Payroll deductions

Payroll deductions are an essential part of the payroll process, representing the amounts withheld from an employee’s gross pay to meet statutory, voluntary, and court-ordered obligations. Managing these deductions accurately is vital for compliance, transparency, and employee trust. At Mercans, payroll deduction management is automated and fully compliant with country-specific tax and labour laws. Our unified payroll platform ensures every deduction—whether mandatory or voluntary—is calculated precisely and applied consistently across global operations. By streamlining complex regulatory requirements and integrating with benefits and HR systems, Mercans enables organisations to maintain accurate records, meet legal obligations, and provide employees with clear, transparent payslips that detail every component of their earnings and deductions.

Mandatory Payroll Deductions

Federal Income Tax

Federal income tax is a compulsory deduction determined by national tax authorities based on an employee’s earnings, filing status, and applicable tax rates. Employers are responsible for accurately calculating and remitting these taxes on behalf of employees, ensuring compliance with all legal requirements. Automated systems like Mercans’ payroll solution reduce errors and ensure timely submission to tax authorities.

FICA Taxes (Social Security and Medicare)

In countries like the United States, FICA (Federal Insurance Contributions Act) taxes fund Social Security and Medicare programs. These contributions are shared between employees and employers. Social Security supports retirement and disability benefits, while Medicare provides healthcare coverage. Accurate tracking and remittance are essential to maintaining compliance with statutory contribution rates.

State and Local Taxes

Depending on the region, employees may be subject to additional state or local income taxes. These vary based on jurisdiction and may include flat or progressive rates. Mercans’ multi-country payroll system automatically applies the correct rates and ensures compliance with local tax regulations, simplifying complex, multi-level tax structures.

State Unemployment Insurance (SUI)

State Unemployment Insurance provides temporary financial assistance to employees who lose their jobs through no fault of their own. Contributions to SUI are generally employer-funded but may include employee contributions in certain jurisdictions. Maintaining accurate reporting and timely payments helps ensure compliance with employment laws and eligibility programs.

Voluntary Payroll Deductions

Pre-tax Voluntary Deductions

Pre-tax deductions are subtracted from gross pay before taxes are applied, reducing the employee’s taxable income. Common pre-tax deductions include contributions to retirement savings plans, healthcare premiums, and flexible spending accounts. These deductions provide tax benefits for employees while supporting long-term financial and wellness goals. Mercans automates pre-tax processing globally, adapting to country-specific benefits and tax structures.

Post-tax Voluntary Deductions

Post-tax deductions are withheld after taxes are calculated. They typically include payments for union dues, charitable contributions, or voluntary insurance programs not eligible for pre-tax treatment. Accurate tracking ensures these deductions are applied correctly without affecting taxable income calculations.

Court-ordered Deductions (Garnishments)

Garnishments are legally mandated deductions ordered by a court or government authority. They may include child support, alimony, tax levies, or other debt repayments. Employers are required to comply strictly with garnishment orders, adhering to limits on withholding amounts as defined by law. Mercans’ global payroll compliance engine ensures these deductions are processed securely, confidentially, and in full accordance with regional regulations.