Termination Workbench Computations
Purpose
This process describes the computations performed by the Termination transaction (PC00_M40_TERM) while determining the amounts payable by or to the employee during termination.
Prerequisites
· You have set the configurations required for the Termination transaction PC00_M40_TERM.
· You have maintained the details of the employment contract in the Contract Elements infotype (0016), including the Period of Notice.
· You have configured customer specific calculation methods for the following termination related payments:
¡ Superannuation
¡ Gratuity
¡ Leave encashment
For this, configure the Business Add-In (BAdI) under Payroll India ® Termination ® BAdI: Calc. Methods for Superannuation, Gratuity and Leave Encashment.
Process Flow
Superannuation
While computing Superannuation, the Termination Workbench:
· Checks for the Continuous Years of Service entry on the Termination Payment Details screen, of the Termination transaction (PC00_M40_TERM).
· Checks for the Trust ID of the employee, maintained in the Personal IDs infotype (0185).
· Indirectly evaluates the Basis amount for Superannuation.
For more information on configurations for Indirect Evaluations, refer to Indirect Evaluation.
· Determines the Factor for Superannuation.
You can maintain the factor for Superannuation using the IMG under Payroll India ® Termination ® Maintain Factor for retiral benefits.
Computations
Terminationtransaction (PC00_M40_TERM) computes Superannuation using the formula:
Superannuation = Basis amount obtained through Indirect Evaluation
Multiplied by
Factor that is maintained in the table view Factor for retiral benefits (V_T7INZ1)
Multiplied by
Continuous Years of Service maintained in Termination Payment Details screen
Termination Workbench performs a similar set of computations for Superannuation and Gratuity. For an illustration of the computations, refer to the Computations section, under Gratuity.
Gratuity
While computing Gratuity, the Termination Workbench:
· Checks for the Number of Years of service entry on the Termination Payment Details screen.
· Trust ID for the employee in the Personal IDs infotype (0185).
· Indirectly Evaluatesthe Basis amount for Gratuity.
The payment of Gratuity can be as per the Gratuity Act or not as per the Gratuity Act. The method of computing the Basis for gratuity depends on the wage type you have configured in for the Gratuity tax codes.
For example, assign the Taxation as per gratuity act tax code (SAGA) to the Gratuity wage type (MPG0). Assign the Taxation as per non gratuity act tax code (SNGA) to the Gratuity wage type (MPG1).
You can configure the tax codes for Gratuity in the IMG under Payroll India ®Tax ® Tax Liability on Reimbursements, Allowances and Perks ® Assign Tax Code Limits to Wage Types.
· Determines the Factor for Gratuity.
For configuring the calculation factor for Gratuity, refer to the IMG under Payroll India ® Termination ® Maintain Calculation Factor for Retiral Benefits.
Computations
The Terminationtransaction (PC00_M40_TERM) computes Gratuity using the formula:
Gratuity = Basis amount obtained through Indirect Evaluation
Multiplied by
Factor that is maintained in the table view Factor for retiral benefits (V_T7INZ1)
Multiplied by
Continuous Years of Service maintained in Termination Payment Details screen
For example, in your company, gratuity is computed as:
Gratuity = 15 days of gratuity per month (taken as 26 working days)
Multiplied by
Current basis salary
Multiplied by
Number of Years of service
As the Termination Workbench computes Gratuity using a combination of the Indirect Evaluation configurations for the basis wage type and the Gratuity Factor, you can set the:
¡ Indirect valuation variant for gratuity wage type as B and the percentage for this wage type as 57.69 (15/26), in the table view Base Wage Type Valuation (V_T539J). You must set the fixed amount to zero in table view Reimbursement allowances perks - eligibility and calculation (V_T7INA9).
¡ Factor to 100 in the table view Factor for retiral benefits (V_T7INZ1).
Leave Encashment
The Termination transaction (PC00_M40_TERM) computes the amount payable to the employee as Leave Encashment, based on the months that you specify in the Earned Leave Entitlement and Earned Leave Availed fields. The computed amount is displayed against the Leave Encashment wage type (MLE0) in the Payments / Deductions section.
You can configure the components of the basis salary for Leave Encashment in the IMG under Payroll India ® Reimbursements, Allowances & Perks ® Maintain Pay Scale Groups and Levels.
Notice Pay
There are two methods for computing the Notice Pay amount:
...
1. Compute the prorated Notice Pay amount separately for every month remaining in the Notice Period and then compute the total Notice Pay amount.
2. Prorate the Notice Pay amount for the remaining days in the Notice Period, based on the number of days in the month of leaving.
For example, an employee resigns on 31st May. The Notice Period is three months, however, the employee decides to leave on 15th July. According to company policy only the Basic Salary is used for computing the Notice Pay.
Method 1 – Notice Pay = (Basic * Number of days of notice period not served in July / Number of days in July) + (Basic * Number of days of notice period not served in August / Number of days in August)
= (16,000 * 16/31)+ (16,000 * 1) = 24,258.06
Method 2 - Notice pay = Basic * (Number of days notice period not served) / (No. Of days in month of leaving)
= 16000 * 47/31 = 24258.06
You configure the method to be used in the IMGunder Payroll India ®Termination Workbench ® Calculation Method for Notice Pay.
Termination Workbench computes Notice Pay for the employee and displays the computed amount in the Termination Payment Details screen only when you select the Reason as Resignation in the Initial Entry screen.
Voluntary Retirement Service (VRS)
If you have specified the Reason for leaving as Voluntary Retirement in the Initial Entry screen, the Payments / Deductions section will display the VRS amount against the VRS wage type.
The system Indirectly Evaluates the VRS amount based on the default VRS amount. You can store a default VRS amount through the IMGunder Payroll India ® Reimbursements, Allowances and Perks ® Maintain Pay Scale Groups and Levels.
Reimbursable Allowances
Termination Workbench determines the amount payable to the employee as a reimbursable allowance, based on:
¡ Employee eligibility
¡ Amount already claimed by the employee
The Termination transaction (PC00_M40_TERM) displays the reimbursement wage types in the Terminal Details screen, under the Payments / Deductions section.
Employee eligibility for reimbursable allowances is as per the settings Pay Scale Grouping for Allowances. For configuration details, refer to the IMGunder Payroll India ® Reimbursements, Allowances and Perks.
See also: