Tutorial: Creating Pay Structure Definition

Pay Structure Definition

The basis of calculations for individual earning and deduction heads are defined for the various pay structures. Pay Structure can be created at enterprise level, Company level or multiple structures under one company. Each pay structure has predefined earning and deduction heads, which will apply to all employees who fall under the selected pay structure. This does not mean that they will receive the same salary, this means that the computation process of salary will be the same. The actual salary will depend on the variable factors like CTC rates, salary days, date of joining in, the month of joining, date of resignation in, the month of leaving, etc.

 

Separate entries have to be done for all applicable earning and deduction heads. Example, define Basic and save the record, then HRA, and earning and deduction heads one after the other.

 

 

Pay Structure: Select the Pay structure which was created in the Pay Structure Master

 

Head Type: Select the head type Earnings or Deductions as per requirement. If Head type is selected as earning then only earning head will reflect, if head type is selected as deduction then only deduction head will reflect in the Head Code.

 

Head Code: Select the code for the earning or deductions head. If Head type is selected as earning then only earning head will reflect, if head type is selected as deduction then only deduction head will reflect in the Head Code.

 

Some of the examples of earning heads tagged in Pay Structure definition are shown below


 Head Code

 Identification

 Period

 Work  Days

 Formula

 Calculation Type

 Calculation Factor

 Basic

 Basic

Monthly

 

 

 Prorata Basis

 Amount

 HRA

 HRA

Monthly

 

 Basic

 Prorata Basis

 Percentage

 Conveyance

 Conveyance

Monthly

 

 

 Prorata Basis

 Amount

 Leave Encashment

 Leave Encashment

Monthly

30

 Basic

 Prorata Basis

 Amount

 Bonus

 Bonus

Annual

 

 Basic

 Prorata Basis

 Amount

 Gratuity

 Gratuity

Monthly

26

 Basic

 ProrataBasis

 Amount

 Sales Incentive

 Other

Monthly

 

 

 Amount to be asked

 Amount

 Night Allowance

 Other

Monthly

 

 

 Days to be asked

 Rate

 Medical Bill

 Reimburse-ment

Monthly

 

 

 Prorata Basis

 Amount

 

Identification: Identification of each head as defined in Earning master is displayed here against the selected head.

 

Effective Date: Enter the effective date from which the heads will be put into work. Any CTC prior to this date will not get this head for selection. Also editing of earning master cannot be possible in payslip generated months, and it needs to be changed effective from next payslip generated month.

 

Period: Calculation earning / deduction head can be done

        Monthly

        Yearly

        Half Yearly

        Quarterly

The period defined here will be used to calculate the value of the amount payable in the Employee Yearly CTC screen. If the calculation period is monthly, and the value entered is 1000, then the maximum  payable amount in the year will be 12,000/-. The total of monthly payments for all earning heads will be aggregated and shown in the yearly figure

 

Head

Period

Value

Payable Amount

Yearly CTC

Annual

Other Benefits

Basic

Monthly

10000

120000

192000

 

 

HRA

Monthly

5000

60000

 

 

Conveyance

Monthly

1000

12000

 

 

Sales Incentive

Quarterly

3000

12000

 

 

22000

Performance Incentive

Half Yearly

5000

10000

 

 

Bonus

Yearly

10000

10000

 

10000

 

 

Work Days: For some heads, like Gratuity, month days are not used for calculation but 26 days are used for calculation or as defined by applicable regulations. Gratuity = (Basic + DA) x 15/26 x number of years.

 

For most of the earning and deduction heads default work days will be calculated as per month days i.e. on the actual number of days in a month. In case the number of days used for calculation is fixed, the preference has to be enabled in Preference Setup.

 

Formula: A formula has to be defined to calculate the value of the earning or deduction heads. In the pop-up window, earning/deduction heads are available for selection.

 

 

For Basic, as it is the primary earning, there is no formula and no head will be available for formula setting. For all other earnings/deductions, multiple heads which can be combined to derive the value on which calculation will be done.

 

Available heads which have to be used for deriving the calculated value are displayed in the left panel. Right panel shows heads which have been selected. Click on a head to move it from the existing panel (available head or selected heads) to the other panel. By clicking on the double arrow above, all heads will be moved.

 

Example

For earning house rent allowance (HRA), the formula can be Basic+DA, first select earning head 'Basic', then select earning head 'Dearness Allowance'.

 

Formula

Head

Formula

HRA

Basic

Over Time

Basic

PF

Basic

Income Tax

Basic+HRA+Conv

Professional Tax

Basic+HRA+Conv

 

Calculation Type: Select the basis of earning. Options available here are:

 

Calculation Type

Head

Calculation Type

Basic

Prorata Basis

Leave Encashment

Fixed number of days

Night Allowance

Days to be asked

Over Time

Hours to be asked

Incentive

Amount to be asked

Rent

Other Fixed Amount

OT (Security Staff)

Hourly Rate

Transport Allowance

Present Days

 

Hourly Rate - for any Calculation factor which is on rate basis, the calculation type should hourly rate. e.g Overtime

 

Amount - has to be selected for Calculation factors which are Prorata, Variable and Fixed.  Example Basic, HRA, Conv, all variable input heads amount based.

 

Percentage - Some calculation like HRA is 50% of Basic. This is also used for auto calculation of earnings in CTC based pay structure and CTC based increment.   

 

Prorata calculation - is based on the number of salary days as per attendance.

 

Fixed number of days - is as per number of days in the month.

 

Days/Hours/Amount - as specified in the variable input screen, it will be taken in salary calculation. Hourly rate as specified in CTC will be calculated on specified hours of work.

 

If calculation type is present days then calculation will be based on the number of days the employee was physically present in the office. Offday and Holidays will not be considered here.

 

Calculation Mode: When defining Yearly CTC and CTC based Pay Setup, calculation mode is used for determining the treatment of values entered in earning and deduction heads. Available options for treatment of value entered in CTC Setup are Amount, Rate, Percentage and Not Applicable.

 

Calculation Mode

Head

Calculation Mode

Value (defined in CTC)

Treatment

Basic

Amount

30,000.00

30,000.00 (no calculation)

OverTime HO

Rate

1.5

x 125.00 (125 is calculated from OT setup)

Over Time Site

Rate

1000

x 10 hours (10 hrs is picked from input variable)

HRA

Percentage

50

50% of 30,000 (30000 is derived from formula)

PF

Not Applicable

NA

12% (auto calculated by system)

 

Amount and Rate will be taken from CTC for salary calculation. In case of percentage, the calculation is based on formula, so formula is mandatory here. If Not applicable option is specified then the value will be derived from setup screen like Provident Fund setup.

 

Month days & Salary days = 30

In Paystructure Definition

Yearly CTC

Payslip

Head

Calculation Type

Calculation Mode

Formula

Value

Calculated Amount

Payslip Amount

Basic

Prorata Basis

Amount

 

10000

10000

10000

HRA

Prorata Basis

Percentage

Basic

50%

5000

5000

Conv

Prorata Basis

Amount

 

2000

2000

2000

Income Tax

Prorata Basis

Amount

Basic+HRA+Conv

0

0

500

Incentive

Amount to be asked

Amount

 

3000

3000

3000

Over Time

Hours to be asked

Amount

Basic

8

333

333

 

 

Round Type: Select round type. This primarily concerns treatment of amounts of the head which have decimals in them i.e. contain denominators of a currency. This will apply to the derived or calculated value of a head. 

 

The value of the relevant head will be changed to

      No Round Off - value will remain in decimals, if any. Eg Basic 8910.34

      Nearest 1 - value will be rounded off to the nearest whole figure. If decimal is half or more it will take next higher figure, if less it will take lower interger figure, 8910.34 = 8910.00 and 8910.64 = 8911.00

●   Next 1 - value will be changed to next higher integer number for any decimal value, 8910.34 = 8911.00

 

Deductions

As earnings are defined for pay structure type, similarly deduction heads are to be defined from here. Most of the information is common to the earning heads screen.

 

Head Code

Identification

Period

Formula

Calculation Type

Calculation Factor

PF

Provident Fund

Monthly

Basic

Prorata Basis

Amount

ESIC

ESI Contribution

Monthly

Basic+HRA+Conveyance+Child education Allowance+SiteAllowance+Special Allowance

Prorata Basis

Amount

P.Tax

Professional Tax

Monthly

Basic+HRA+Conveyance+Child education Allowance+SiteAllowance+Special Allowance

Prorata Basis

Amount

I.Tax

Income Tax

Monthly

Basic+HRA+Conveyance+Child education Allowance+SiteAllowance+SpecialAllowance+LeaveEncashment+LTA+Bonus + Sales Incentive+Night Allowance

Amount to be asked

Amount

Advance

Advance

Monthly

 

Prorata Basis

Amount

Misc Deduction

Other

Monthly

 

Amount to be asked

Amount

 

Report Usage

 

1.  Employee Pay Register

 

 

 

2.  Abstract Query

 

 

3. Employee Payslip

 

 

Tutorial: Creating Pay Structure Definition


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