When you create a pension or savings scheme, Oracle Payroll generates a formula that calculates the contributions. The content of the formula depends on your choices when you set up the pension type and scheme. The formula uses default values specified for the pension type, or overrides you specify for the assignment or element entry. The formula may refer to balances for values, such as salary and past year bonuses.
Pension contributions can be:
A fixed premium amount specified by the pension provider and divided between employee and employer contributions
To set this up, you select a salary calculation method of Fixed Premium Amount for the pension type, and a Deduction Method of Percentage for the scheme. You enter the Annual Premium Amount and the percentage paid by the employee. The remaining proportion is paid by the employer.
Attention: Fixed premium amount is not relevant to ABP pensions.
A percentage of the pension basis (which is normally related to pensionable salary), calculated as:
A payroll period contribution, based on salary in first payroll period in the year or
A payroll period contribution, based on the salary in that period
Attention: The second option does not apply to ABP pensions. Percentage-based ABP pensions always use the salary calculation method Actual Salary of First Payroll Period in the Year.
To set this up, you select a salary calculation method of Actual Salary of first payroll period in the year or Actual Salary of each processing payroll period, and you select a Deduction Method of Percentage for the scheme. You enter the percentage of salary paid by employee and, if appropriate, employer. For certain ABP pension types, you can use a user-defined table to specify percentages that depend on the employee's age and the age at which the employee began contributing to the pension.
A flat amount entered separately for employee and employer (if there are employer contributions)
To set this up, you select a salary calculation method of Actual Salary of first payroll period in the year or Actual Salary of each processing payroll period, and you select a Deduction Method of Flat Amount for the scheme. You enter the flat amount paid by the employee and, if appropriate, employer.
In all cases the contributions are paid as a regular deduction each payroll period.
You can select a conversion rule to define how to prorate the pension deduction amount, salary, and annual salary threshold to a particular pay period. There are four conversion rules. One--used particularly by ABP pensions--is called Prorate to Pay Period. This conversion rule simply divides the annual amount by the number of payroll periods in the year, such as 12 for an employee on a monthly payroll.
The other three rules calculate a daily amount--by dividing the annual amount by a global value for average days per year--and multiply this by a different factor. The following table explains the factors and how to override them at assignment and element entry levels. Notice that element entry overrides take precedence over assignment-level overrides.
| Conversion Rule | Uses the Factor . . . | Override Factor At Assignment Level Using . . . | Override Factor At Lowest Level Using . . . |
|---|---|---|---|
| Average Working Days | Average number of working days in the payroll period (such as 5 for a weekly payroll) | Dutch Average Pension Days EIT | ABP schemes: ABP Pensions Override Information EIT (for a specific pension type) Other schemes: Override Pension Days input value on the Pension Deduction and Employer Pension Contribution elements. |
| Average Days With Work Schedules | Average Working Days calculated from the employee's work pattern (excluding non-SI absences). Average Working Days is calculated by dividing the number of days the employee is scheduled to work by the total number of days in the work pattern, and multiplying by the average number of days in the period. If the employee has no work pattern the calculation uses the same figures as in the Average Working Days method | Dutch Average Pension Days EIT | ABP schemes: ABP Pensions Override Information EIT (for a specific pension type) Other schemes: Override Pension Days input value on the Pension Deduction and Employer Pension Contribution elements. |
| Real Working Days | Real working days in the pay period, according to the employee's work pattern (including paid leave but excluding non-SI absences). If the working days from the work pattern exceed the maximum Social Insurance Days, this maximum figure (minus any non-SI absences) is used in the calculation instead. | Override Real SI Days field on the Social Insurance/Pension tab of the Assignment window. | ABP schemes: ABP Pensions Override Information EIT (for a specific pension type) Other schemes: Override Pension Days input value on the Pension Deduction and Employer Pension Contribution elements. |
You can specify an annual limit on contributions, set for each pension type, which you can override at the assignment level. If an employee has multiple assignments, the limit is split between assignments.
For percentage-based schemes, Oracle Payroll calculates the deduction as a percentage of the pension basis. You select one of the following as the pension basis for each pension type:
Basis equals Pension Salary--deductions are a percentage of pensionable salary (which can include bonuses)
Basis equals Annual Limit--deductions are a percentage of the maximum that employees and employers can contribute to this pension type
Pension Salary Minus Threshold--deductions are a percentage of pensionable salary minus the annual threshold prorated to the pay period using the specified conversion rule
No Basis Required--deductions are based on a Fixed Premium Amount or Flat Amount.
Additional Information: For PGGM, you can specify whether to round up or round down the contribution and pension basis values individually. The two methods give slightly different final deduction amounts.
Oracle Payroll supports the use of multiple pay periods while calculating the pension basis and part-time percentage for PGGM pensions. You can choose either calendar month (12 pay periods), lunar month (13 pay periods), quarter (4 pay periods), or week (52 pay periods).
If you select Basis equals Pension Salary or Pension Salary Minus Threshold, you must specify how to calculate pensionable salary. You can select which pension salary balance to use, and you can specify whether to include bonuses. You can include this year's bonuses--calculated as a percentage of salary and prorated to the pay period--and last year's bonuses, taken from a balance.
Note: Unlike ABP, OHT correction and inflation check are not applicable to PGGM pension salary.
Oracle Payroll calculates pensionable salary separately for each assignment, if an employee has multiple assignments. You can enter an override pensionable salary at the assignment level.
If you select the pension basis Pension Salary Minus Threshold, you must enter an annual threshold. For example:
Payroll = Calendar Month
Conversion Rule = Average Working Days
Employee Contribution Percentage = 10%
Pensionable Salary for the Pay Period = 5000
Annual Threshold = 12 000
Threshold for the pay period = (12000/261 ) * 21.75 = 1000
Deduction Amount for monthly pay period = 10% of (5000 - 1000) = 400
You can set a similar threshold for the employer contribution.
If an employee has multiple assignments, the threshold is split between assignments based on the FTE value of each assignment. For example, if the annual threshold is 1000 Euros for a pension type, the limit would be divided as follows:
Assignment A, FTE 0.5, Annual limit = 1000 * (0.5/0.9) = 555.56
Assignment B, FTE 0.4, Annual limit = 1000 * (0.4/0.9) = 444.44
For certain ABP pension types, you can specify age-dependent salary thresholds using user-defined tables.
For a pension type where contributions are based on salary, you can set the following values for both employee and employer contributions:
Contribution Percentage
Annual Limit
Annual Salary Threshold
For a pension type where contributions are based on a Fixed Premium Amount, you can set the following values:
Annual Premium Amount
Employee and employer percentage contributions (which must sum to 100%)
When you create a pension scheme, which is a specific instance of a pension type, these values are defaulted, but you can override them.
Attention: For Fixed Premium Amount schemes, the premium amount is divided between all of an employee's assignments. If you override Fixed Premium Amount or contribution percentages for one assignment (on the pension element entry), you must make the same change for all of this employee's other assignments that contribute to a scheme of the same pension type. If you override one assignment but not the others, the Fixed Premium Amount will not be split correctly between assignments.
Savings contributions can be:
A percentage of the fixed premium amount, such as 600 Euros per year, prorated to the pay period using the conversion rule.
A flat amount, such as 100 Euros per pay period
A percentage of the annual limit. For example, if the maximum employee contribution is 600 Euros per year, a 10% contribution would be 60 Euros per pay period until the maximum of 600 Euros is reached.
To create a flat amount or a percentage of the annual limit scheme, you can leave the Salary Calculation Method field blank when you define the pension type.
For life savings scheme, you can specify the deduction amount as a percentage of the savings basis, which can be:
User-defined Balance - The application derives savings basis for the pay period from the ASG_RUN balance.
Note: If you use a customized balance, ensure that the balance gets populated when the application processes the savings scheme deduction elements.
Predefined Basis Balances - Enables you to include portions of employee earnings, which you plan to pay at a later date, in the savings basis. This can be an annual amount based on the value of a predefined balance.
Annual Premium Amount - The application considers the annual premium amount as the savings basis. For flat amount schemes, the application derives the amount by dividing the amount by the number of pay periods in an year. For percentage schemes, the application deducts a percentage of the annual premium amount as the life savings scheme amount.
Annual Limit - The application considers the annual limit for the employee or employer as the savings basis.
The employer can match the employee's contribution. However, an annual limit exists for both the employee and employer contributions.
The application considers the Savings deductions as third party payments, so that you can transfer the calculated contribution to a separate bank account for the employee.