Salary Components
A salary comprises of several different earning, deduction and reimbursement components. In this section of settings, you can:
Note: After payroll is set up for the components you’ve associated with one or more employees, you can only edit the Name and Amount/Percentage. The changes made to Amount/Percentage will apply only to new employees.
Add Earning
Any money that an employee receives as an income is termed as an earning. Some of the common earning components are Basic Pay, House Rent Allowance (HRA), and Dearness Allowance.
- 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 which 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.
All fixed earnings will be included as part of the CTC, will be considered as taxable, and will be shown in the payslip as per the Government norms.
- 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. You can also restrict your employees from overriding the FBP amount by checking the Restrict employee from overriding the FBP amount option. Once you do this, they can opt for either the maximum FBP value (specified here) or exclude the FBP component entirely.
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.
- Select whether you want to consider the earning for EPF contribution. Mention if it should always be considered or only when the PF wages are less than ₹15,000.
- Choose whether you want to consider the earning for ESI contribution.
- Check Mark this as Active option.
- Click Save.
Note: You can add up to 5 earnings of the same component type for Basic, HRA, Conveyance Allowance, etc. You can add any number of earnings for Custom Allowance and Bonus. You cannot add multiple earnings for Leave Encashment, Notice Pay, Gratuity, and Fixed Allowance.
Add Deduction
Deduction is money that’s taken from your employees’ monthly pay. There are two types of deductions,
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).
Note: 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 a Deduction Type (National Pension Scheme or Other Non-Taxable Deduction).
- If you select Other Non-Taxable Deduction, associate it with one of the investment types mentioned in Section 80 of the Income Tax Act.
- Enter a name for this pre-tax deduction to be displayed in payslips.
- If you wish to include employer’s contribution in the CTC, check the option.
- Check Mark this as Active option.
- 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 deducted from your employees’ pay after the income tax has been calculated. This does not affect the net taxable income of the employee. For example, purchases made in the company grocery store or food court are 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.
- Check the relevant options regarding the EPF and ESI contributions.
- Check Mark this as Active option.
- Click Save.
You can now add these correction components if needed for specific employees while processing your monthly pay runs.
Edit Component
You can edit salary components, provided it isn’t involved in any pay runs. If you have pay runs in draft or approved status, delete them and then edit salary components. To edit component:
- Go to Settings > Salary Components.
- Click the Overflow icon next to the salary component that you want to edit.
- Make the necessary changes.
- Click Save.
The changes will be applicable only to the new employees.
