PeopleSoft Global Payroll for Germany 9.1 PeopleBook

Defining Direct Insurance

This chapter provides overviews of direct insurance, types of direct insurance, and direct insurance setup, and discusses how to:

Set up direct insurance.
Enter direct insurance data.

Understanding Direct Insurance

Direct insurance represents a type of earning that is subject to lower taxation than regular earnings. Direct insurance premiums can either be paid by the employer in addition to wages or salaries or can be financed by converting wages or salaries from legally owed compensation.

The employer pays insurance fees directly to the insurer and deducts those fees from the employee's income. The advantage to employees is that they pay a fixed tax percentage that is lower than the tax percentage for their regular salaries.

The lump-sum tax rate for such future insurance benefits has been 20 percent since 1996, but legislation grants such tax concessions have changed, depending on how the insurance premiums are financed.

This chapter discusses the types of direct insurance and how to set up calculations for direct insurance in Global Payroll for Germany.

Delivered Elements

The PeopleSoft system delivers a query that you can run to view the names of all delivered elements designed for Germany. Instructions for running the query are provided in the PeopleSoft Global Payroll PeopleBook.

Understanding Types of Direct Insurance

Tax concessions apply to the following types of direct insurance:

Capital life insurance.
Term life insurance.
Combined term and capital life insurance.
Retirement insurance.
Pension insurance with capital options.
Accident and employment disability insurance with guaranteed premium refund.
Supplemental accident insurance combined with a life insurance policy.
Employment disability insurance combined with a life insurance policy.
Variable life insurance.

Note. Tax concessions apply only to insurance policies with a term of at least five years.

Direct insurance benefits are paid directly by the employer to the employee's account at the employee's insurance company. Benefits can be paid regularly (periodically) or in the form of a one-time payment. Such payments can involve normal work pay, a pay conversion, or a one-time payment. Each case requires different taxation processes. Earnings up to 1,752 EUR per year are also taxed differently than the share of earnings above this limit.

The interest yielded from these types of insurance policies is nontaxable, if the term of the policy is not less than 12 years and individual contribution adjustments do not exceed the lump-sum amount.

If pay is converted, the insurance premium is deducted from the compensation amount in advance. If the employer makes a one-time payment, the premium is taxed at the lump-sum rate of 20 percent. This rate applies up to an annual total amount of EUR 1,752. Earnings above this amount are taxed separately.

Amounts from one-time payments, as well as old policies, are exempt from social insurance contributions.

Understanding Direct Insurance Setup

All setup for direct insurance is done in the core application, using elements that are specific for Germany. Global Payroll for Germany has no specific pages that need to be set up for direct insurance.

Set up the earnings element that you use for direct insurance on the Earnings Name page in the core application.
Define the calculation rule for the direct insurance earnings on the Earnings Calculation page in the core application.
Assign the earnings element to an accumulator on the Accumulators page in the core application.
Assign an individual recipient for direct insurance deductions on the Payee Deduction Recipients page in the core application.

Note. After the earnings element is assigned to an accumulator, the system automatically deducts all entered amounts related to the earnings. Use deduction element DE_DD_M90100.

Entering Direct Insurance Data

This section discusses how to:

Set up an earning for direct insurance.
Define calculation rules for direct insurance.
Assign accumulators for direct insurance.
Assign recipients for direct insurance deductions.

Pages Used to Set Up an Earning for Direct Insurance

Page Name	Definition Name	Navigation	Usage
Earnings Name	GP_PIN	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Elements, Payroll Elements, Earnings, Earnings Name	Name the element and define its basic parameters.
Earnings - Calculation page	GP_ERN_DED_CALC	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Elements, Payroll Elements, Earnings, Calculation	Define calculation rules for an earning element.
Accumulator Name	GP_PIN	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Elements, Supporting Elements, Accumulators, Accumulator Name	Name an accumulator element and define its basic parameters.
Define Deduction Recipients	RECIPIENT	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Banking, Deduction Recipients, Define Deduction Recipients	Define general and individual recipients for deductions.

Setting up an Earning for Direct Insurance

Access the Earnings Name page (Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Elements, Payroll Elements, Earnings, Earnings Name).

See Naming an Earning Element.

Defining Calculation Rules for Direct Insurance

Access the Earnings - Calculation page (Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Elements, Payroll Elements, Earnings, Calculation).

Use this page to view the calculation rule information for the direct insurance deduction.

Define the calculation rule of the direct insurance earnings as an Amount and then select Payee Level as the amount.

See Defining Calculation Rules for an Earning Element.

Assigning Accumulators for Direct Insurance

Access the Accumulator Name page (Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Elements, Supporting Elements, Accumulators, Accumulator Name).

Create a new earnings element, which you must add to an accumulator for direct insurance. Depending on who is paying the lump-sum tax, the accumulator is different. This PeopleSoft application delivers both of these accumulators:

If the employer is paying the lump-sum tax, use the DE_A3_K2042 accumulator.
If the employee is paying the lump-sum tax, use the DE_A3_K2052 accumulator.

By assigning the earnings to one of these accumulators, you define the earnings as a direct insurance type of earnings.

Assigning Recipients for Direct Insurance Deductions

Access the Define Deduction Recipients page (Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Banking, Deduction Recipients, Define Deduction Recipients).

Use this page to define the banking details for direct insurance deductions. This definition includes assigning a recipient ID and identifying a deposit schedule.

Note. You must assign the DE_DD_M90100 deduction element to the individual recipient.

See Defining Recipients.