To process Payroll in BizCentric HR,

Define Payroll Period (optional)
Define Income Tax Slab (optional)
Create Salary Structure with Salary Components (Earnings and Deductions)
Assign Salary Structures to each Employee via Salary Structure Assignment
Generate Salary Slips via Payroll Entry.
Book the Salary in your Accounts.

Payroll Period

In BizCentric HR, the Payroll Period refers to the timeframe during which employees receive compensation for their work within the company. This period aids in determining the applicable tax brackets, facilitating the management of evolving legal requirements.

> Note: Configuring Payroll Period is optional if you do not intend to use Flexible Benefits or Tax Slabs

Salary Component

This document enables you to define each earning and deduction component, which can then be utilized to establish a salary structure and subsequently generate salary slips or additional compensation. You can configure various parameters such as type, condition, formula, and other settings, as elaborated below. It allows for the customization of each component to align with your company’s or regional policies.

Dependent on Leave Without Pay: Leave Without Pay (LWP) occurs when an employee exhausts their allocated leaves or takes unauthorized leave (via Leave Application). If enabled, BizCentric HR will automatically deduct pay in proportion to the LWP days divided by the total working days for the month (based on the Holiday List).

Note: If you prefer not to have BizCentric HR manage LWP, do not activate this flag for any of the salary components.

Exclude from Total: When this option is activated, the component will not be included in the total earnings or deductions on the salary slip.

Earning

Additional Component: This setting specifies that the component can only be disbursed as Additional Salary. Examples of such components include Performance Bonuses or compensation received for on-site deputations. These components are not considered part of the standard Salary Structure. Instead, Additional Salary incorporating these components can be submitted as needed, and they will be automatically added to the Salary Slip.
Tax Applicability: If a component needs to be factored into tax calculations as per the specified Payroll Period, you may choose to enable this option. To facilitate this, you must have a valid Payroll Period and Income Tax Slab configured with appropriate tax rates for payroll processing.
Payable Status: Components marked as payable can be allocated to separate payable accounts, with the accounts being configured in the Accounts table.
Flexible Benefits: Flexible Benefits are earning components that employees can choose to receive on a pro-rata basis or annually when they file a claim. These components are typically tax exempt, unless employees fail to submit adequate bills or documents for their claims. Enabling this feature allows you to specify the maximum benefit allowed for an employee in a year. Employees can then create an Employee Benefit Application to select the benefits they wish to receive.

Note: The Employee Benefit Application only allows employees to choose from flexible components present in the Salary Structure assigned to them.
Pay Against Benefit Claim: Employees can choose to receive flexible benefits annually through an Employee Benefit Claim or along with their monthly salary. Enabling this option ensures that the allocated amount for the component is paid when the employee submits an Employee Benefit Claim. Otherwise, the amount will be disbursed as part of the employee’s salary on a pro-rata basis.
Tax Impact Only (Non-claimable but Taxable Income): These components represent payments made by the company to the employee in cash or through other means, such as a car purchased for the employee’s use. Employees cannot claim these benefits but are liable to pay tax on them. The allocated amount for this component is considered when calculating the taxable income of the employee.
Create Separate Payment Entry Against Benefit Claim: Certain flexible benefits may legally require separate payment vouchers. Enabling this option ensures that when posting the bank entry, the amount paid for such components will be recorded as a separate entry for each employee.

Note: Flexible Benefits are generally exempt from normal tax calculations. To tax these components before the final payroll, use “Deduct Tax for Unclaimed Employee Benefits” in the Payroll Entry/Salary Slip during salary processing.

Deduction

Variable Based On Taxable Salary: If you enable this, the component will be considered as the standard Tax deduction component. Tax will be calculated based on the Income Tax Slab linked to the employee.

Salary Structure

The Salary Structure outlines how salaries are formulated and computed based on earnings and deductions. Organizations utilize salary structures to:

Maintain competitive pay levels aligned with the external labor market.
Preserve internal pay relationships among different job roles.
Acknowledge and reward variances in responsibility, skills, and performance.
Manage salary expenditures effectively.

Typically, components of a salary structure in India encompass:

Basic Salary: This forms the taxable base income and usually does not exceed 40% of the Cost to Company (CTC).
House Rent Allowance (HRA): HRA typically constitutes 40 to 50% of the basic salary.
Special Allowances: These cover the remaining portion of the salary, often smaller than the basic salary, and are entirely taxable.
Leave Travel Allowance (LTA): This is a non-taxable allowance provided by the employer to cover vacation/travel expenses within India for the employee and their family.
Gratuity: Gratuity is a lump sum amount disbursed by the employer to the employee upon resignation or retirement.
Provident Fund (PF): This fund is accumulated for emergencies or old age. 12% of the basic salary is automatically deducted and deposited into the employee provident fund.
Medical Allowance: Employers reimburse employees for medical expenses incurred, typically tax-free up to Rs. 15,000.
Bonus: The bonus constitutes the taxable portion of the CTC and is usually a once-a-year lump sum payment based on individual and organizational performance.
Employee Stock Options (ESOPs): ESOPs are shares provided by the company to employees either free of charge or at a discounted rate. This initiative is primarily aimed at enhancing employee retention.

Creating a New Salary Structure

To initiate the creation of a new Salary Structure, follow these steps:

Navigate to:

Human Resources > Payroll Setup > Salary Structure > New Salary Structure
In the new Salary Structure form:

Specify the name of the salary structure and select the company.
Choose the letterhead for Salary Slip printing and determine the frequency of payroll.
Establish the starting date from which the structure is valid. (Note: Only one Salary Structure can be “Active” for an employee at any given period.)
Configure the Leave Encashment Amount per Day, which represents the amount payable to employees for Leave Encashment requests.
Define the Max Benefits amount, which denotes the maximum eligible amount for Flexible Components available to employees.

Salary Slip Based on Timesheet

Salary Slip based on Timesheet is applicable if you have timesheet-based payroll system.

Check “Salary Slip Based on Timesheet”
Select the salary component and enter Hour Rate (Note: This salary component gets added to earnings in Salary Slip)

Earnings and Deductions in Salary Structure

Within the “Earnings” and “Deductions” tables, you have the option to choose earnings and deductions components. By default, the conditions and formulas configured in the Salary Component will be copied, although you can modify them if necessary. Additionally, you may wish to designate the Base component in the Earnings table. It’s important to note that the amount eligible for each employee must be configured in the Salary Structure Assignment.

If the conditions and formulas for any of the earnings or deductions are not set up in the Salary Component, you can calculate the values of Salary Components accordingly.

In conditions and formulas:

Utilize the “base” field to refer to the base salary of the employee.
Employ Salary Component abbreviations. For instance, use “BS” for Basic Salary.
Employ field names for employee details. For example, use “Employment Type” for employment type.

Account Details

Select Mode of Payment and Payment Account for the Salary Slips which will be generated using this Salary Structure

Finally, Save the Salary Structure.

Leave Without Pay (LWP)

Leave Without Pay (LWP) happens when an Employee runs out of allocated leaves or takes a leave without an approval (via Leave Application). If you want BizCentric HR to automatically deduct salary in case of LWP, then you must check on the “Apply LWP” column in the Earning Type and Deduction Type masters. The amount of pay cut is the proportion of LWP days divided by the total working days for the month (based on the Holiday List).

If you don’t want BizCentric HR to manage LWP, leave the LWP unchecked in all of the Earning Types and Deduction Types.

Salary Structure Assignment

The Salary Structure Assignment feature enables you to allocate a salary structure and define the eligible base pay for each employee. It’s crucial to establish the base salary for each assignment, as this figure serves as the foundation for calculations according to the specified Salary Structure

To create a new Salary Structure Assignment, go to:

> Human Resources > Payroll > Salary Structure Assignment > New Salary Structure Assignment

Processing Payroll

You can either bulk process payroll for Employees under a department, branch or designation or process payroll individually by creating Salary Slips for each employee.

Payroll Processing Using Payroll Entry

You can also create salary slip for multiple employees using Payroll Entry:

> Human Resources > Payroll > Payroll Entry > New Payroll Entry

Payroll Entry

In Payroll Entry,

Choose the company for which you intend to generate the Salary Slips. Additionally, you can refine your selection by specifying other criteria such as Branch, Department, Designation, or Project.
If you wish to process Salary Slips based on Timesheets, mark the “Salary Slip based on Timesheet” option.
Indicate the Posting Date and select the desired frequency of payroll for generating the Salary Slips.
Click on “Get Employee Details” to retrieve a list of employees for whom Salary Slips will be created based on the specified criteria.
Enter the Start and End dates for the payroll period.
If you want to deduct taxes for all benefits (Salary Components marked as “Is Flexible Benefit”) paid to employees until the current payroll, check the “Deduct Tax For Unclaimed Employee Benefits” box.
Similarly, the “Deduct Tax For Unsubmitted Tax Exemption Proof” option enables you to deduct taxes for earnings that were exempted in previous payrolls as declared in the Employee Tax Exemption Declaration but for which the employee has not submitted sufficient proof in the Employee Tax Exemption Proof Submission.
Select the Cost Center and Payment Account as required.
Save the form and submit it to generate Salary Slip records for each active employee for the selected time period. If Salary Slips have already been created, the system will not generate duplicates. Alternatively, you can save the form as a draft and generate the Salary Slips later.
Once all Salary Slips are generated, utilize “View Salary Slips” to ensure their accuracy. You can edit them if adjustments are necessary, such as deducting Leave Without Pay (LWP).
Upon verification, you can collectively “Submit” all Salary Slips by clicking on “Submit Salary Slip”.

Note: Submitting Salary Slips will also record the accrual of salary by booking the default Payroll Payable account.

Booking Salaries in Accounts

The final step involves recording the salaries in your accounts.

Salaries are typically handled with utmost confidentiality in businesses. Often, companies issue a single payment to the bank, consolidating all salaries, and the bank then distributes the salaries to each employee’s individual salary account. This method results in only one payment entry in the company’s accounting records, ensuring that individuals with access to the company’s accounts do not have visibility into individual salary amounts.

The salary payment entry is executed through a Journal Entry. This entry debits the total earnings of salary components and credits the total deductions of salary components for all employees to the default account set at the Salary Component level for each component.

To generate your salary payment voucher from the Payroll Entry, navigate to: Make > Bank Entry.

Upon accessing the Payroll Entry, you will be directed to the Journal Entry interface with relevant filters to view the draft Journal Vouchers created. Here, you can set the reference number and date for the transactions and then submit the Journal Entries.

Note: For Salary Components designated as Flexible Benefits and marked with the “Create Separate Payment Entry Against Benefit Claim” option, BizCentric HR will generate separate draft Journal Entries.

Creating Salary Slips Manually

Once the Salary Structure is created and assigned to employees via Salary Structure Assignment, you can make a Salary Slip individually. Go to:

> Human Resources > Payroll > Salary Slip > New Salary Slip

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