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:

• Component group

• References for wage basis rules

• References for calculation factors

• Wage basis rules

• Related elements

• Calculation factors for elements

• 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.

• Component group: Taxes

• Component name: Individual Income Tax Deduction

• References for wage basis rules:

  Reference Name	Reference Value
  Geographical Region	Mainland
  Geographical Region	Territory

• References for calculation factors:

  Reference Name	Reference Value
  Residential Status	Resident
  Residential Status	Nonresident

• 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

• 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.

• 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%

• 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:

1. Calculate the base amount for the employee's contribution.

2. Calculate the base amount for the employer's contribution.

3. Calculate the employee's contribution amount.

4. Calculate the employer's contribution amount.

The following rules and definitions apply to this calculation at the legislative level:

• Component group: Social Insurance

• Component name: Medical Insurance Deduction

• References for wage basis rules: None

• References for calculation factors:

  Reference Name	Reference Value
  Contribution Level	Employee
  Contribution Level	Employer

• 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

• 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.

• 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%

• 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.