Creating Pay Heads

The salary components constituting an employee's pay structure are Pay Heads. A pay head may be a benefit, or a deduction from the salary. The value of these pay heads could be fixed or variable for each payroll period.

For example, Basic Pay is a fixed pay component, whereas Variable Pay and Bonus are variable components.

Pay Head Type

A Pay Head is categorised as Earnings, Deductions or Reimbursements.

The default pay head types in Tally.ERP 9 are:

Note: For international customers, Employees' Statutory Deductions, Employer's Statutory Contribution and Employer's other Charges pay head types are not applicable.

Statutory Pay Head Type

The Statutory Pay Head Type field is enabled when you choose one of the following Pay Head Types:

The default Statutory Pay Head Types in Tally.ERP 9 are:

Note: Statutory Pay Head Type will appear only when the Payroll Statutory Features are enabled.

Use for Gratuity

Set this parameter to Yes for those pay head components that are used for calculating gratuity (For example, Basic Pay and DA).

Calculation Types

The value of a pay head component is derived based on the Calculation Type chosen. The List of Calculation types includes:

 

Note: The formula defined in Calculation Type will be used for computation only while using payroll Auto Fill feature in the Payroll Voucher. The formula is not applicable when you create the payroll voucher in the manual entry mode.

Flat Rate

Use Flat Rate when the value of the pay head is a fixed amount for a period. If you choose this, pro-rata calculation is not applicable.

For example,

On Attendance

Use On Attendance type to calculate the pay head component based on the attendance details of employees.  You can record attendance as positive days (Present) or loss of pay (Absent) type.

For example,

Attendance/Leave with pay

Select Present to calculate the pay head value.

Leave without Pay

Select Not Applicable in the Attendance/Leave with Pay field, and select Absent in the Leave without Pay field to calculate the pay head value.

On Production

Use On Production to calculate the pay head value based on the production/work done. You can enter the production data in the  Attendance voucher against the Production type. For example, Overtime.

 

As Computed Value

Use the As Computed Value if the pay head value is dependent on another pay component.

You can define a pay component by

You can define the slab either by percentage or value, or a combination of both. 

For example, HRA as 40% of Basic Salary

Computation Info

Compute On

Effective From

By default, the Effective From date is considered as the start date of the financial year in which the Pay Head is created. You can define any revision in pay computation for a given pay head by modifying the Effective From date.

Amount Greater Than

If you use multiple slabs for calculating any pay head, enter the start value for each slab in this field. By default, this field is skipped, and assumed to be 0 for the first slab.

Amount Upto

The upper limit for each slab is provided in this field.

Slab Type

Value Basis

Value Basis for each slab is provided in this field, which can be either an Amount or Percentage based on the Slab Type.

Note: All new Pay Heads appear under the List of Ledgers in the default Accounting reports.

As User defined Value

You can use the As User defined Value field to manually enter the value at the time of processing the salary. This calculation type is applicable when the value of pay is not fixed, and does not depend on any pay component. You can also choose a calculation period, as is applicable.

For example,

Calculation Period

Calculation Period refers to the periodicity of pay head calculation. Four pre-defined calculation periods are available in Tally.ERP 9:

Per day Calculation Basis

As per Calendar Period

As per Calendar Period refers to calculation based on a calendar month period. For instance, if the payroll process is carried out for the month of March, the attendance records will be entered for 31 days.

User Defined

User Defined refers to a consistent payroll period entered by the user, irrespective of calendar month. For instance, if an employee’s salary is based on a standard month of 30 days irrespective of the calendar month, you can select User Defined as the Calculation Basis, and define the periodicity of the specified period or month.  

User Defined Calendar Type

You can use the User Defined Calendar Type option to select user defined working/calendar days for every Calculation Period.

For example, you can enter the total number of working days after reducing the Saturdays,  Sundays and holidays, if any, as  required.

Rounding Method

The four methods of rounding off available while calculating pay heads are: