How do payroll processing code exceptions 1 and 2 work?

How do payroll payroll exceptions work for processing codes 1 and 2?

• Munis
• Payroll Exceptions

Processing Code 1 - ALL PAY TYPES ARE INCLUDED EXCEPT

If an employee is receiving payment under a pay code listed under a deduction's processing code 1 payroll exception, the pay amount tied to that pay code will be subtracted from the deduction gross.

PROCESSING CODE 2 - NO DEDUCTIONS ARE EXEMPTED EXCEPT

If an employee has an employee withholding amount for a deduction listed under a deduction's processing code 2 payroll exception, the employee withholding amount will be subtracted from the deduction gross.