Belina PayrollHR has a feature that can be used to pay an allowance to compensate for the tax payable on a benefit.   When an employee receives a benefit it increases the taxation payable and therefore reduces the Net Paid. Use this feature to ensure that the Net Paid before or after the payment of the benefit is the same.  Use the 'Allowance - Benefit' Transaction Category to create this allowance.  It will automatically compute the amount of tax payable on the benefit as well as the tax payable on the allowance itself and add this to the employee's pay.

Pro-rate the benefit if the the employee has commenced or ceased employment during the year.

Examples of Benefits
- Company car
- Housing
- Remuneration e.g. directors fees from a third party that have not been taxed at source.
- School Fees
 

To 'Cushion' a benefit

(To cushion a benefit means to give the employee an allowance that compensates for the additional tax being paid for receiving a benefit leaving the net paid the same as it was before receiving the benefit.  The amount of the allowance takes into account the tax payable not only on the benefit but on the allowance itself.  For example an employee has a net paid of $500 and is given the use of a company car which has a tax benefit.  Processing a Benefit Allowance will mean that the employee will receive an an allowance equal to the additional tax payable, leaving the net paid at the original amount of $500.

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To create a Benefit Allowance Transaction Code:
- Go to the 'Edit' , 'Transaction Codes' menu options.

- Click 'Insert' and select the Transaction Category 'Allowance - Benefit'.

- Accept/ Change the default 'Code'

- Enter an appropriate 'Description'.

- The 'Employee Amount' is greyed-out because the amount of the allowance will be automatically computed.

- Select the 'General Ledger' Code to be entered onto journal reports and exports.

- Set the 'Duration' - whether the transaction is to come through for a 'Single', 'Multiple' or 'Indefinite' number of periods.

- Set the 'P6 Field' for year end ITF16 export.

- 'Manual Edit' is not applicable since the amount of the allowance is automatically computed by Belina PayrollHR.

- Click Ok to save the new Transaction Code.
 
The value of the benefit may be pro-rated according to selected criteria largely based on employment start and end dates which may reduce being paid if that amount is based on the period worked.

Pro-rate Allowance

Place a tick against 'Pro-rate Amount based on' if the allowance is to be reduced because a full period has not been worked.  Select the criteria that applies.  The system will then automatically pro-rate the amounts paid for this allowance if the period is not complete.

See further discussion Taxation on Benefits.

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Use the Allowance - Normal (Regular) Transaction Code to process a taxable allowance that will be regarded as an regular earning in the FDS calculation.  The amount will be included in the projection of annual income.  Use Allowance - Normal (Irregular) where the allowance is paid sporadically and should not be projected in the FDS calculation.

The amount of the allowance can be set up as a standard amount or 'Manual Edit' has been ticked then it can be entered during processing.  In the example, below, we do not have to specify the the amount of the allowance since it will be computed automatically from the 'Dependencies' that have been set up.  Using 'Dependencies' it is possible to set the amount of the allowance to be a percentage of one or more other Transaction Codes.

To create a Normal (general) Allowance:

- Go to the 'Edit' , 'Transaction Codes' menu options.

- Click 'Insert' and select the Transaction Category 'Allowance - Normal (Regular)' or 'Allowance - Normal (Irregular)

- Accept/ Change the default 'Code'.  This is a unique identifier for the Transaction Code and the numbers are designed to group similar types of transaction together.

- Enter an appropriate 'Description'.

- Enter the 'Employee Amount' if the payment is a standard amount.  If the amount varies leave blank and place a tick against 'Manual Edit' which allows the entry of an amount when processing.

- Select the 'General Ledger' Code to be entered onto journal reports and exports.

- Set the 'Duration' - whether the transaction is to come through for a 'Single', 'Multiple' or 'Indefinite' number of periods.

- Set the 'P6 Field' for year end ITF16 export.

- Set 'Manual Edit' if you would like to be able to enter, or change, the amount of the Allowance when processing.

- Set the 'Default Currency' that this transaction code will be paid in.

- Click 'Ok' to save the new Transaction Code.

Dependencies

After pressing the 'OK' button and saving the Transaction Code, if you re-open the Transaction Code you will notice that a 'Dependencies' button is now displayed at the bottom of the screen.  It is now possible to link this Transaction Code to other Transaction Codes and have computations done to produce a result to be used.  Alternatively access the 'Dependencies' button from the Transaction Codes table.

Pro-rate Allowance

Place a tick against 'Pro-rate Amount based on' if the allowance is to be reduced because a full period has not been worked.  Select the criteria that applies.  The system will then automatically pro-rate the amounts paid for this allowance if the period is not complete.

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The 'Allowance - Service' Transaction Code is a way of paying a taxable amount that depends on the number of full years service that an employee has worked for the organization. The value of the Service Allowance is :

Basic  X  Service Allowance Percentage  X  Years Service.

To create an 'Allowance - Service' Transaction Code"

- Go to the 'Edit' , 'Transaction Codes' menu options.

- Click 'Insert' and select the Transaction Category 'Allowance - Service'.

- Accept/ Change the default 'Code'.  This is a unique identifier for the Transaction Code and the numbers are designed to group similar types of transaction together.

- Enter an appropriate 'Description'.

- Enter the Service Allowance percentage to be applied in the calculations.

- Select the 'General Ledger' Code to be entered onto journal reports and exports.

- 'Base On' - If the contribution is being calculated as a percentage of basic, then select whether the amount should be based on basic entered in the Employee Master, Internal Grade Rate or Grade Rate.

- Set the 'Duration' - whether the transaction is to come through for a 'Single', 'Multiple' or 'Indefinite' number of periods.

- Set the 'P6 Field' for year end ITF16 export.

- Set 'Manual Edit' if you would like to be able to enter, or change, the amount of the Allowance when processing.

- Set the 'Default Currency' that this transaction code will be paid in.

- Click 'Ok' to save the new Transaction Code.

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The 'Allowance - Shift' Transaction Code is a way of paying a percentage of Basic, based on what is set up for the employee on the Employee Masterfile, Internal or NEC Grade multiplied by the number of shifts worked (entered whilst processing the transaction).

To create a 'Allowance - Shift' Transaction Code:

- Go to the 'Edit' , 'Transaction Codes' menu options.

- Click 'Insert' and select the Transaction Category 'Allowance - Shift' .

- Accept/ Change the default 'Code'.  This is a unique identifier for the Transaction Code and the numbers are designed to group similar types of transaction together.

- Enter an appropriate 'Description'.\

- Enter the Shift Allowance percentage to be applied in the calculations.

- Select the 'General Ledger' Code to be entered onto journal reports and exports.

- 'Base On' - If the contribution is being calculated as a percentage of basic, then select whether the amount should be based on basic entered in the Employee Master, Internal Grade Rate or Grade Rate.

- Set the 'Duration' - whether the transaction is to come through for a 'Single', 'Multiple' or 'Indefinite' number of periods.

- Set the 'P6 Field' for year end ITF16 export.

- Set 'Manual Edit' if you would like to be able to enter, or change, the amount of the Allowance when processing.

- Set the 'Default Currency' that this transaction code will be paid in.

- Click 'Ok' to save the new Transaction Code.

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The 'Allowance - Vehicle' Transaction Code is used in conjunction with the Vehicle Benefit Code only.  Belina PayrollHR will automatically calculate the value of allowance that should be given to an employee to cover the amount of tax being paid on a vehicle benefit, taking into account the tax on the allowance itself.

If you would like to process a specific amount for vehicle allowance use the Allowance - Normal Transaction Type.

To create a 'Allowance - Vehicle' Transaction Code:

- Go to the 'Edit' , 'Transaction Codes' menu options.

- Click 'Insert' and select the Transaction Category 'Allowance - Vehicle'.

- Accept/ Change the default 'Code'.  This is a unique identifier for the Transaction Code and the numbers are designed to group similar types of transaction together.

- Enter an appropriate 'Description'.

- Select the 'General Ledger' Code to be entered onto journal reports and exports.

- Set the 'Duration' - whether the transaction is to come through for a 'Single', 'Multiple' or 'Indefinite' number of periods.

- Set the 'P6 Field' for year end ITF16 export.

- Set the 'Default Currency' that this transaction code will be paid in.

- Click 'Ok' to save the new Transaction Code.

Dependencies: This Transaction Code can be based on a percentage, amount or the number of units stated in one or more dependent Transaction Codes.

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