Understanding Retirement Allowance Processing

Upon retirement, payees may be eligible for a retirement allowance based on years of service, base pay, the reason for termination, or other criteria, according to your organization's policies. With Global Payroll for Japan, you can enter an employee's retirement allowance and have the system automatically calculate and deduct the related income tax and inhabitant tax (prefecture tax and municipality tax ) on retirement earnings. The system can also generate a withholding tax report and payslips for retirement allowances.

This section discusses:

  • Delivered elements for retirement allowances.

  • Viewing delivered elements.

  • Deduction processing rules.

  • Retirement allowance setup and processing.

Global Payroll for Japan delivers these elements for processing retirement allowances:

  • Earning element (ER RET ALW).

    Use this element when entering the earning amount of an employee's retirement allowance through positive input.

  • Accumulator (ER AC RET ALW EARN).

    This elements stores the earning amount of the retirement allowance. It has two members: earning element, ER RET ALW, which you populate through positive input, and the accumulator ER AC RET CUST ERN, which has no contributing members as delivered. You can have additional earnings contribute to ER AC RET ALW EARN by adding earning elements as members of that accumulator.

  • Deduction elements (IN TAX RET, IH MUNIC RET), and (IH PREFT RET).

    The system uses these elements to calculate income tax, municipality tax, and prefecture tax for retirement allowances.

  • Process list (JPRRET).

    This is the process list that is associated with the delivered run type element.

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

Global Payroll for Japan processes tax deductions for retirement allowance earnings by:

  • Calculating the deduction amount of the retirement allowance, taking into account overlapping years of service and retirement due to disability.

  • Calculating the retirement allowance income after the deduction by summing the earning amount of the retirement allowance (that you enter through positive input) and the former retirement allowance paid in the same year (as reported on the Maintain Ret Allow Data JPN page) and subtracting the deduction amount of the retirement allowance.

  • Calculating the taxable amount of the retirement allowance.

  • Determining the income tax on the taxable amount of the retirement allowance, taking into account whether the employee submitted a retirement income report.

    Note: The system calculates income tax of zero when the retirement allowance was paid due to death.

  • Determines the inhabitant tax based on the retirement allowance income after the deduction.

Retirement allowances are handled as unscheduled payments in an off-cycle run.

High-level steps for setting up and processing retirement allowances include:

  1. Entering retirement allowance data, including the employee's years of service and data from the payee's Retirement Income report on the Maintain Ret Allow Data JPN page.

    The system uses this information when it calculates the deduction amount of the retirement allowance and the taxes on the current retirement allowance. This step is required whether or not the payee has submitted a Retirement Income report.

  2. Using the Off Cycle component to enter the payee's current retirement allowance earning as an unscheduled payment.

  3. If applicable, entering the payee's date of death on the Biographical Details page in the Administer Workforce JPN business process in PeopleSoft HR.

  4. Running an off-cycle process for retirement allowances.

  5. Printing payslips.

  6. Generating the Retirement Allowance Withholding Tax report.