1. Administering Payroll for the United Kingdom
  2. Statutory Deduction Components and Component Groups

Statutory Deduction Components and Component Groups

Although you can't modify predefined statutory deduction components, it's useful to understand the role they play in payroll deduction calculations. You can view details of these components in Payroll using the Payroll Calculation Information task in Payroll.

There are two predefined statutory deduction component groups for the UK: National Insurance and Taxes.

  • The National Insurance group contains a single component: NI.

  • The Taxes group also contains only one component: PAYE.

NI Component

Here are some key aspects of the NI component:

  • This component defines a set of calculation factors used to derive the correct employee and employer national insurance contribution (NIC) amounts. Since NI rates vary based on the employee's NI category, NI category is defined as a reference value for these calculation factors. Each calculation factor identifies the calculation value definition that holds the rates for a particular category.

  • The Statutory Deduction calculation card captures the NI category and pension basis to use as inputs when calculating the NI contribution.

  • This component relates to the Tax and NI payroll element, which actually drives the calculation of the NI contribution. During a payroll run, the element's processing rule retrieves input values from the calculation card and rates stored in calculation value definitions. The Tax and NI element generates autoindirect elements, each with its own processing rule, to calculate various components of the NI deduction, such as the employer and employee contribution amounts and any arrears.

PAYE Component

Here are some key aspects of the PAYE component:

  • This component defines a set of calculation factors used to derive the correct income tax deduction amount. Since Pay As You Earn (PAYE) rates vary based on the employee's tax code, tax code is defined as a reference value for these calculation factors. Each calculation factor identifies a calculation value definition that holds the rates for a particular tax code value.

  • Statutory Deduction calculation cards capture employee-specific information, including the HMRC payroll ID, tax code, tax basis, and other information required by HMRC.

  • This component relates to the PAYE payroll element, which actually drives the calculation of PAYE. During a payroll run, the element's processing rule retrieves input values from the calculation card and rates stored in calculation value definitions.