Washington Labor and Industry (L & I)

The Washington State Labor & Industries Tax differs from other taxes because it is based on the number of hours worked by employees. You must create a deduction and an employer expense for every risk class that could apply to your employees, in order to track the tax. Here's how:

CREATE A DEDUCTION FOR EACH RISK CLASS

  1. In the Payroll Command Center, select Payroll Categories.
  2. Click on the Deduction tab then click the New icon in the lower left corner of the window.
  3. In the Deduction Name field of the Deduction Information window, enter WA L&I Class XXXX. (XXXX represents the risk class number.)
  4. Under Type of Deduction, select "Equals $0.00 Dollars Per hour".
  5. Enter the employee deduction amount for the risk class you're creating in the Dollars Per field.
  6. Choose Hour from the frequency list.
  7. Note: The deduction amount per hour for each risk class is listed in the employee risk class table from the Department of Labor and Industry. Link to this site here: http://www.lni.wa.gov/
  8. In the Deduction Limit field, be sure the No Limit selection is marked.
  9. Click the Employee button in the lower left hand corner of the window.
  10. In the Linked Employee window, mark the Select field next to the name of each employee who is in the risk class. Click OK when finished.
  11. Note: When you are ready to create a new risk class, click the New button in the Deduction Information window.

CREATE AN EMPLOYER EXPENSE FOR EACH RISK CLASS

  1. In the Payroll Categories list, click the Employer Expense tab then select the New button.
  2. In the Employer Expense Information window, enter WA L&I Class XXXX as the Employer Expense Name. (XXXX represents the risk class number).
  3. Choose Other as the Type of Expense.
  4. In the Expense Basis field, select the "Equals 0% Percent of ____".
  5. In the risk class tables from the Department of Labor and Industry, locate the employee deduction amount and the composite amount for the risk class.
  6. Make the following calculations:
    1. Subtract the employee deduction amount from the composite amount. The difference is the employer expense amount for the risk class.
    2. Divide the employer expense amount you calculated in step 6.1 by the employee deduction amount. This is the employer expense percentage for this risk class.
  7. Enter the employer expense percentage you calculated in step 6.2 in the Percent Of field.
  8. From the Percent Of list, choose the WA L&I deduction that corresponds to the employer expense you are creating.
  9. Click the Employee button in the lower left corner of the Employer Expense Information window.
  10. In the Linked Employee window, mark the Select field next to the name of each employee in this risk class.
  11. Click OK to return to the Employer Expense Information window.
  12. Note: When you are ready to create a new risk class, click the New button in the Employer Expense Information window.

Warning:

  • When calculations are made on paychecks for salaried employees that are assigned the WA L&I deduction, the calculations are based upon the number of hours in your company's work week.