Deduction Components
Create and manage custom deduction components for salary schemas.
Deduction components are configurable items that reduce an employee's gross pay. The system includes built-in deductions (such as tax and social security), and you can create custom deductions to match your company's specific needs.
Navigation: Within Salary Configuration, under the Deduction Components tab or section.
Default Components
The system provides the following built-in deduction components:
| Component | Description |
|---|---|
| Income Tax | Tax withholding based on applicable tax regulations |
| Social Security | Employee contribution to the social security system |
These default components are always available and cannot be deleted. You can, however, adjust their values within individual salary schemas.
Creating a Custom Deduction Component
To create a new deduction component:
- Click the Add Component button.
- Enter a name for the deduction (e.g., "Transportation Fee", "Uniform Deduction", "Insurance Contribution").
- Select the type:
- Fixed Amount -- A specific amount deducted every pay period
- Percentage -- A percentage of gross pay or base salary
- Calculated -- Uses a custom formula for the deduction
- Enter the value (the fixed amount or percentage, depending on the type selected).
- Set the priority order -- this determines the sequence in which deductions are calculated.
- Click Save.
Component Types Explained
Fixed Amount
A fixed deduction removes the same amount from every payroll run, regardless of the employee's earnings.
Example: A monthly transportation fee of AED 100. Every employee assigned a schema with this deduction will have AED 100 deducted each period.
Percentage
A percentage deduction is calculated as a proportion of gross pay or base salary.
Example: A 2% social security contribution. An employee with AED 10,000 gross pay would have AED 200 deducted.
Calculated
A calculated deduction uses a custom formula, allowing you to define more complex logic. This is useful for deductions that depend on multiple variables.
Example: A deduction that varies based on the number of working days or a tiered structure based on salary bands.
Priority Order
Priority order matters -- deductions are applied in sequence from highest priority (lowest number) to lowest priority. Higher priority deductions are calculated first, which can affect the base amount used by subsequent percentage-based deductions.
For example, if you have:
- Income Tax (Priority 1) -- calculated on gross pay
- Social Security (Priority 2) -- calculated on gross pay after tax
- Transportation Fee (Priority 3) -- fixed amount
The system processes them in order: first tax, then social security, then the transportation fee.
Managing Deduction Components
From the deduction components list, you can:
| Action | Description |
|---|---|
| Edit | Change the name, type, value, or priority of an existing component |
| Reorder | Drag and drop or update priority numbers to change the calculation sequence |
| Activate / Deactivate | Toggle a component on or off. Inactive components are excluded from salary calculations |
Deactivating a deduction component will exclude it from all future payroll calculations for every schema that uses it. Review the impact before deactivating.
Best Practices
- Use clear, descriptive names so that all team members understand what each deduction represents.
- Set priorities carefully -- the calculation order affects the final amounts, especially when percentage-based deductions depend on values computed by earlier deductions.
- Review after changes -- After modifying deduction components, run a test payroll or use the formula preview to verify the results are correct before the next official payroll run.