Threshold and Limit for Base Salary Rate Calculation

For base salary calculation, it is possible to set up limits and thresholds both annually and for a pay period.

The term “limit” specifies how much an agreement can pay out and is an upper cap, whereas “threshold” specifies a lower limit.

This is calculated using the following formula:

L_YC = L_Y / 364 * D(C)

T_YC = T_Y / 364* D(C)

where

• L_YC = Annual limit as scaled down to the calculation period
• L_Y = Annual limit of the agreement.
• D(C) = Number of days in the calculation period.
• T_YC = Annual threshold as scaled down to the calculation period.
• T_Y = Annual threshold of the agreement.

For scaling down the pay period threshold and limit, the period length of these two fields on the compensation type and agreement are specified by the default period length on the pay period calendar used by the compensation model, for which the compensation agreement belongs to. If this field is left blank, a period length of 1 month is assumed.

To scale down the pay period limit and threshold to match the calculation period of the base salary calculation we use the following formulas:

L _PC = L _YP / 364 * D(C)

where

• L_PC = Pay period limit as scaled down to the calculation period.
• L_YP = Annual pay period limit.

Here the annual pay period limit (L_YP) is given by the pay period limit scaled up to cover a year. To calculate this value, different functions are used depending on whether the default period length of the pay period calendar is specified in months or days.

If the default period length of the calendar is specified in months, the following function is used:

L _YP = L _P * 12 / M

where

• L_P = Pay period limit as specified on the agreement.
• M = Default period length of the pay period calendar measured in months.

If the default period length of the calendar is specified in days, the following function is used instead:

L _YP = L _P * 364 / P _D

where

• P_D = Default period length of the pay period calendar measured in days.

For calculating the pay period threshold for the calculation period of the base salary rate calculation, similar methods are used:

T _PC = T _YP / 364 * D(C)

T _YP = T _P * 12 / M (If default period length of the calendar is specified in months.)

T _YP = T _P * 364 / P _D (If default period length of the calendar is specified in months.)

where

• T_PC = Pay period threshold scaled down to the calculation period.
• T_YP = annual pay period threshold.
• T_P = Pay period threshold as specified on the agreement.