Deduction Definitions

About Deduction Definitions

Deductions which will be used in your company must be defined on the Deduction Definition Screen (DD).

 

The VIP Classic Payroll and VIP Essentials Payroll Systems cater for up to 36 individual deduction lines for each of which multiple methods of calculation can be defined.

The VIP Premier Payroll System caters for up to 72 individual deduction lines for each of which multiple methods of calculation can be defined.

If you would like to use more than 36 Deduction lines, the Additional Earnings and Deductions Functionality should be activated on the Company Miscellaneous Screen. This functionality may be activated by a VIP Consultant.

 

Once a Deduction has been added on the Deduction Definition Screen (DD), it will be displayed on each employee’s Payslip Screen.

 

Any Company Contributions you may have in your system must also be defined on the Deduction Definition Screen. Company Contributions will be included in the Salary Cost of the employee.

 

How to Access the Deduction Definition Screen

To access the Deduction Definition Screen from the VIP Main Menu:

  1. Click on Payroll.
  2. Click on Definitions.
  3. Click on Deduction Definitions.
  4. The Deduction Definition Screen will be displayed.

 

Deduction Definition Screen

In most instances this screen will already be set up according to your company's requirements. You may however add deductions, make changes to the existing setup, or delete deductions that are not used.

 

 

How to Add a Deduction

  1. Click on the <Change Mode> button at the bottom of the screen.
  2. Click in the Short column of the first available line. Enter a short description for this deduction. This will be the description that you will see when working on the system.
  3. Click in the English column. Enter a meaningful description for this deduction. This will be the description that prints on the employee's payslip.
  4. Click in the Alternate column. Enter a meaningful description for this deduction. This will be the description that prints on the employee's payslip, when the language of the employee is set to 'Alternate' if you make use of another language in your company.
  5. Click in the Ded Type column. Select the required Deduction Type from the list provided for this deduction.
    • See Useful Information on this Screen below for more detail.
  6. Click in the Tax Ded column. Select whether this deduction is tax deductible or not.
    • See Useful Information on this Screen below for more detail.
  7. Click in the IRP5 column. Select the required IRP5 Code from the list provided , if applicable to this deduction.
  8. Click in the Incl SDL column. Select whether or not the deduction should be included in SDL.
    • See Useful Information on this Screen below for more detail.
  9. Click in the Clearance Number column. Enter a number, if applicable.
  10. Click in the IRP5 column. Select the required option from the list provided for this deduction, if applicable.
  11. Click in the CC Tax column. Select whether or not the company contribution is taxable.
  12. Click in the IRP5 column. Select the required option from the list provided for this company contribution, if applicable.
  13. Click in the SDL column. Select whether or not the company contribution should be included in SDL.
    • See Useful Information on this Screen below for more detail.
  14. Click in the BCEA column. Select the required option from the list provided for this company contribution.
  15. Click on <Close>.
  16. You will be prompted to recalculate earnings and deductions for all employees. Click on <Yes>.
  17. This deduction will now be displayed on all employees' Payslip Screens.

 

 

How to Change a Deduction

  1. Click on the <Change Mode> button at the bottom of the screen.
  2. Click in the column where changes should be made.
  3. Make the necessary changes, then click on <Close>.
  4. You will be prompted to recalculate earnings and deductions for all employees. Click on <Yes>.

It is advisable to contact the VIP Call Centre before making changes to this screen, as it may have a tax implication on your Payroll.

 

 

How to Delete a Deduction

  1. Click on the <Change Mode> button at the bottom of the screen.
  2. Click in the Short column of the deduction that you want to delete.
  3. Delete the description, then press <Enter>.
  4. The deduction will be deleted from the screen.
  5. You will be prompted to recalculate earnings and deductions for all employees. Click on <Yes>.

 

You will not be able to delete a deduction if there are year-to-date totals on that line.

 

It is advisable to contact the VIP Call Centre before deleting deduction lines.

 

It is advisable to delete unused deduction lines at the start of the tax year.

 

Useful Information on this Screen

 

 

It means whether the deduction should be deducted from the taxable earnings before tax is calculated, e.g. Pension within the allowable Statutory Limits, is tax deductible.

Example:

 

Taxable Earnings: R7500.00

- Pension: R 500.00

= Taxable Income: R7000.00

 

 

 

Additional Tax

This option may be used for specifying all additional tax payments made for employees.

 

Arrears Pension

Methods of Calculation can be defined for Arrears Pension. A maximum of R1800 per annum is allowed as a tax deductible deduction.

 

Bonds

Up to 15 Bonds per employee can be defined.

 

Calculated

This option is used for any deduction, which is not mentioned above, for which you need to use Methods of Calculation.

 

External payments

These are essentially payments made to third parties, such as insurance companies, on behalf of the employee.

 

Extra Payments

Up to 15 payments per employee can be made. If you use this payment method, you cannot use Zeroed Payments.

 

Extra Zeroed Payments

Up to 15 payments per employee can be made which are automatically zeroed during the Start of a New Period. If you use this payment method, you cannot use Extra Payments.

 

Finance House

Up to 15 other Financial Institutions per employee can be defined.

 

Garnishee Orders

Up to 15 Garnishee Orders per employee can be entered.

 

Hourly Input

Use this option if you are going to enter the number of hours worked by an employee. A Method of Calculation will have to be defined to calculate the monetary value according to the entered hours.

 

Income Replacement Policy

Use this option for specifying Income Replacement Policy detail on the subscreen provided.

 

Insurance

Up to 15 Insurance policies at different insurance companies may be defined for each employee.

 

Loans 

The system will allow you to enter a balance, which will automatically decrease according to the loan repayment.

 

Medical Aid

If you use this Deduction Type, you have to enter a Medical Aid Start Date for each employee who belongs to the scheme. The system will automatically apply the tax rebate for Medical Aid for employees over 65 years of age with this Deduction Type.

 

Not Calculated

This option is used for any deduction, which is not mentioned above, where there is no calculation involved.

 

Payroll Giving

Payroll Giving is a tax deductible deduction. The donation is limited to 5% of the Balance of Remuneration as calculated before deducting Payroll Giving.

When this Type of Deduction is selected, the system will flag the line as Tax Deductible and automatically populate the correct IRP5 Code. The system will also flag the Company Contribution as CC Taxable and populate the correct IRP5 Code.

 

Pension

Start Dates and percentages on the Basic Employee Information Screens (IS) can be entered for employees who belong to the scheme. The system will then use the fixed Wage/Salary of the employee to calculate the Pension contribution or a Method of Calculation can be defined.

 

Provident Fund

Start Dates and percentages on the Basic Employee Information Screens (IS) can be entered for employees who belong to the scheme. The system will then use the fixed Wage/Salary of the employee to calculate the Provident fund contribution or a Method of Calculation can be defined.

 

Rounding

This type of deduction must be specified when rounding of the Nett Wage/Salary is required.

 

Savings

The system will allow you to enter a balance, which will automatically increase according to the Savings amount entered for the period.

 

Skills

Use this option if you want the system to automatically calculate the Employer Skills Development Leviable amount.

 

Subscreen

Up to 15 additional payments per employee can be entered. An unlimited number of Type ‘Subscreen’ lines can be defined.

 

Tax/PAYE

VIP automatically calculates the tax. This Deduction Type is mandatory for the company.

 

UIF

For R.S.A. companies, the UIF contributions are automatically calculated. The percentages and the Earnings Limit on the Basic Company Information Screen are used for this calculation.

 

Unit Input

Use this option if you are going to enter the number of units for a deduction. A Method of Calculation will have to be defined to calculate the monetary value according to the entered units.

 

 

When you click on this button, all flags will be reset according to VIP recommended defaults.

 

SDL Options

Full: Full value included.

Not Included: No value included.

 

For the following, the taxable or allowable amount will be taken into account:

  • Pension.
  • RA.
  • Medical Aid.
  • Arrears RA.
  • Arrears Pension.
  • Income Replacement Policy.