Contributions and provident fund

A contribution scheme is a rate, a base and two wage types. Get those four things right and provident fund, EOBI and social security all work the same way.

This stage comes after the wage types, and not with them, for one reason: a scheme needs its two wage types to exist before it can be set up at all. One for the employee's share and one for the employer's share.

Contribution Scheme

Contribution Scheme is the whole of this stage. One document per scheme.

What the header says

• Scheme Type: EOBI, PESSI or SESSI social security, provident fund, gratuity fund, or another contribution the company runs itself.
• Employee Share Wage Type and Employer Share Wage Type. Both are named on the header, and both must already exist. The employee share is the deduction that comes off his pay. The employer share is the company's cost, and it does not reduce the employee's net pay, which is correct and is also the thing most often queried by a client reading a payslip.
• Contribution Basis: basic salary, gross salary, the statutory minimum wage, or a fixed amount. This is what the percentage is applied to.
• Fixed Basis Amount, required when the basis is a fixed amount, and Minimum Wage, required when the basis is the statutory minimum wage. The screen insists on each of these when the basis calls for it, because a scheme with a basis and no figure to apply it to would quietly contribute nothing.
• Wage Ceiling, which caps the base. A ceiling of zero means uncapped, so leave it at zero rather than trying to express "no limit" some other way.
• Rounding: none, up, down, or to the nearest. Statutory schemes in Pakistan usually round to a whole rupee and the authority is particular about which way.

The rate lines

A scheme's rates sit on dated lines, not on the header, because a rate changes and last year's payslip still has to be explainable.

Each line carries an Effective From and an Effective To, an Employee Rate % and an Employer Rate %, and an Employee Fixed Amount and an Employer Fixed Amount for a scheme that contributes a flat figure instead of a percentage. Where a fixed amount is given it is used in place of the percentage.

What the screen refuses, and why each refusal is doing you a favour:

• A scheme with no rate lines at all. There would be nothing to contribute.
• A line with no Effective From, or an Effective To before the Effective From.
• A line with no basis.
• A rate below zero or above one hundred.
• A line where neither side carries a rate or a fixed amount. An empty line is almost always a line somebody started and abandoned.
• A negative wage ceiling.
• Two lines covering the same date. This is the important one. A payroll run that found two rates for one month would have no way of choosing, so the overlap is refused at setup rather than guessed at run time.

So when the employee share goes from five percent to six, you close the five percent line on the last day of the old rate and add a six percent line from the next day. You do not change the number.

The arithmetic the run then does with all of this, step by step, is on the maths.

The two gates a scheme has to pass

The payroll run ignores a scheme that is not ticked Active. That tick is the whole switch: there is no second flag to release on this screen.

This is the commonest reason a provident fund that is set up perfectly does not appear on a payslip. The scheme was saved, the rates are right, the wage types are right, and the run never looked at it because it was still a draft. See how a screen works.

Who it reaches

Which schemes reach a man is said on his Employee Policy Profile, and it says one of three things.

What the profile says	What happens
Its Contribution Schemes grid is empty	Every active scheme the company runs applies to these people. This is the ordinary case and the commonest one
Its grid has lines on it	Only those schemes apply. Anything not listed does not
No Contribution Scheme Applies is ticked, grid empty	No scheme at all applies

The profile is the right place for it, because the reason somebody is in or out of a scheme is almost always a class of person rather than an individual: expatriates outside EOBI, management outside social security, daily wagers outside the provident fund.

Three things follow from that:

• A new scheme reaches every employee whose profile leaves its grid empty, the moment it goes live. Check the profiles before you release the scheme, not after the run.
• It reaches nobody on a profile that lists its schemes until somebody adds it there. That is deliberate. A scheme the client set up last week does not sweep itself into a payroll run.
• One individual on his own arrangement means either a profile of his own or a correction after the fact. Think about the classes first and you will rarely need to.

What to check on the first run

Pick three people, on different policy profiles, and reconcile each of them by hand before the client sees anything.

For each one, confirm the base is what you expect, that the ceiling has been applied if there is one, that the employee share has reduced the net and the employer share has not, and that the rounding has gone the way the client's auditor expects.

A contribution that is printed on the payslip and not actually taken off the net is a real failure mode and it is invisible unless somebody adds up a payslip. Add up a payslip.

If something looks wrong

• "The provident fund is not on the payslip at all" - the scheme is not ticked Active, or the people's policy profile does not reach it: its grid lists other schemes and not this one, or No Contribution Scheme Applies is ticked.
• "It will not let me save the scheme" - no rate line, or a line with neither a rate nor a fixed amount, or two lines covering the same date.
• "The employer share has been deducted from his pay" - it has not. The employer share is a cost to the company and never reduces the net. Check which of the two wage types the payslip line actually is.
• "The deduction is right on the payslip but the net is wrong" - the employee share wage type's direction is wrong. See value lists.
• "The amount is a rupee out" - the rounding setting. Confirm with the client which way the authority expects it.
• "The contribution stopped changing after the rate went up" - a new dated rate line was never added, or the old line has no Effective To and is still the one covering the month.
• "One man should be outside the scheme and is not" - it is said on his policy profile, not on the scheme, and the profile is shared. He needs a profile of his own that lists the schemes he really is in.