of leaving work from an incident. This consideration is in place because the payments are made in place of regular wages. If the benefits are received more than six months after the work discontinuation, it is classified as unearned income and not subject to taxation.
Unless insurance premiums are paid with after-tax dollars, the pay is itself taxable, but this will depend on the coverage plan. Within AMS Payroll, the template includes the information you’ll need to provide in order to determine how much sick pay should be included and how much you will need to tax.