How pay is calculated

This page explains what payroll does when a pay period is calculated or recalculated, so you can predict a figure and choose the right settings. It describes the Colombian rules in most detail, because several steps apply only to a Colombian rule group: one whose Country is Colombia.

Before you start: the settings named here live on the employee form, on the rule group and on the employee's schedule. Changing one affects the next calculation, not periods you have already calculated.

From punches to hours

1. Each clock in is paired with the first unused clock out after it. A clock in with no clock out after it adds no hours. A missing clock out in the middle of a period can pair a clock in with the next day's clock out, so resolve missing punches before you calculate. See The payroll wizard.
2. Pay is figured from the time between a clock in and the clock out that follows it. Days and times are read in your organisation's time zone.
3. A shift that crosses midnight is cut at midnight into one piece for each calendar day.
4. Each piece is placed in one of four groups. It is either a weekday or a Sunday or holiday, and either day or night.

The night window comes from the employee's rule group, in Night Shift Start and Night Shift End. If the rule group does not set them, the window is 19:00 to 06:00. The two fields appear on the rule group form when Apply Night Differential is ticked. If you clear that box and save, the times are removed and the window is 19:00 to 06:00. Payroll uses the window whether or not the box is ticked. A holiday is a date in the Holiday Calendar assigned to the rule group.

Every group is then split again into regular hours and overtime hours, which gives eight kinds of hours in all.

Lunch is measured from the lunch start and lunch end punches between a clock in and a clock out. A single lunch counts for at most 2 hours. Break punches are recorded for information and are not subtracted. The calculation screens show the result in three columns: Time at Work, Lunch/Break and Paid Hours.

Find the overtime

Three settings on the employee form decide which hours are overtime. Overtime Calculation Mode is on the Admin Hub form only.

• Weekly Hours Threshold, the hours a week before overtime starts. For a Colombian rule group, a threshold that is blank or 40 is replaced by the rule group's default weekly threshold. No form shows that default. It is 44 on a group made with Colombia Template and after the defaults backfill, and 40 on a group you create by hand, where a blank or 40 threshold stays 40.
• Overtime Calculation Mode. Period-Wide (recommended for bimonthly) counts overtime only above the weekly threshold times the number of weeks in the period. Per-Week (FLSA-compliant) measures each Monday-to-Sunday week on its own. A Colombian employee left on Period-Wide is measured per week as well, whatever the field shows, because the rule group's per-week default is on and no form shows that default either.
• Use Contractual OT Threshold. In Per-Week mode, the weekly threshold becomes the contracted hours of the week: for a Fixed employee schedule the days times the hours a day, for an Alternating one the hours of that week of the rotation, and otherwise the employee's Expected Weekly Hours, or 40 when that is blank.

Lunch time is subtracted before hours are compared with the threshold.

In a Colombian rule group a second test runs as well: hours above 8 in one day, after lunch, are overtime even when the week stays under the threshold. Payroll uses the larger of the two results.

The overtime hours are then spread over the four groups in proportion to the hours worked in each. A long weekday can therefore produce a little Sunday or night overtime. The worked example below shows this.

Price the overtime

Overtime pay is the hours times the hourly rate times the multiplier for that kind of hour. These rates are all-inclusive: the night or Sunday surcharge is not added on top of them.

The Colombian values are what the Colombian defaults set. They are ordinary settings that you can change, and they are only set for an employee when someone applies them; see Colombian payroll defaults backfill. The three night and Sunday fields are on the Payroll Employees page, not on the Admin Hub form. Overtime Calculation Mode, Sunday Multiplier, Allow Stacked Multipliers, Calculate pay from salary, Variance Threshold (%) and Variance Threshold (Hours) are on the Admin Hub form only.

If Night OT Multiplier is 0, night overtime uses Overtime Multiplier. If a Sunday overtime multiplier is 0, a Colombian rule group uses the ordinary day or night overtime rate plus the Sunday or holiday surcharge. Elsewhere the Allow Stacked Multipliers setting decides how the rates combine.

Add the surcharges on regular hours

These are added to regular hours only, at the hourly rate:

• A multiplier of 1 or less adds no night or Sunday surcharge.
• The rule group's Apply Night Differential, Apply Sunday Premium and Default Sunday Multiplier do not switch these surcharges on or off. The employee's Night Differential and Sunday Multiplier do.
• A worked holiday is surcharged once. It is not also treated as a Sunday.
• The holiday's multiplier is the one set on the holiday in its calendar, or else the employee's Holiday Multiplier. In a Colombian rule group, a Holiday Multiplier of 1 or less is replaced by the Sunday Multiplier.
• Overtime hours on a holiday use the Sunday and holiday overtime rates above.
• Holiday bid premium. When an employee has an approved holiday shift bid with an awarded multiplier, the hours worked inside the bid's shift window are topped up to the hourly rate times that multiplier. Payroll first takes off the night, Sunday and holiday surcharges already paid for the same hours. The calculation notes name each bid. See Holiday calendars and holiday shift bidding.

The hourly rate is the employee's Hourly Rate. When pay is calculated from salary (see below), an employee without an hourly rate uses the Base Salary divided by 240, which is 30 days of 8 hours. For an employee paid from salary, the salary share, the overtime and the night and Sunday surcharges are rounded to whole units in any currency. For hourly pay, amounts in Colombian pesos are rounded to whole pesos.

Pay a salary

When an employee has a Base Salary and the Calculate pay from salary option is ticked, regular pay does not come from the punches. The option's full label ends with "(ignore timeclock for pay calculation)". It appears on the Admin Hub employee form once Pay Type is Salary and a Base Salary is entered.

Enter the monthly salary in Base Salary, on either employee form. Payroll treats the figure as a monthly amount.

• Regular pay is the monthly salary times the days in the period divided by the days in the month. Colombian rule groups use a 30-day month, so a semi-monthly period is 15 of 30 days.
• An employee hired or terminated during the period is paid only for the days employed.
• Punches still produce overtime and surcharges, which are added to the salary share, and they are checked against Expected Weekly Hours. When Variance Threshold (%) or Variance Threshold (Hours) is set, hours that differ by more than the threshold raise a variance exception.
• With Auto-Deduct for Missed Time ticked, the salary share is reduced for hours under the expected hours, after approved time off, and never below zero.

Allowances, deductions and employer costs

The rule group's rules are applied in order:

1. Allowances first. A rule with Add to gross pay (allowance) ticked adds to gross pay. A fixed monthly allowance, such as a transport allowance, is cut to the length of the period. It is then reduced for days not worked. When the employee has an employee schedule with work days, the allowance is the monthly amount times the paid days of the period, less the rostered days missed, divided by the days in the month. A holiday and a day that has not happened yet are never counted as missed. The reduction for days not worked applies only when the employee has clock-ins in the period. Without a schedule that lists work days, payroll assumes a 6-day week in a Colombian rule group, and elsewhere uses the employee's Expected Weekly Hours divided by the schedule's hours a day, or by 8 when there is no schedule.
2. Deductions and contributions next. A percentage rule based on gross pay uses gross pay minus the allowances marked Exclude from deduction base (IBC), so those allowances stay out of social security bases.
3. Manual adjustments last. A bonus is added to gross pay and a withholding or loan payment is deducted.

A rule with Salary Conditions applies only when the employee's monthly salary is inside the band. The monthly salary is the Base Salary, or for an hourly employee the hourly rate times 240 in a Colombian rule group and times 160 elsewhere. Progressive brackets, such as the solidarity pension fund, use this.

Net pay is gross pay minus deductions. Burdened cost is gross pay plus the employer-paid costs. See Payroll rule groups.

Incapacity leave

Approved incapacity leave inside the period reduces gross pay. For each day of leave, payroll takes off the daily rate times the share not paid. The daily rate is the monthly salary divided by 30, or the hourly rate times 8. The paid share is the pay percentage on the leave request, or 66.67% when the request has none.

Who is calculated

Payroll calculates active employees who were hired on or before the end of the period and who were not terminated before it began. Punches by a HaloPSA agent count only when the payroll employee is linked to that agent. An agent with punches and no linked payroll employee gets no row.

A worked week

Jane is paid by the hour in Colombian pesos at 10,000 an hour. She is in a Colombian rule group with the Colombian values: 1.25, 1.75, 2.0 and 2.5 for overtime, 1.35 for Night Differential and 1.75 for Sunday Multiplier. Her weekly threshold is 44 and she took no lunch punches. One week, she works:

1. Hours. The week has 26 weekday day hours, 8 weekday night hours and 6 Sunday day hours: 40 in all.
2. Overtime. 40 hours is under the weekly threshold of 44. Wednesday is 2 hours over 8, so the daily test finds 2 hours. Payroll uses the larger result: 2 overtime hours.
3. Spread. The 2 hours are spread in proportion to the hours worked. Weekday day takes 26/40, which is 1.3 hours. Weekday night takes 8/40, which is 0.4 hours. Sunday day takes 6/40, which is 0.3 hours. The regular hours left are 24.7, 7.6 and 5.7: 38 in all.
4. Pay.

The rule group's allowances and deductions are then applied to this gross pay. The employee's gross pay, deductions, net pay and cost per employee appear in the preview and summary steps of the wizard and in Pay periods.

Related pages

• Payroll rule groups: night window, holiday calendar, allowances and deductions.
• Payroll employees: rates, multipliers and thresholds.
• Employee schedules: contracted hours, rosters and shift times.
• Holiday calendars and holiday shift bidding: holidays and bids.
• Payroll wizard: preview and summary: read the figures employee by employee.