Generate Staff Loan Payroll Transactions {FARS-5} 


After interest on staff loans has been generated, the option is used to create Individual Earnings / Deductions {FPRI-2} for the Payroll System that allows the fringe benefit value of low interest loans to be taxed and the loan repayment to be deducted from the person's salary.

 

This option is also available in Generate Staff Loan Payroll Transactions {FPRI-23} in the payroll system.  Users should ensure that access is allowed to only one of these two options.

 

Staff loan transactions may be rolled back and regenerated as long as cheques have not been generated for the specific payroll cycle, calc and sequence number. Once cheqeus have been generated, staff loan deductions are finalized for that specific payroll cycle calc and sequence number. The "C" record  as set up in menu option {FPRM-2} determines the payroll cycle  for which staff loan deductions should be generated.

 
User Selection Prompt Text
* an item between square brackets [ ] is the default answer 		Type
&
Length		 Comments
  Institution Code N3 Do not change this field.
  Transactions will be generated for Cycle YYYYMM, is this correct? A1 Only (Y)es or (N)o; the date displayed is determined by the "C" record as set up on menu option {FPRN-2}.
  Enter the salary calculation or ALL N1 Enter the correct calc number  or "ALL"
  Enter the personnel number  or ALL N9  
 

Sort Order Per Comments
  Personnel number, loan code.   


System Select   
  The system selects staff loan data for staff debtors, who has loans that have not yet been redeemed.
Only debtors linked to a personnel number with Salary Calculation Number as in the User Selection Parameters and a service record for the payroll cycle indicated by event "C" in the Run cycle Control File  {FPRM-2} will be included.


Example:

Example of ...




Processing
Rules		  
1

The program will create transactions for the cycle of the “C” - Salary Calculations record in the Run Cycle Control File {FPRM-2}. 
2

The program will stop processing if Calculate Interest {FARS-3} was not executed for the cycle.
3 If transactions have already been generated for this pay cycle the run will terminate.
4 For those loans with “Generation of E/Ds Required” indicator = (Y)es, the value of the interest is obtained from the debtor's transaction file.

The calculations are as follows:

I    = interest rate

P    = principal

CP = cumulative principal repayment

N    = balance of repayment period

RP = reducing principal

OR = official interest rate


The current value of the fringe benefit is (OR - I) * RP / 1200

The installment is as follows

  1. The “Advised Repayment Amount” if it was entered
  2. The full outstanding balance if the employee is in his or her resignation month
  3. (F1 / F2) * RP * I / 1200, where
    • F1 = (1 + I / 1200)N
    • F2 = F1 - 1

Then 

  • RP  =  P - CP - (installment - interest)
  • CP  =       CP + (installment - interest)
5

The following three Individual Earnings / Deductions {FPRI-2} are generated for each loan:

  • Post-tax loan deduction
  • Pre-tax value of the fringe benefit
  • Post-tax contra of the latter

The latter two transactions are obviously generated only if a fringe benefit exists.

The detail of all the individual earnings or deductions are

  • Loan Deduction:  
E/D Code As specified for the loan
Salary Level As specified for loan
Calculation Method  '3' - Advised Amount
GLA Salary Loan Suspense GLA
IRP5 Box As on the Earning / Deduction Type {FPRG-6}
Reference Number Debtors code, Loan Code and “LOANREP”
Amount Installment as calculated or advised.

  • Taxable value of the Fringe Benefit:  
E/D Code As specified for the loan
Salary Level As specified for loan
Calculation Method  '3' - Advised Amount
GLA Salary Loan Suspense GLA
IRP5 Box As on the Earning / Deduction Type {FPRG-6}
Reference Number “LOANREP”
Amount Current value of the Fringe Benefit as calculated
  • Contra of the Fringe Benefit:  
E/D Code As specified for the loan
Salary Level As specified for loan
Calculation Method  '3' - Advised Amount
GLA Salary Loan Suspense GLA
IRP5 Box As on the Earning / Deduction Type {FPRG-6}
Reference Number “LOANREP”
Amount Current value of the Fringe Benefit as calculated
 
The Start Date of each transaction will be the first day of the payroll cycle indicated by event "C" - Salary Calculations in the Run Cycle Control File {FPRM-2}; the end date will be the last day of the cycle.
Existing Individual Earnings or Deductions for the employee, with the same E/D Code, Salary Level and Start date will be removed before the new earnings or deductions are are created.  
The program will generate a warning message per loan if an Earning or Deduction Code without a valid tax Box in the Earning / Deduction Types {FPRG-6} exists on the Loan; staff loan deductions will not be created for such loans
To correct this, the staff loans should be rolled back, corrected and generated again, before the payroll calculation is run. 
If any inactive Earnings or deductions are encountered, the run aborts.
These E/D codes should be corrected before another attempt is made. 

The program will generate a list of 

  • The Individual Earnings or Deductions generated
  • A list of employees for whom no Individual Earnings or Deductions were generated because of 
    • A  “Stop Pay” indicator for the payroll cycle.
    • A non-zero balance exists, but the “Generate E/Ds” indicator is set to (N)o.
    • One or more of the Earning or Deduction codes for this loan have passed their inactivation date.
    • The debtor was made inactive (if transaction generation not requested above).
  • The debtors has no fringe benefit (because the loan interest rate is greater than or equal to the official rate).
The field “Cumulative Principal Repayment” in Maintain Loan Details {FARS-2} will only be updated with the latest value of CP if the Copy Staff loan Deductions to AR  {FARS-7} was run.
Each interest transaction is flagged with the date of calculation in order to avoid repetitive calculation of interest for the same period.
At this stage, the Salary Loan Suspense account will reflect the total deduction for loan repayments. 
On “Post-to-GL”, the following transactions will be posted:
  • Credit to suspense account for repayment
  • Debit to suspense account for fringe benefit
  • Credit to suspense account for contra.

NOTE:  This credit will be cleared by “Copy Staff Loan Transactions to AR” in option {FARS-7}, as explained below.





See Also:



History of Changes

Date System Version By Whom Job Description
10-Jan-2007 v01.0.0.0 Frans t129600 Tax boxes on EDs.
10-Jan-2007 v01.0.0.0 Allie t126911 New manual format + date effective notches.
10-Jan-2009 v01.0.0.1 Magda van der Westhuizen t158351 Update manual; Language Editing; Juliet Gilies.