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Administrator Guide
Last Updated: 2025-05-30
Steps: Set Up Termination Allowance Taxation (FRA)

Steps: Set Up Termination Allowance Taxation (FRA)

Security:
Set Up Payroll (Calculations - Payroll Specific)
 domain in the Core Payroll functional area.
You can use Workday to calculate income tax and social contributions for these types of termination allowances:
  • Mutual agreements.
  • Legal/conventional allowances.
  • Retirement at the employer's instigation.
  • Supra-legal allowances.
  1. Create earnings for each type of termination allowance.
    See Example: Set Up Severance Allowances Based on the Legal Requirement (FRA).
    Workday delivers the
    IND Fixed Term Contract Allowance [FRA]
     earning for legal termination allowances for fixed-term contracts.
  2. Access the
    Edit Earning
     task for each earning that represents a termination allowance.
    On the
    Non-Effective Dated
     tab, select the appropriate pay component group from the
    Groups
     prompt to identify the type of termination allowance.
    Pay Component Group
    Description
    FRA Adds to Total Severance Allowance Paid [FRA]
    Applies to all termination allowances that are partially liable to taxes and contributions.
    For each earning associated with this pay component group, Workday:
    • Calculates the taxable portion of the termination allowance.
    • Includes the taxable portion in the applicable taxable base.
    FRA Adds to Legal or Conventional Severance Allowance [FRA]
    Workday uses the amounts associated with this pay component group to calculate exemption limits for termination allowances.
    FRA Adds to Retirement Allowance at the Employer's Instigation [FRA]
    Identifies termination allowances for retirement at the employer's instigation. Workday applies specific URSSAF contributions to these types of termination allowances.
    This is required for on-demand payments in a prior period related to a payroll period before 2023-09-01.
    Workday applies the appropriate taxation rules through the
    Memo – Severance Allowances Taxation
     earning.
    FRA Adds to Total Severance Allowance paid for Social Lump Sum 20% [FRA]
    Applies to payments for terminations by mutual consent.
    FRA Adds to Severance Allowance for Specific Employer Contribution at 30% Calculation [FRA]
    Applies to termination allowances that represent the full value of a mutually agreed termination. This amount isn’t configured in the
    FRA Adds to Specific Employer Contribution 30%
     pay component group.
    Workday applies the appropriate taxation rules through the
    Memo – Severance Allowances Taxation
     earning.
    FRA Adds to Specific Employer Contribution 30% [FRA]
    Represents only the indemnity portion submitted when the specific employer contribution is 30%. This amount isn’t configured in the
    FRA Adds to Severance Allowance for Specific Employer Contribution at 30% Calculation
     pay component group.
    You need to precalculate the portion submitted to contributions for this pay component group.
    FRA End of Contract by Mutual Agreement when Eligible for Retirement [FRA]
    Identifies workers who are eligible for retirement and accept a mutually agreed end of contract. Add only payments directly related to severance to this pay component group.
    Workday applies the appropriate taxation rules through the
    Memo – Severance Allowances Taxation
     earning.
    Workday recommends creating a new earning pay component to replace earnings before 2023-08-31 for the pay component groups associated with mutually agreed termination.
    For termination allowances that are split into successive payments, Workday:
    • Includes previous payments when calculating income tax or social contribution exemptions.
    • Uses only the monthly payment amount when calculating the amount subject to contributions or taxation.
Run a payroll calculation, and then access the
Gross to Net
 tab of a worker's payroll results. Review the
Related Values
 for the
Memo - Severance Allowances Taxation [FRA]
 earning to verify:
  • Amounts subject to taxes and contributions.
  • Exemption amounts.
  • Legal and conventional amounts.