What is third party sick pay?
A disability benefit, or payment, that assists workers in the event they become disabled due to non work related injury or illness.
Who makes the payments?
The payments are made to the worker by a third party, typically the insurance carrier. However, it's important to note that the taxability of the payments depends on the type of disability plan. You can read more on the different types here.
How can I record this in Zenefits?
If Zenefits is your payroll provider, see instructions below. If Zenefits is not your payroll provider, you'll want to connect with them for next steps.
- From the Zenefits Payroll card, click the Pay Runs tab.
- Click Add Off-Cycle Run (third party sick pay can only be recorded through off cycle runs)
- On the Pay Run Additional Details step, toggle to mark the run as Third-Party Sick Pay.
Note that once this is selected, you can select a check date in the past
- Check the box next to the relevant workers to add them.
- Click Edit to open the paystub.
- +Add Earning and notate the third party earnings.
- Enter taxes withheld by the third party.
- Once these are entered, employer taxes will be estimated below.
- When you're ready, Finish Edit and Approve Run to save the taxes
What are the different earnings codes for Third Party Sick Pay and what do they mean?
- Less than six months (after last day of work): taxable for ALL taxes (FIT, FICA, MED, SIT, SDI, and local)
- Six months or greater (after last day of work): taxable for income taxes only (FIT, SIT, some local)
- Non-taxable: employee funded payments are non taxable, but map to Box 12J on the W-2
What if I have questions on the amounts that were provided to me by the third party?
Ultimately, the best resource will be the third party. However if you'd like advice on a situation surrounding third party sick pay in Zenefits, feel free to reach out to one of our Payroll Advisors.