Estimating Fixed Income

Employees with a net guarantee receive special treatment for tax percentage calculation. The system performs a normalization process each month, regardless of whether the normalization schedule is set up for the employee's pay entity and tax location, because the system needs to perform the net to gross process to calculate the fixed income part of the tax base. The system use the Target Compensation Rate field value on the Compensation page of the Job Data component as guarantee net and retrieves a gross amount after an iterative process.

For employees who are not net-paid, the system calculates the estimated fixed income using the annual rate. The annual rate comes from the employee's compensation rate and frequency or the target compensation rate, depending on the employee, on the Compensation page of the Job component. The system prorates this value for the remainder of the year or contract by:

1. Calculating an annual value for the compensation by multiplying the entered amount by the entered frequency.

2. Calculating a daily value by dividing the annual amount by the number of days in the year. When determining the number of days in the year, the system includes the number of days of extra periods for which the employee is eligible.

3. Calculating the value of the remaining portion of the year by multiplying the daily amount by the number of days in the remaining portion of the year. When determining the number of days in the remaining portion of the year, the system includes the number of days of the extra periods that are paid during that time period and for which the employee is eligible.

Note:

The system does not perform an earning-by-earning estimation. This means that the system counts extra period days as regular days even though the extra period could conceivably pay a different gross amount. The system assumes that payments in regular and extra periods are similar.

The system considers the employee's current job records and accrued seniority earnings, the remaining days in the year, and the pending extra periods in the calculation of estimated fixed income. For seniority earnings, the system uses the effective date data from the Job records.

PeopleSoft Global Payroll for Spain enables you to include future job data events and future seniority events in the year as part of the calculation of estimated fixed income. Use the CLI VR EST FUTURO variable to control this functionality.

With the CLI VR EST FUTURO variable you can specify that the system consider job record data with future effective dates in the estimated fixed income. For example, perhaps an employee's compensation rate in May is 1000 euros but in August this value increases to 1500 euros. To consider job records with future effective dates (future information in the Job record), set the character value of the CLI VR EST FUTURO variable to Y.

With the CLI VR EST FUTURO variable you can also specify that the system calculate future accrued seniority earnings in the year as part of the calculation of estimated fixed income. The system computes the values for each seniority segment using the seniority compensation base elements as of each segment date. For example, if an employee is hired in August 2003 and receives a seniority amount every three years, then in August 2006 the employee is due the increase in seniority earnings. The system thus uses the current seniority earnings amount for January through August and uses the future seniority amount for August through December during the calculation of the seniority portion of the estimated fixed income.

To perform the initial set up of the CLI VR EST FUTURO variable, select Set Up HCM, Product Related, Global Payroll & Absence Mgmt, Elements, Supporting Elements, Variables. Access the CLI VR EST FUTURO variable and set it to the desired character value. The default value of this variable is N. The setting for this variable controls both the future job data and seniority events simultaneously. You can also control this setting by using the supporting element override functionality at the payee level.

Extra Periods and Tax Estimation

For pending extra periods, the system considers extra periods when estimating each member of the tax base through the calculation of pending days to be paid. The system uses a homogeneous distribution of salary along the different payments. The system does not perform an earning-by- earning estimation to determine which earning belongs to which extra period when the tax base using Job compensation data.

If a payee begins working part of the way through the accrual time frame for an extra period, the system prorates the number of pending days to be paid accordingly by dividing the number of days worked in the period by the extra period time frame. For example, let us assume that a payee is hired in November and that payee's labor agreement includes an extra period that is paid in December and accrued from July to December. In this case, the system counts one sixth (30 days ÷ 6 months) of the extra period when counting the number of days in the estimation period. Therefore, only 5 days would count for the December extra period for this payee.

Determining the End Date for Tax Estimation

The formula CLI FM F FIN EST determines the end date for tax estimation for employees based on the values of the Contract End Date and Contract Expected End Date fields on the Contract Status/Content (CONTRACT1) page. If the Contract Expected End Date field has a value, the system uses that value as the end date for tax estimation. If the Contract Expected End Date field is blank, but the Contract End Date field has a value, the system uses that value as the end date for tax estimation. If both fields are blank, the system uses December 31 as the end date for tax estimation.

In the case where there is a contract end date defined, but no contract expected end date defined, you can override the contract end date by modifying the setup variable CLI VR EST F AÑO. If you change the value of this variable to Y, the system uses December 31 as the end date for tax estimation instead of the contract end date.