Organizations compensate their employees for the services they provide through salaries. The various elements constituting the Salary Structure are referred to as Salary Components.

Employee salaries consist of several distinct components, including basic salary, allowances, arrears, and more. BizCentric HR enables you to define these Salary Components and specify their various attributes.

To access Salary Component, go to: > Home > Human Resources > Payroll > Salary Component

1. How to create a Salary Component

To create a new Salary Component:

1. Go to Salary Component list, click on New.
2. Enter its Name and Abbreviation.
3. Enter Description of the Salary Component (optional).
4. Enter the Company name and the Default Account of the Salary Component in the Accounts table.
5. Save.

2. Features

Apart from the above-mentioned mandatory fields, some of the additional features of the Salary Component are given below:

2.1 Condition and Formula

This section enables the specification of the Condition and Formula necessary for calculating the Salary Component. To define the formula, activate the ‘Amount based on formula’ checkbox.

You can synchronize updated Condition and Formula values of a Salary Component with existing Salary Structures, where the Component is utilized, by utilizing the Update Salary Structures button.

If the Salary Component is based on a predetermined amount, BizCentric HR permits direct entry of the amount in the Amount field (deactivate the ‘Amount based on formula’ checkbox).

Note: The above setup is optional. You have the flexibility to define the Amount and Formula/Condition for a Salary Component directly within the Salary Structure as well. If specified in the Salary Component document itself, this information will be automatically retrieved in the Salary Structure when the Component is selected.

2.2 Additional Properties

Several additional attributes of the Salary Component can be activated using checkboxes, including:

• Is Payable: Check this box if the Salary Component is payable.
• Depends on Payment Days: Enable this checkbox if the Salary Component’s calculation is based on the number of working days.
• Is Tax Applicable: Applicable for Earning Components, this checkbox allows tax to be applied to the Salary Component.
• Deduct Full Tax on Selected Payroll Date: If checked and used in Additional Salary, the applicable tax amount will be fully deducted in the specific payroll month. If unchecked, the tax will be spread over the remaining months of the payroll period. For example, if a bonus is issued in a particular month using Additional Salary, the full tax amount can be deducted in that same month.
• Round to the Nearest Integer: Selecting this checkbox enables rounding the amount of this Salary Component to the nearest integer.
• Statistical Component: When selected, the value specified or calculated in this component does not contribute to earnings or deductions but can be referenced by other components for addition or deduction. If set as a Statistical component, no Default Account needs to be set, and this component cannot be designated as a Flexible Benefit.
• Do Not Include in Total: This checkbox ensures that the Salary Component is excluded from the Total Salary. It is used to define components that are part of the Cost to Company (CTC) but are not payable, such as the usage of company cars.
• Variable Based On Taxable Salary: This component is automatically calculated based on taxable income according to the applicable Income Tax Slab, such as TDS or Income Tax.
• Exempted from Income Tax: If checked, the full amount will be deducted from taxable income before calculating income tax without any declaration or proof submission. For instance, Professional Tax in India is deducted from taxable income before computing income tax.
• Disabled: This checkbox can be selected to deactivate the Salary Component. A disabled Salary Component cannot be used in the Salary Structure.

2.3 Flexible Benefits

This section is displayed when the Salary Component is categorized as an Earning Component. Flexible Benefit plans provide employees with the flexibility to choose the benefits they require from a selection of programs offered by their employer. These plans may encompass health insurance, pension schemes, telephone expenses, etc. To designate a Salary Component as a Flexible Benefit, mark the ‘Is Flexible Benefit’ checkbox.

Input the maximum yearly amount for this flexible benefit in the ‘Max Benefit Amount (Yearly)’ field. Several additional attributes of Flexible Benefits that can be activated using checkboxes are outlined below:

• Pay Against Benefit Claim: Activate this checkbox if you wish to disburse this benefit via the Employee Benefit Claim.
• Only Tax Impact (Cannot Claim But Part of Taxable Income): When enabled, the flexible benefit becomes part of taxable income.
• Create Separate Payment Entry Against Benefit Claim: Selecting this checkbox enables the creation of a separate payment entry against the Benefit Claim.

3. Related Topics

1. Salary Structure
2. Salary Structure Assignment
3. Payroll Entry
4. Payroll Period