Calculatory pay adjustment
Pay adjustments are used to estimate the effect of an entrepreneur's unpaid work input on the enterprise's profitability. The purpose of the pay adjustment is to provide a more accurate picture than before of profitability in the industries where the significance of unpaid work input by entrepreneurs themselves is considerable.
The pay adjustment is made by first specifying in detail the annual unpaid work input performed by the entrepreneur. Then the total amount of wages and salaries for the unpaid work input is estimated.
It should be noted that the pay adjustment is only a calculatory item hampering profitability. It differs from other profit and loss account items in that it is not an expense item or payment actually incurred. The pay adjustment is based on the idea that the business activity should produce for the entrepreneur at least reasonable earnings for the annual work input.
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Validity of the definition
- Valid until (31 December 2078)