ANS-0739 · ACCOUNTING & FINANCIAL CONFIGURATION
How to Reimburse Employee Expenses via Direct Deposit in NetSuite Payroll
Configure NetSuite to automatically include approved employee expense reports in payroll for direct deposit reimbursement.
Short answer
To reimburse employee expenses via direct deposit on payroll, enable the 'Pay Expenses on Paychecks' preference and create an 'Earning:Expense' payroll item. This method integrates approved expense reports into the payroll process, consolidating payments. Note that reimbursements occur on payroll day and must be for the full expense report amount.
Scenario
Organizations often seek to streamline the reimbursement process for employee expenses, aiming to consolidate payments and reduce administrative overhead. When employees submit expense reports, the goal is to integrate these approved reimbursements directly into the regular payroll cycle, facilitating payment via direct deposit alongside their regular wages.
Solution
It is convenient to reimburse employees for expenses via direct deposit on their payroll check, consolidating two payments into one transaction. If employees submit Expense Reports, approved reports can be automatically included in the payroll process. There are a couple of limitations to be aware of before implementing this feature:
Payments for expenses to employees can only be made on payroll day. (If a payment is needed on a non-payroll day, a “Pay Bill” transaction must be used.)
If reimbursing employees for an amount on an Expense Report, the entire amount must be reimbursed. This method does not allow for partial reimbursement.
To pay employees via direct deposit, an account must first be configured for these payments. NetSuite's SuitePeople Payroll solution handles direct deposit, often through an authorized third party. Organizations utilizing SuitePeople U.S. Payroll will need to ensure their direct deposit setup is complete.
After NetSuite is configured for direct deposit, individual employee payment settings must also be configured. This involves entering the employee's bank account and routing number, and typically sending a prenote to the employee's bank to verify proper transmission.
To configure the system for paying expenses on payroll, it is assumed that direct deposit is already configured and employee bank accounts are entered. The first step is to enable the 'Pay Expenses on Paycheck' preference within NetSuite, which activates this feature.
Go to Setup > Payroll > Set Up Payroll.
Check the Pay Expenses on Paychecks box.
Click Save.
After enabling the feature, a payroll item must be created for reimbursing employees. To ensure this reimbursement item does not affect tax withholdings or the employee’s gross pay, the 'Earning:Expense' item type should be used. This type ensures the dollar amount is added to the employee's net pay and is not included on the employee’s W2 form.
To create a payroll item:
Go to Lists > Employees > Payroll Items > New (Administrator).
Click on the Earning:Expense link.
On the Payroll Expense Item page, if using a NetSuite OneWorld account, select a subsidiary from the drop-down list in the Subsidiary field.
Enter a name for the earning item.
The Type field displays the payroll item type, which determines how this new earning will be taxed and reported.
Select a Report Section from the drop-down list to specify which section of payroll reports should display this amount.
Check the Inactive checkbox to prevent the use of this Earning Item, or clear it to make it available.
Click Save.
To pay approved Expense Reports on an employee’s paycheck, this new Payroll Item must be added to the Employee’s Payroll record.
To add an expense payroll item to an employee record:
Go to Lists > Employees > Employees.
Click Edit next to the employee name.
On the employee record, click the Payroll subtab.
Click the Earnings subtab.
In the Earnings field, select the newly created Earning:Expense payroll item.
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