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Managing Deduction Rules

Deduction rules allow you to automate the calculation of taxes, social security, and other employee contributions during the payroll process.

What are Deduction Rules?

In plain English, a deduction rule is an instruction for the system to automatically take away a specific amount from an employee's gross salary. These can be:

  • Percentage: A portion of the gross salary (e.g., 5% for Social Security).
  • Fixed Amount: A specific dollar or dinar amount (e.g., $50 for a specific fund).

Step 1: Accessing Deduction Rules

  1. Navigate to Human Resources → Deduction Rules.
  2. Here you will see a list of all existing rules and their current status.

Step 2: Creating a New Rule

  1. Click New Deduction Rule.
  2. Name: Give the rule a clear name (e.g., "Income Tax").
  3. Code: (Optional) Use a unique code if you need to map this to specific accounting reports.
  4. Deduction Type:
    • Choose Percentage to calculate based on a percentage of the total salary.
    • Choose Fixed Amount to deduct a set value regardless of the salary amount.
  5. Value/Amount: Enter the percentage (e.g., 0.05 for 5%) or the fixed amount.
  6. Liability Account: Select the accounting account where these deducted funds should be recorded until they are paid to the authority.
  7. Is Statutory: Check this if the deduction is required by law (e.g., government taxes).
  8. Is Active: Ensure this is checked for the rule to be applied in the next payroll run.

Step 3: How Rules are Applied

When you Process Payroll, the system automatically:

  1. Fetches all Active deduction rules for your company.
  2. Calculates the amount based on the employee's gross salary.
  3. subtracts the total from the Gross Salary to reach the Net Salary.
  4. Creates a corresponding liability in your accounting records.

Troubleshooting & FAQs

Q: Why isn't a rule being applied to my payroll? A: Ensure the rule is marked as Active. Also, remember that rules only apply to payrolls created after the rule was activated.

Q: Can I have different rules for different employees? A: Currently, rules are applied company-wide. If you need specific deductions for one employee, you can add them manually as an adjustment on their payroll record.