Issue With Back Dated Termination In The First Pay Of The New Financial Year
Last updated on APRIL 02, 2018
Applies to:Oracle HRMS (Australia) - Version 12.1.3 and later
Information in this document applies to any platform.
Processed the Payroll for an employee on the last FY end: 21-JUN-2018. Some time later in the next pay period i.e. 1st pay period of the next FY (say 29-JUN-2018) it was reported that the employee has to be terminated as of 15-JUN-2018. So on 29-JUN-2018, we do a back dated termination for that employee with the Actual Termination Date as 15-JUN-2018.
Now, since we are already into the new FY, we cannot use the Date Paid as 21-JUN-2018. We need to do the calculations for the balance earnings/tax deductions in the next pay period only which will be 05-JUL-2018 i.e. 1st pay period end of the next FY.
Since we terminated an employee in the 1st pay period of the next FY, aren't we supposed to use the date 05-JUL-2018 ? How can we use the date 21-JUN-2018 here which has already passed ?
Below are some of the observations:
1. Tax on Termination Payments if made in same FY considers marginal tax rate and computes tax accordingly.
2. Tax on Termination Payments if made in new FY for backdated old FY is also correct
3. However, when the Termination payment is made in new FY for the back dated period, the normal tax earnings for the period seems to include the entire gross earnings for the period, and computes a marginal tax of approx 32% on the earnings. Whereas, it should look at the current period Earnings which is 0 and hence the Tax Deduction should be 0.
1. Ran a Quick Pay with Date Paid and Date Earned as 07-JUN-2018. The Earning elements and Tax Elements looks fine.
2. Ran a Quick Pay with Date Paid and Date Earned as 21-JUN-2018. The Earning elements and Tax Elements looks fine.
3. Terminated the employee (Back-dated termination) on 15-JUN-2018.
4. Ran a Quick Pay with Date Paid: 05-JUL-2018 and Date Earned: 15-JUN-2018.
In the last Quick Pay we are getting a Tax Deduction of some amount ($) for which we could not find an Earning Element. Also, since there is no Earning component we are NOT expecting this Element to be processed in this Quick Pay.
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