Estimating Recurring Income From Earnings Assignments

The above topics explains how the system calculates the estimated portion of each member of the annual tax base (fixed income, in kind income, and variable compensation). You saw that in the case of fixed income and in kind income the starting point of the estimation is the values in the Job Data component. But what happens with other compensation that you do not enter through the Job Data component, compensation that is recurring and that is reasonable to consider as part of the tax base estimation? This other compensation is the type that is entered through the payee earning and deduction assignment functionality. PeopleSoft Global Payroll for Spain enables you to decide whether to consider compensation coming from payee earning and deduction assignments when the system calculates the tax base.

Use the CLI VR EST ASIGN and CLI VR EST ASG SOB variables to control whether to include earnings entered through earnings and deduction assignments as part of the tax base estimation. These variables enable you to include recurring earnings that are not entered through the Job record.

You can override these variables in three ways:

Variable definition: Modify the CLI VR EST ASIGN variable at the variable definition level.

You can define the default value of this Global Payroll variable element during the implementation phase. If you set the default value of the variable to N, the system does not perform estimation for the values that you enter through earning and deduction assignments. If you set the variable value to Y, the system does perform analysis of earning and deduction assignments as part of the tax base estimation.
Earning definition: Override the CLI VR EST ASG SOB variable at the earning definition level.

You can override the default value of the CLI VR EST ASG SOB variable on the Supporting Element Overrides page of the earnings definition by setting it to N, provided that the default value of the variable at the variable definition level is set to Y. The system estimates the amounts coming from earning and deduction assignments but bypasses the earnings for which you have set the variable override value to N. Oracle recommends that if you are using earning and deduction assignments to override values coming from the Job record, you set the variable value of the earning to N at the earning level. Otherwise, the system might count the earning twice—once through the Job Data component and once through the earning and deduction assignment. This override level affects the specific earning for every employee.
Supporting element override: Override the CLI VR EST ASG SOB variable value of a basic or recurring earning for a specific employee.

You can do this by using the supporting element overrides functionality within the components of the Earnings and Deductions Assignments menu by changing the character value of the CLI VR EST ASG SOB variable to N. This override level affects that specific entry (earning and payee combination) only.

Earnings are categorized as either fixed, in kind, or variable income at the earning level. When you create earnings in PeopleSoft Global Payroll for Spain you must assign the earning to certain accumulators to define whether the earning is payable and taxable and whether it contributes to social security. Regarding taxes, you include the earning in a different accumulator depending on its categorization. For example, you include fixed income in the accumulator CLI AC ING DIN FJO. This categorization enables the calculation process for the tax base estimate to split earnings entered through earnings and deduction assignments into their appropriate categories for the estimation. The system determines which member of the tax base (fixed, in kind, variable) the earning belongs to by checking which accumulators the earning is a member of in the earnings definition. The system then adds the earning to the corresponding member of the tax base.

When the take base estimation process reads the earning and deduction assignment and performs the corresponding calculation and frequency conversion, the system performs an earning-by-earning estimation. This means that the system determines the extra periods to which each earning belongs when it calculates the number of days in the year. When the tax base estimation process evaluates an earning, it takes into account whether the earning is included in pending extra periods. To calculate an annual amount, the system multiplies the earning amount by the specified frequency (element frequency or calendar period frequency). Then the system calculates the daily value by dividing the annual amount by the total number of days in the year. When calculating the number of days in the year for an earning, the system again takes into account the extra periods that include that earning. For example, let us assume that an employee who is paid monthly has two extra periods that both include earning A. The total number of days in the year for earning A would be then be 360 for the year, plus another 30 days for each extra period, for a total of 420 days. After the system calculates the daily value for an earning, it calculates the amount for the remaining part of the year by multiplying the daily amount by the remaining number of days. When calculating the remaining number of days, the system once again takes into account the extra periods pending payment.

Note:

When the system calculates the number of days in an estimation period, it includes the number of days from extra periods that are paid in the estimation period. If a payee begins working part of the way through the accrual time frame for an extra period, however, the system does not pay the extra period 100%. Instead the system determines the number of worked days. It prorates the number of pending days to be paid 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 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.

Annualizing Income from Earnings Assignments

The system annualizes earning assignment income based on the value you select in the Frequency Option field on the Element Detail page for the assignment:

Use Calendar Period Frequency: If you select this value, the system assumes that the entered amount for the earning is a monthly amount for the purposes of determining the annual conversion factor. In addition, the system takes into account any extra periods to which the earning applies. For example, if an earning gets paid in two extra periods, the annualization factor is 12 (regular monthly payments) + 2 (extra periods) for a total of 14.
Use Element Frequency: If you select this value, the system determines the annualization factor based on the frequency specified at the earning level. If the frequency option for the earning is Use Calendar Period Frequency, the system calculates the annualization factor as explained above.
Use Specified Frequency: If you select this value, the system determines the annualization factor based on the value you enter in the Frequency field on the Element Detail page.