Defining Deductions

This chapter provides overviews of deductions, provisions, and batch positive input and discusses how to:

• Run deduction and provision reports.

• View delivered deductions.

• View delivered provisions.

Understanding Deductions

This section discusses:

• Deduction types

• Deductions and accumulators

Deduction Types

In Mexico, there are different types of deductions:

• Before taxes − reduces the net salary and the taxable gross for federal retention. Examples are maternity leave, tardiness, and sick leave.

• After taxes – reduces the net salary. Examples are savings fund and union contributions.

• Subject to state tax − represents all deductions that are subtracted from the taxable base of the state tax. Examples are disabilities and absences.

• State taxes − each state has its own taxable base.

Note. You define deductions using the Deductions component.

See Also

Defining Earning and Deduction Elements

Deductions and Accumulators

To ensure that the new deductions you create are used correctly in other calculations, you need to know which accumulators they should contribute to, since the value of the accumulated deductions is critical to these other processes. The accumulators to which you will be adding your deductions are the same ones that Global Payroll for Mexico has created for the delivered deductions. These include:

• Any deduction that you want to contribute to the net pay should be included in the TOTAL DEDUCCION N accumulator.

• Any deduction that you want to subtract the taxable base for federal tax purposes should be included in the BASE ISR accumulator.

  Also, each of these deductions should have a supporting element override for the variable FD VR METODO ISR with the corresponding value depending on which tax method you want to affect (113, 142, 148, or 112).

Understanding Provisions

This section discusses:

• Provisions in Mexico

• Provision definition

• Provision processing

Provisions in Mexico

A provision is an accrued expense for a company.

Provisions are generated for two main reasons:

• To cover the earnings financially, so that when your company has to pay this earning, it is prepared to do so.

  From a general ledger perspective, each provision is a debt that your company is accruing, and sooner or later, it has to be paid. So, debt accounts are balanced with the use of provisions.

• To keep track of costs.

  Although the employee receives his earnings at the end of the year or on his anniversary date, the cost is generated every day that the employee works. Costs can be controlled and distributed accordingly to the real cost generation.

In Global Payroll for Mexico, you can generate three types of provisions:

• Christmas bonus provision

• Vacation provision

• Vacation premium provision

The vacation premium and Christmas bonus are legal earnings that are assigned to an employee on a yearly basis, depending on his seniority. For every day that an employee works, he earns a fraction of these earnings. Even if an employee leaves the company before receiving his bonus, a proportional part of this earning will be paid in his termination pay.

Provision Definition

While Global Payroll for Mexico delivers deductions for the Christmas bonus provision, vacation provision, and vacation premium provision, you can also create your own deductions for other provisions.

To define a provision:

1. Define the provision on the Deductions component.

2. The payroll process will calculate the proportional amounts of the provision for the period corresponding to the actual days worked.

See Also

Defining Earning and Deduction Elements

Provision Processing

This section provides an overview of provision calculation and discusses:

• Christmas bonus provisions

• Vacation provisions

• Vacation premium provisions

Provision Calculation

Global Payroll for Mexico delivers deductions that are used to calculate provisions for vacation, vacation premium, and Christmas bonus. All of these provisions are defined as non-taxable for ISR and are not subject to state taxes. These earnings do not affect any other earning, deduction, or accumulator.

The system calculates the proportion of the provision for each pay period in terms of Actual Worked Days for an employee. Every time a regular payroll process is run, the system determines the corresponding quantities of provisions for vacation, vacation premium, and Christmas bonus according to the procedures detailed below.

Christmas Bonus Provisions

To determine the corresponding amount of the Christmas bonus provision, this formula is used:

(Days of Christmas bonus according to seniority/365 days * Worked days in the period) * (Salary type)

Here's an example:

• Days of Christmas bonus = 25

• Worked days in a period = 15

• Daily salary = 100.00

The formula calculates the corresponding amount of the Christmas bonus provision as:

(25/365 * 15) * 100.00 = 102.74

Note. An employee's salary can be taken from either his daily salary rate or any average salary. You can choose which salary type you want to use in calculating the Christmas bonus provision. Global Payroll for Mexico delivers the provision calculation using the daily salary. Seniority has to be calculated to the date of the Christmas bonus payment, not to the processing date, nor the period begin or end date. Otherwise, the provision will not be accurate. The provision has to reflect the payment that the employee is going to receive as a Christmas bonus in December. By law, this date is no later than December 20.

The Christmas bonus provision will not be included in the NET accumulator (TOTAL NETO), since this deduction won't be deducted from the employee.

Vacation Provisions

To determine the corresponding amount of the vacation provision, this formula is used:

(Number of days according to the vacation table/365 days * Worked days in the period) * (Salary type)

Here's an example:

• Vacation days = 25

• Days worked in a period = 15

• Daily salary = 100.00

The formula calculates the corresponding amount of the vacation provision as:

(25/365 * 15) * 100.00 = 102.74

Note. An employee's salary can be taken from either his daily salary rate or any average salary. You can choose which salary type you want to use in calculating the vacation provision. Global Payroll for Mexico delivers the provision calculation using the daily salary. Seniority has to be calculated to the date of the next anniversary, not to the processing date, nor the period begin or end date. Otherwise, the provision will not be accurate. The provision has to reflect the payment that the employee is going to receive as vacation on the date that the employee earns the entitlement.

The vacation provision will not be included in the NET accumulator (TOTAL NETO), since this deduction won't be deducted from the employee.

Vacation Premium Provisions

To determine the corresponding amount of the vacation premium provision, this formula is used:

(Number of days according to the vacation table/365 days * Worked days in a period) * (Percentage of vacation premium) * (Salary type)

Here's an example:

• Days of vacation = 20

• Days worked in a period = 15

• Daily salary = 100.00

• Vacation premium percent = 25%

The formula calculates the corresponding amount of the vacation premium provision as:

((20/365 * 15) * (25%)) * 100.00 = 20.55

Note. An employee's salary can be taken from either his daily salary rate or any average salary. You can choose which salary type you want to use in calculating the vacation premium provision. Global Payroll for Mexico delivers the provision calculation using the daily salary. Seniority has to be calculated to the date of the next anniversary, not to the processing date, nor the period begin or end date. Otherwise, the provision will not be accurate. The provision has to reflect the payment that the employee is going to receive as vacation on the date that the employee earns the entitlement.

The vacation premium provision will not be included in the NET accumulator (TOTAL NETO), since this deduction won't be deducted from the employee.

Note. You can generate a provisions report in Global Payroll for Mexico.

See Also

Viewing Delivered Provisions

Global Payroll for Mexico Reports

Understanding Batch Positive Input

You can use batch positive input to reduce time-consuming data entry in Global Payroll for Mexico. Batch positive input can be used for earnings or deductions.

For example, you could enter and trigger bonuses for all of your employees using batch positive input, or you could trigger mass deductions. Suppose that an employer has an agreement with a cell phone company to provide half the employee population with a 50 percent discount rate on calls. Instead of entering each of the monthly cell phone invoices (deductions) for each employee, the cell phone company could generate a flat file with a layout that loads this invoice information using a batch process.

Note. Setting up the flat file for batch positive input is discussed in another chapter in this PeopleBook.

See Also

Tracking Earnings

Running Deduction and Provision Reports

This section discusses how to run deduction and provision reports.

Pages Used to Run Deduction and Provision Reports

See Also

Global Payroll for Mexico Reports

Viewing Delivered Deductions

This section discusses:

• Delivered deductions.

• Delivered deduction process lists and sections.

Note. The deduction elements for Mexico are defined as PeopleSoft Delivered/Not Maintained. This means that you can modify these elements to fit your needs, and when necessary, create your own earnings using the delivered elements as your guide.

Delivered Deductions

This table lists the delivered deductions for Mexico:

Delivered Deduction Process Lists and Sections

In Global Payroll for Mexico, deductions are processed and calculated within different process lists. Most deductions are calculated as part of the NOMINA process list, and are included in the section called DEDUCCIONES. However, the DEDUCCIONES section recurs in other process lists and there are numerous other deduction elements, such as termination pay, that are processed elsewhere.

This table lists the main process list and sections used to calculate deduction elements for Mexico.

Note. A complete list of delivered process lists and sections used to calculate deductions and other elements can be found previously in this PeopleBook.

See Also

Defining Country Data

Viewing Delivered Provisions

This table lists the provision deductions for Mexico:

Note. The PeopleSoft system delivers a query that you can run to view the names of all delivered elements designed for Mexico. Instructions for running the query are provided in the PeopleSoft Global Payroll 9.1 PeopleBook.

See Also

Understanding How to View Delivered Elements