The system assigns a level to each earning/deduction you set up. The level determines whether one earning/deduction can be included in the calculation base of another earning/deduction. The level also determines which taxes an accrual, earning, or benefit may be subject to and which taxes can be taken after a deduction is taken. Essentially, levels determine the order in which earnings/deductions and taxes are calculated.
All calculation base earnings/deductions must have levels lower than the earning/deduction whose base they constitute.
Because most earnings are subject to tax and most deductions are taken after taxes, the system defaults a level of 10 for all earnings/deductions and a level of 20 for all taxes. You may need to edit the levels of particular earnings/deductions to create your earning/deduction calculation bases. Learn more about Using Levels and Calculation Bases.
When levels must be considered
Earnings/deductions that are assigned the calculation methods Amount per Hour, Hours per Hour Worked, Percentage of Base, and Wage Bracket Table use other earnings/deductions and taxes in their calculation bases so their levels need to be higher than the levels of the earnings/deductions in their calculation bases.
In addition, when you set up an earning or a benefit that uses any of the calculation methods, the earning or benefit must have a level lower than the levels of the taxes to which the earning or benefit is subject (the taxes you enter in the Subject To The Following Taxes field on the Employee Calculation tab).
In the same way, when you set up a pre-tax deduction with any calculation method, the deduction must have a level lower than the levels of the taxes it precedes in the calculation (the taxes you enter in the Take Deduction Before field on the Employee Calculation tab). To accommodate these relationships between earnings/deductions and taxes, the system defaults a level of 10 for all earnings/deductions and a level of 20 for all taxes. From there, you must consider the hierarchy of levels needed to create your earning/deduction calculation bases
When levels can be low
Earnings/deductions with the calculation methods Flat, Fixed, Hourly Rate, Piece Rate Table, and Sales Commission Table do not use other earnings/deductions or taxes in their calculation bases so their levels can be low. These earnings/deductions may be part of the calculation base of another earning/deduction with a higher level.