Setting up Deduction Policies for Payroll

This article guides you in setting up standard and advanced deduction policies for employees.

You can set up and define the deduction policy to trigger warnings and penalties according to UAE as well as KSA law.

You can follow the steps to create a deduction policy.

Click on Settings > Attendance > Deduction Policies for Payroll > "Add New" to Setup Policy for Deductions and name the policy under the Policy Name section as shown below

Step 1:

Setup Policy Name & Settings

Name your policy- You can name the deduction policy according to your requirements.
Visibility of Deduction Amounts for Managers- When specific policies are created, line managers can also be given permission to see the addition or deduction amount associated with the Time and Pay adjustment.

If this toggle is switched OFF, line managers will just be able to see the status of the request, but all monetary values will not be visible.

However, if the toggle is switched ON, line managers will be able to see all monetary values associated with attendance time and pay adjustments.

Please note. This toggle also applies to Attendance managers
Time to Action Window For Managers- If enabled, the duration specified here represents the time limit for approving violation entries by the Line managers (Late Arrival, Early Departure, and Absent) on the Time and Pay Adjustment page (Attendance >> Time and Pay Adjustment).

If violation entries are not approved within the defined time limit, the entries will be marked as expired, and no further action can be taken on those entries.
Attendance Violation Tracking Method For Managers- To set up the penalties in case of attendance violation by the employees, there are two options:
1. Standard Tracking
2. Advanced Tracking
Policy refresh duration- This option is available only with Advanced Tracking. The policy refresh duration determines how long a violation needs to happen again for it to be considered a repeated violation. If the same violation occurs within this duration, it is counted as a repeated violation. Otherwise, if the violation occurs outside of this duration, it is considered a fresh violation, meaning it is being committed for the first time.

For example:
1. Policy refresh duration = 10 days
  1. Violation 1 [1st June 2023] >> 1st Occurrence
  2. Violation 2 [3rd June 2023] >> 2nd Occurrence
    
    Reason: (previous violation(s) in last 10 days - violation 1)
  3. Violation 3 [13th June 2023] >> 2nd Occurrence
    
    Reason: (previous violation(s) in last 10 days - violation 2)
  4. Violation 4 [14th June 2023] >> 2nd Occurrence
    
    Reason: (previous violation(s) in last 10 days - violation 3)
  5. Violation 5 [16th June 2023] >> 3rd Occurrence
    
    Reason: (previous violation(s) in last 10 days - violation 3, violation 4)
  6. Violation 6 [1st July 2023] >> 1st Occurrence
    
    Reason: (previous violation(s) in last 10 days - Nil)

Step 2:

Option 1: Standard Tracking

Under standard tracking, the penalty defined for Late Arrival, Early Departure, or Absent will be applied each time the violation occurs.

Selecting the formula for deducting the salary

Note:

The rate multiplier will be 1.00 by default in percentage or unit.
The rate multiplier is an open numeric field with a min value of 0.1 and no max value. Decimals will be rounded off to 2 values.
Salary component will have 2 selections = 'Basic Salary' OR 'Basic Salary + Allowances'
The default 'salary component' selected will be 'Basic Salary + Allowances.
The days' calculation will have 3 selections - Actual Calendar Days, Actual Working Days, and Custom Days.
By default, the 'days calculation' will be Calendar Days.
If Custom days are selected, there will be a field to enter the number of days.

A sample result of the formula for Fixed deduction = [Salary Component (Basic OR Basic + Allowances) / Days (Custom days OR Calendar days OR Working days)] X Multiplier in percentage or unit will be shown for easy reference of the calculation.

Option 2: Advanced Tracking

Under advanced tracking you will see the following options:

Policy refresh duration: As explained in Step 1.
Allow marking of work disruptions: The work disruption option is used when an employee's attendance problem affects their co-workers. With the advanced tracking option, you can set different penalties for work disruption, depending on whether it's deemed "TRUE" or "FALSE".

After setting this up, when reviewing the attendance violations, the Line Manager, Attendance Managers, or Admins will have the ability to choose whether the violation caused work disruption or not. You can make this selection based on the provided screenshot that shows options for indicating work disruption as "YES" or "NO".
Setting up different levels and occurrences: When configuring penalties for attendance violations, it is possible to set up multiple levels (up to 4 levels) that correspond to the levels defined in the work timings.

Each level provides the option to establish penalties (with multiple penalty types available) for different occurrences (up to 4 occurrences).
Different penalty types: When configuring penalties for attendance violations, various penalty options are available, and these penalties will be applied to employees in the event of attendance violations.
1. Written Warning: An email will be initiated to the employees mentioning a warning has been issued. In the email, a hyperlink will be provided to redirect the employee to the warning letter on their Time and Pay Adjustment.
  
  For example, an employee is late by 15 minutes according to their work time and it is his first time being late, so the manager decides to only send a warning letter.
2. Deduction (Payroll): Payroll deduction can be created based on the configured formula. There are two ways to configure deductions: Fixed deduction and Variable deduction. These types of deductions can be set up separately or together.
  1. Fixed Deduction: A flat rate penalty will be applied based on a percentage/multiplier of the Daily wage.
  2. Variable Deduction: Deduction equivalent to the violation duration will be applied as a penalty.
    
    Example: Now, the employee checks in late again by 15 minutes for the second time (2nd occurrence); the manager would like to set up a fixed deduction since this is not affecting his co-workers' work. For work disruption caused you can set up a Variable deduction.
    
    Similarly, multiple deductions can be defined based on occurrences.
3. Deduction (Payroll) + Written Warning: In this penalty type, a warning letter will be issued once the payroll deduction has been processed.