Examples of Payroll Calculation Information at the Legislative Level
To understand how the rules and definitions for calculating payroll components work together, let's examine two common examples: income tax deductions and social insurance deductions.
Each example provides sample values for the following rules and definitions:
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Component group
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References for wage basis rules
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References for calculation factors
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Wage basis rules
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Related elements
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Calculation factors for elements
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Associations for tax reporting
Individual Income Tax Deduction
A particular country or territory has a statutory deduction for an individual income tax. The exemption amount for the tax varies based on the person's residential status. The earnings classifications included in the wage basis for the tax vary by geographical region. Therefore, references are defined for both the wage basis rules and the calculation factors.
The calculation is a two-step process that calculates the exemption and then calculates the tax amount based on the reduced deductible amount.
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Component group: Taxes
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Component name: Individual Income Tax Deduction
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References for wage basis rules:
Reference Name
Reference Value
Geographical Region
Mainland
Geographical Region
Territory
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References for calculation factors:
Reference Name
Reference Value
Residential Status
Resident
Residential Status
Nonresident
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Wage basis rules:
Geographical Region Reference Value
Primary Classification
Secondary Classification
Use in Wage Basis?
Mainland
Standard Earnings
All secondary classifications selected
Y
Territory
Standard Earnings
All secondary classifications selected
Y
Mainland
Supplemental Earnings
Commission
Y
Territory
Supplemental Earnings
Commission
N
Mainland
Supplemental Earnings
Personal Use of Company Car
Y
Territory
Supplemental Earnings
Personal Use of Company Car
N
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Related element: Individual Income Tax Processor
The processing rule (a fast formula) associated with this element drives the income tax calculation. It accesses the appropriate calculation factor, based on the resident status reference value and the current step in the calculation process.
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Calculation factors for Individual Income Tax Processor element:
Resident Status Reference Value
Calculation Step
Calculation Method
Calculation Value Definition
Values
Nonresident
Calculate exemption amount
None
Tax Exemption Amount for Nonresident
4800
Resident
Calculate exemption amount
None
Tax Exemption for Resident
2000
(None)
Calculate individual income tax
None
Individual Income Tax Rate
0-50000: 3%
50000-100000: 4%
Over 10000: 5%
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Tax reporting units: All tax reporting units defined for this payroll statutory unit can report this calculation component. You associate calculation components with a specific tax reporting unit on the personal calculation card.
Social Insurance Deduction
The same country has a statutory deduction for a social insurance tax. Both the employer and the employee contribute to the social insurance tax, but their contribution rates are different. Calculation of the deduction includes several steps:
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Calculate the base amount for the employee's contribution.
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Calculate the base amount for the employer's contribution.
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Calculate the employee's contribution amount.
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Calculate the employer's contribution amount.
The following rules and definitions apply to this calculation at the legislative level:
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Component group: Social Insurance
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Component name: Medical Insurance Deduction
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References for wage basis rules: None
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References for calculation factors:
Reference Name
Reference Value
Contribution Level
Employee
Contribution Level
Employer
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Wage basis rules:
Primary Classification
Secondary Classification
Use in Wage Basis?
Standard Earnings
All secondary classifications selected
Y
Supplemental Earnings
All secondary classifications selected
Y
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Related elements: Medical Insurance Calculation element
The processing rule (fast formula) associated with this element drives the social insurance calculation. It accesses the appropriate calculation factor, based on the contribution level reference value and the current step in the calculation process.
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Calculation factors for Medical Insurance Calculation element:
Contribution Level Reference Value
Calculation Step
Calculation Method
Calculation Value Definition
Values
Employee
Calculate Employee Base Amount
None
Employee Contribution Upper Limit
8000
Employee
Calculate Employer Base Amount
None
Employer Contribution Upper Limit
5000
Employer
Calculate Employee Contribution Amount
None
Employee Contribution Amount
4%
Employer
Calculate Employer Contribution Amount
None
Employer Contribution Amount
3%
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Tax reporting units: All tax reporting units defined for this payroll statutory unit can report this calculation component. You associate calculation components with a specific tax reporting unit on the personal calculation card.