Creating Pay Heads

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The salary components constituting Pay Structures are called Pay Heads. A Pay Head may be an earning, which is paid to an employee, or a deduction, which is recovered from his/her salary. The value of these Pay Heads could be either fixed or variable, for each Payroll period.

Pay Head Type

A Pay Head is categorized as Allowances, Deductions or Reimbursements.

The preset Pay Head Types in Tally.ERP 9 are as shown below:

Note: While creating the Salary, PF, ESI payable ledgers you can use Not Applicable as the Type of Pay Head, which will be used to post appropriate accounting entries.

 

Note: For international Customers Employees' Statutory Deductions, Employer's Statutory Contribution and Employer's other Charges Pay head Types are not applicable.

 

Statutory Pay Head Type

The Statutory Pay Head Type field is enabled when Employees' Statutory Deductions, Employer's Statutory Contributions and Employer's Other Charges Pay Head Types are selected in the Pay Head Type field.

The preset Statutory Pay Head Types in Tally.ERP 9 are as shown below:

Note: Statutory Pay Head Type will appear only when the Payroll Statutory Features are enabled.

Use for Gratuity

This parameter should be set to Yes, for the Pay Head components that will be used for the Gratuity calculation (e.g. Basic and DA etc.)

Calculation Types

The method of calculation of the Pay Head is based on its Calculation Type.

Tally.ERP 9 payroll allows following calculation methods  

Note: The formula defined in Calculation Type will be used for computation only while using Payroll Auto Fill functionality in the Payroll Voucher, and not in Manual entry mode of Payroll voucher.

The following computational models are supported in Calculation Types.

Flat Rate

Flat Rate is a Calculation Type is used where the value of the Pay head is a fixed amount for a period. Pro-rata will not happen in this type of the component (Pay Head). Examples of Flat Rate Calculation Type:

On Attendance

On Attendance type of Calculation Type is based on the attendance data where the component will get pro-rated based on the actual days the Employee is present in the office for the selected period.  In Tally.ERP 9 the attendance can be recorded as positive days (Present) or loss of pay (Absent) type.

Example:

e.g. Basic Salary is calculated on Attendance.

Attendance /  Leave with pay

If you want to calculate the Pay Head Value using the Positive Attendance (Present), then select the same against this field or else select Not Applicable.

Leave without Pay

If you want to calculate the Pay Head Value using the Negative Attendance  (Absent), then select the same against this field.

On Production

On Production Calculation Type is used to calculate the pay value based on the Production/Work down. The production data can be entered in Attendance voucher against the Production type.

As Computed Value

As Computed Value is used if the Pay Head value is based on a dependent component. You will be able to define the dependent component by specifying the formula or using the current sub-total or current earning or deduction total.  You can also define the slab either by percentage to value or the combination in a slab.

Example:

HRA as 40% of Basic Salary.

As User defined Value

As User defined Value allows you to manually enter the value at the time of processing the salary. This Calculation Type is used the value of pay is not fixed and does not depend upon any pay components.

Example:

Incentives or Variable Salary.

Calculation Period

Calculation Period refers to the periodicity of Pay Head Calculation. There four pre-defined Calculation Period in Tally.ERP 9 as shown below:

Per day Calculation Basis

Per day Calculation Basis refers to the calculation of per day Pay Head value Computation.

As per Calendar Period refers to the perpetual calendar month, i.e. if the payroll process is carried out for the month of March, then the attendance records will be entered for 31 days.

For e.g.

User Defined refers to the consistent payroll period irrespective of calendar month, i.e. If an employee’s salary is based on a standard month of 30 days irrespective of the calendar month, then you can select User Defined as the Calculation Basis and define the periodicity of the specified period or month.  

For e.g.

User Defined Calendar Type option will provide the flexibility to the user to select user defined calendar days every Calculation Period. Once this option is selected the user can have different number of working days for every Calculation Period.  

For example the user can enter the total number of working days after reducing the Saturdays or Sundays or even the Holidays if any, as per the requirement.

For e.g.

Note: The user defined Calendar days have to be entered while passing the Attendance Voucher using the Auto Fill feature in the Default Value to Fill field that needs to be filled for every Calculation Period.

Rounding Method

There are four methods of Rounding Off in Tally.ERP 9 which are as follows:

Computation Info

When As Computed Value is selected as the Calculation Type, then you can select the Pay Head Computation as per one of the following options:

Compute On

Effective From

The Effective From date is by default taken as the Financial Year start date in which the Pay Head is created. In case of a revision in Pay Computation, you can define the revised computation information for the given pay head, by giving the Effective From date.

From Amount

In case where there are multiple slabs for Computation, the start value for each slab should be provided in this field. By default, this field is skipped and assumed to be 0.

Amount Upto

The upper Stratum value for each slab is provided in this field.

Slab Type

Value Basis

Value Basis for each slab is provided in this field, which can be either an Amount or Percentage based on the Slab Type selected the previous field.

Note: All the Pay Heads created will also appear under the List of Ledgers in the default Accounting reports.

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