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7shifts Payroll: Custom Earning Codes

Updated

What Are Custom Earning Codes?

Custom earning codes allow businesses to categorize different types of employee compensation in 7shifts Payroll. These codes determine how earnings are calculated, taxed, and reported. Employers can create or modify earning codes to match their pay structures, comply with tax laws, and streamline payroll processing.

Why Are Custom Earning Codes Important?

  • Payroll Accuracy – Ensures employees receive correct pay.
  • Tax & Compliance – Helps categorize taxable and non-taxable earnings for payroll tax reporting.
  • Automation & Reporting – Simplifies payroll processing and financial reporting (e.g., W-2, 1099 forms).

Need Help? If you’re unsure which earning codes to use, check with your payroll administrator or accountant for guidance. 

Configuring Custom Earning Codes

To set up custom earning codes in 7shifts Payroll:

  1. Login as an Admin.
  2. Head to Payroll > Business Settings.
  3. Click + Add Custom Earning:

Supported Custom Earning Codes: 

Below is a list of earning codes currently supported in 7shifts Payroll:

All supported custom earning codes in 7shifts Payroll are taxable unless otherwise specified by your accountant or payroll administrator. “Paid to Employee?” indicates if the amount is included in net pay, not just reported for tax purposes.

Custom Earning Code Description Taxed? Paid to Employee?
2% Shareholder Benefits Health and accident insurance premiums are paid on behalf of a 2% shareholder. These benefits are taxed differently than regular earnings and are reported in Box 14 of the W-2. Yes No
2% Shareholder HSA Company HSA contributions are paid to a 2% shareholder. HSA earnings for 2% shareholders are taxed differently than regular earnings and are reported in Box 14 of the W-2. Yes No
Bonus

A payment made as a bonus to an Employee. 
On regular payroll runs, the bonus is combined with regular wages for a single tax calculation based on the employee's withholding elections and pay frequency. 

To have the bonus taxed separately at the supplemental rate, process it in an off-cycle payroll run.

 Yes Yes
Cash Tips Tips received in cash by an Employee. Cash tips are taxed normally but are not included in the Employee’s net pay because they’ve already received them. They are not taken into account with any 7shifts tip calculations. Yes No
Commission Payment to an Employee based on commission. Commission earnings are taxed differently than regular earnings. Yes Yes
Group Term Life The imputed cost of coverage above $50,000 for Group Term Life (GTL) must be included in income. The total can be calculated using the IRS Premium Table. GTL imputed income amounts are subject to social security and Medicare taxes. Group Term Life is reported in Box 12(code C) of the W-2. Yes No
Non-hourly Regular Income not associated with hours, such as paid leave. This is taxes as regular earnings. See note here. Yes Yes
Other Imputed Income imputed from sources other than group term life insurance. These earnings will be taxed normally. Some examples include the use of a company car or a gym membership.
*Fringe benefits are included in this category.
*Not included in net pay 		Yes No
Paycheck Tips Tips that an Employee has not yet received. They are taxed normally and will also be included in the employee net pay because they have not already received them. They are not taken into account with any 7shifts tip pools and calculations. Yes Yes
Severance Payment to an Employee as a one-time sum at termination. Severance pay is not the same as the payment for final hours worked and is taxed differently than regular earnings. Yes Yes

Not Currently Supported: 

The following earning codes are not currently supported in 7shifts Payroll:

Custom Earning Code

Description
Weighted Overtime Any weighted overtime pay that a piecework employee makes. Piece overtime is taxed like regular earnings.
Double Overtime Hours worked by an Employee that count as double overtime. Earnings from overtime are taxed like regular earnings.
Hourly Regular hours worked by hourly employees, excluding overtime.
Non-productive Hours under the Employer's control, excluding rest and recovery periods, where no work is done or work can’t be completed due to factors beyond an employee's control. Earnings during non-productive hours are taxed like regular earnings.
Overtime Hours worked by an Employee that count as overtime. Earnings from overtime are taxed like regular earnings.
Paid Holiday Hours worked by an Employee on a holiday. Earnings from paid holidays are taxed like regular earnings.
Piece Work where Employees are paid a fixed piece rate for each unit produced. Piece earnings are taxed like regular earnings.
Piece Adjustment Additional contributions made by an employer to ensure a piece-rate worker meets the minimum wage requirement. Piece adjustments are taxed like regular earnings and require a piece earning.
Paid Time Off Any hours worked by an employee that qualify as double overtime. Earnings from double overtime are taxed in the same way as regular earnings.
Rest and Recovery Uninterrupted breaks where the Employee can’t be required to work but must be compensated for. Earnings during rest and recovery are taxed like regular earnings.
Salaried Hours worked by salaried Employees. Although hours may not be tracked, it's recommended to include 40 hours per week.
Sick Paid time off during which an Employee was sick. Sick earnings are taxed like regular earnings.
Tip Credit Adjustment Additional contributions made by an Employer to ensure a tipped employee meets the minimum wage requirement. Tip credit adjustments are taxed like regular earnings.
Weighted Double Overtime Any weighted double overtime pay that a piecework employee makes. Piece double overtime is taxed like regular earnings and requires a piece earning.

⚠️ 7shifts Payroll does not currently support a dedicated earning code for statutory holiday pay when the employee did not work on the holiday (e.g., 8 hours of paid time off for July 4th). 

To record this type of pay without affecting timesheet hours or triggering overtime, we recommend creating a custom earning code under Non-Hourly Regular. This lets you enter the gross pay amount while keeping reported hours accurate. Consult your payroll administrator or accountant to ensure correct usage and tax handling.

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