Salary Components
A salary comprises of several different earning, deduction and reimbursement components. In this section of settings, you can:
Add Earning
Any money that an employee receives as income is termed as an earning. Some of the common earning components are Basic Pay, House Rent Allowance (HRA), and Dearness Allowance. You can add an earning by following these steps.
- Go to Settings > Salary Components.
- Click Add Component > Earning.
- Select an Earning Type. If none of the options fit your requirements, choose Custom Allowance.
- Enter the name of the earning. This name will be displayed on payslips.
- Select the Pay Type.
- Fixed Pay: A fixed amount will be paid each month.
- Variable Pay: You can enter the amount for a month while running payroll.
- Choose whether you want to calculate this earning on a pro-rata basis. Pro-rata basis means the employee will be compensated based on the number of days they’ve worked.
- Select whether you want to include this earning as a Flexible Benefit Plan (FBP) component. FBP allows your employees to personalise their salary structure by choosing how much they want to receive under each component. This helps them reduce their income tax. Select the Calculation Type and Amount/Percentage.
- Click Save.
Add Deduction
Deduction is money that’s taken from your employees’ monthly pay. There are two types of deductions, pre-tax and post-tax.
Pre-tax
A pre-tax deduction is money taken out of the employee’s pay before income tax is calculated. As a result, they reduce the employee’s net taxable income and thereby reduce income tax. An example is deductions made towards schemes like National Pension Scheme (NPS) or Voluntary Provident Fund (VPF).
Disclaimer: Zoho Payroll does not deposit the deductions to the vendors on your behalf. You would have to deposit the deductions by yourself.
- Go to Settings > Salary Components.
- Click Add Component > Pre-Tax Deduction.
- Select the Deduction Type.
- Select the investment which you want to associate with this deduction.
- Enter a name for this pre-tax deduction to be displayed in payslips.
- Click Save.
You can associate this deduction to your employees from the employee details page or during pay runs.
Post-tax
A post-tax deduction is money taken out of your employees’ pay after income tax has been calculated. This does not affect the net taxable income of the employee.Purchases made in the company grocery store or food court are examples of post-tax deductions.
Note: Post-tax deductions are one-time. They won’t recur in subsequent pay runs
- Go to Settings > Salary Components.
- Click Add Component > Post-Tax Deduction.
- Enter the name of the deduction.
- Select whether it is a one-time or a recurring deduction.
- Mark the component as active.
- Click Save.
You can associate this deduction to your employees from the employee details page or during pay runs.
Add Correction
Once you’ve associated recurring earnings like Basic, HRA, DA etc. to employees, you won’t be able to edit them. In such cases, you can create a one-time correction component to make corrections to an earning component.
- Go to Settings > Salary Components.
- Click Add Component > Correction.
- Select the earning type that you want to correct.
- Enter the name of the correction.
- Mark the component as active.
- Click Save.
You can now apply this correction component to specific employees while processing your monthly pay runs.
Edit Component
You can edit salary components, provided it wasn’t involved in any pay runs, by following these steps:
- Go to Settings > Salary Components.
- Click the more icon next to the salary component that you want to edit.
- Make the necessary changes.
- Click Save.
