A percentage amount deduction takes a certain percentage of the adjusted gross salary (gross salary less the allowance amount times the number of exemptions) up to some given dollar limit. The limit can be on the deduction amount or gross pay. For deductions where the limit is for gross pay, the entry in the flags field is p. If a deduction limit is to be used instead of the default gross pay limit, the flags field is pd.
The Allowance field is multiplied by the number of exemptions given by the employee record. This amount is then adjusted by the deduction frequency and subtracted from the gross salary (adjusted by the employee frequency). This adjusted gross salary is then used as a basis for the remaining calculations.
The Frequency field indicates how often the limit is applied. For example, a salary limit of $35,000 per year or a deduction limit of $400 per quarter, etc. Using a limit implies history. The payroll calculation routine correctly computes limits for monthly, bi-monthly, quarterly, semi-annual, or annual frequencies. For any other frequency, the routine attempts to evenly divide the year into the indicated time periods and then compute the accumulated amount in the current period. This may or may not produce the desired results. For this reason, only the above frequencies should be used with limits. A limit field of zero means there is no limit.