In the Netherlands there are two methods of RetroPay, the Standard method and the Replacement method. The Standard method is the default. However, some customers require an additional method of RetroPay calculation, referred to as the Replacement Method.

Standard RetroPay

The standard RetroPay process depends on whether a retrospective change was made in the current or previous year.

When you make a retrospective change in the current year, the system reprocesses the payroll for the period the change occurred, calculating the tax deductions and SI contributions based on the tax and SI tables of the retro period. The changes to any earnings, deductions and other relevant values are carried forward to the current period.

When you make a retrospective change in the previous year, the system reprocesses the period the change occurred. The system only carries forward earnings changes to the current period, and calculates deductions in the current payroll run based on the current tax tables.

Replacement RetroPay

The alternative method, Replacement RetroPay, handles retrospective changes to earnings or tax/social insurance related information made in the current year, differently. Earnings changes in the previous year can be processed, but are treated the same as earnings changes in the current year.

There are two main differences when processing retrospective changes in the current period using the Replacement method. Those differences are as follows:

Key difference between Replacement and Standard RetroPay

When Oracle Payroll reprocesses the retro period, instead of bringing forward the changes to the current period, the run results are negated and brought forward to the current period as RetroPay entries. The new run results are brought forward as entries also.

Example of running RetroPay using the Standard method

The above example shows a payroll period processed with a salary of 1000 Euros and a tax rate of 10%. If you then run RetroPay using the standard method, changing the salary to 1200 Euros, only the changes are posted as RetroPay entries.

Example of running RetroPay using the Replacement method

If you run the RetroPay using the Replacement method, then the system negates the original run results and posts them as RetroPay entries. The system brings forward the new run results as entries.

Key difference between Replacement and Standard RetroPay

When reprocessing the retro period, Oracle Payroll uses the tax and SI values for the current payroll period, instead of the values for the retro period.

Example of running RetroPay using the Standard method

The above example shows a payroll run for the periods January-March, with a salary of 1000 Euros. The tax rate for this period is 10%, but changes to 20% in April. If the current period is April, and you run a RetroPay from January using the Standard method, then Oracle Payroll uses the 10% tax rate when reprocessing the January-March period. If the retrospective change increased the salary to 1200 Euros, then the additional 200 Euros would result in an additional retrospective tax deduction of 20 Euros for each month, using the 10% rate.

Example of running RetroPay using the Replacement method

If, however, the current period is still April, and you run a RetroPay from January using the Replacement method, Oracle Payroll uses the 20% tax rate, when reprocessing the January-March period. If the retrospective change increased the salary to 1200 Euros, then the additional 200 Euros would result in an additional retrospective tax deduction of 40 Euros for each month, using the 20% rate. The system negates the original run results using this method, which results in a new retrospective tax deduction of 140 Euros posted for each retro period to the current period.

To select the method of RetroPay you require, see: Enabling the Method of RetroPay

For further information on how to override the Replacement RetroPay method, see: Business Groups: Entering Dutch Business Group Information

For further information on setting up RetroPay, see: To Set Up Enhanced RetroPay with Component Usages and Element Span Usages

The following information, when changed in the current year, affects Tax deductions or SI contributions:

• Tax Code

• Tax Reduction

• Senior Tax Reduction

• Additional Senior Tax Reduction

• Certain Special Indicators: Student Arrangement (28) and Young Disabled WAJONG Allowance (72)

• Beneficial Rule

• 30% Foreigner Rule and related dates

• Last Years Salary

• Special Rate Individual Percentage and related dates

• Social Insurance (SI) Days

• SI Information at SI Provider level: Basis Calculation Rule, Employee Contribution (%), Employer Contribution (%), Senior Employee Contribution (%), Senior Employer Contribution (%), Employee Threshold, Employer Threshold, Maximum Salary, Calculation Code, Day Method, Employer Contribution Taxable Income, Employee Contribution Gross or Net, Day Adjustment and Contribution Adjustment

• Change of SI Provider for an employer

• Assignment level SI Information: SI Classification, Insurance Provider, Status, SI Day Method, Day Adjustment, Contribution Adjustment, Overriding Day Method and Overriding Day Value

• Assignment level private health insurance information: Employee Contribution, Employer Contribution, Unit of Contribution and Transfer Indicator.

• Changes to information on another assignment where Oracle Payroll has a number of multiple assignments to aggregate.

• Labour Tax Reduction

• SI Information at employer level: Insurance Provider, Primary Provider and Transfer Indicator.

• Override input values for SI days on the element Social Insurance