Salary Components Overview

  • Individual components of salary are grouped under two categories namely: Allowances & Deductions.
  • Allowances represent the earnings of staff and are always taken as positive while calculating net salary. For Eg: House Rent Allowance.
  • Deductions as the name suggests is that part which will be subtracted from the gross positive salary while calculating net salary. For eg: Professional Tax.
  • [Allowances – Deductions] constitute the annual net salary of a staff.

Basic Salary

  • One allowance under master component ‘Basic Pay’ needs to be mandatorily created before creation of any other salary component.
  • Basic salary in addition with other allowances constitute the annual gross salary of a staff.
  • Basic Salary logic can only be fixed amount and no other logic can be used while creating basic salary.
  • For basic salary, ‘Include in Loss of Pay’ checkbox will be by default selected and can’t be unchecked.

Creating Salary Components

  • The user has to first choose whether an allowance or deduction has to be created.
  • Any allowance created under master component ‘Basic Pay’ can only have ‘Fixed Amount’ logic.
  • Master Component
    1. List of master components (Allowances/Deductions) will be available to select, under which the salary component would fall.
    2. Our system already has predefined list of components which will be available if allowance is chosen and the same for deductions.
  • After choosing a master component, the user should define a unique name and code.
  • Salary Component Type
    1. Mandatory -> If this is selected, the salary component will be automatically mapped to all staff of the school.
    2. Optional -> If this is selected, the salary component will have to be individually mapped to selected staff after it’s creation.
  • Logic has to be chosen in order to create a salary component. Logic can be of 3 types:
    1. Fixed Amount: Fixed amount as given here by the user, will be allocated to all staff.
    2. Formula:
      1. A valid mathematical formula can be entered which can include any active salary component based on preference number.
      2. The formula for an allowance can only include other active mandatory/optional allowances which have a higher preference in comparison to the salary component being created.
      3. The formula for a deduction can include any(deduction/allowance) active mandatory/optional salary components which have a higher preference in comparison to the salary component being created.
    3. Slab Based:
      1. One or more slabs can be added whose individual calculation will be dependent on the already existing component calculated value as selected in ‘For Range, use’ field.
      2. ‘For range, use’ dropdown is used to allocate different amounts/formula to the staff according to the slab range of another component in which they lie.
      3. For each individual slab, the user can either choose to keep the logic as a fixed amount or formula.
      4. Consecutive slabs have to be continuous. ‘To amount’ of the first slab should coincide with ‘From Amount’ of the immediate next slab.
      5. In case the amount of selected component in ‘For range, use’ field of staff doesn’t belong to any of the slabs defined, then the value of such component will be taken as 0 for all such staff members.
  • Include in Loss of Pay: Only available as an option for fixed amount allowances. Allowances with this checkbox selected will be considered while calculating the LOP amount in salary register. If this checkbox is checked or unchecked anytime after salary structures are created, the impact will be shown only when LOP days are re-uploaded in all the created salary register after this change.
  • Editable on run-time in salary register: Available for both Allowances and Deductions. Values of salary component with this checkbox selected can be edited on a monthly basis in salary register and will have no effect in defined salary structure.
  • Display in payslip if ‘0’ calculated value: User can choose whether to display such components in payslip or not if their value is ‘0’ in salary register while payslip generation.
  • Label:
    1. For all the components who have the same label, their values will be summed up and shown against the common label in staff payslip.
    2. A label used for an allowance can’t be used for a deduction & vice-versa.

Adhoc Payments & Deductions

  • Master Components – Adhoc Payment & Adhoc Deduction can be used when the user wants to create ad-hoc components which can be directly added in any salary register on need basis.
  • Logic of such components can only be ‘Fixed Amount’ and type can only be ‘Optional’ however no option to map staff will be available for such components in this screen.
  • These components once created won’t be a part of salary structure for any of the staff members and can be added on adhoc basis in monthly salary registers directly.
  • This component won’t be shown in general settings while defining the formula for gross/net salary.

Adhoc Payments & Deductions

  • Mandatory or optional salary component can be created anytime but can’t be added in gross/net formula when freezing of salary register is done even for one staff member.
  • Optional components which are already included in the gross formula(before any salary register freezing was done for any staff member) can be mapped/unmapped to any staff for which salary register is not frozen.
  • If a salary component is created, after creation of a salary structure of staff but freezing is not done.
    1. It won’t be directly added to any salary structures.
    2. It has to be first added in the gross/net formula from settings.
    3. For all the staff whose salary structures are already created, this new component will be added to their salary structure and the values of all dependent components on this new component will be revised accordingly.
    4. However, any manual edits done in values of non-dependent components on this new component will be retained even after the addition of this new component.
  • Any salary component(allowance/deduction) if coming out to be a negative value, in case of discrepancies in a formula, will automatically take value ‘0’ in salary structure and register.

Preference Number:

  • The assignment of preference number will be in the order of creation of salary components.
  • Any salary component created first will have a preference number higher than ones created after it (For ex: The one which is created first gets 1, the second one gets 2 and so on).
  • Any component can only be dependent on the components who have a preference higher than itself.
  • User can also change the preference but necessary changes in a formula will be required before that (If any cyclic dependency exists).

Deleting Allowances and Deductions

  • Salary components can’t be deleted if it is included in gross/net formula
  • They can be deleted anytime before freezing of salary register if they are not added in gross/net formula in general settings screen.
  • Adhoc Components: Since they are not a part of gross/net formula, they can be deleted anytime if no salary register has been frozen which contains this Adhoc component.

Deactivating/Activating Allowances and Deductions

  • Deactivating/Activating salary component can only be done before the salary register is frozen for any of the staff and is not included in gross/net formula in general settings screen.
  • Deactivating would simply mean that they will no more be treated/displayed as a part of salary structure or register of the staffs and no edits can be made in deactivated mode.
  • Deactivating of an allowance/deduction can only happen if all the others dependent on it are also deactivated or none of them exists.
  • Adhoc Components:
    1. When an adhoc component is deactivated from salary components screen, it is removed from all the unfrozen salary registers (irrespective of the mappings done and amount defined).
    2. When an adhoc component is activated, it can be added by the user in any salary register which is currently in unfrozen state. However, in cases of deactivating and again activating adhoc again, no previous mappings at the time of deactivation will be retained at the time of activating again.
Was this article helpful to you?
Was this article helpful to you?