One line that can appear on a payslip: an earning such as basic pay or an allowance, or a deduction such as a fund contribution or tax.
When to use it
When setting the system up, and whenever your pay structure gains a new kind of earning or deduction.
Before you start
Decide which account in your books each component should post to, and have those accounts ready.
Where to find it
Open the HR area from the main menu, then HR Setup, then Salary Component.
The fields on this screen
| Field (on screen) | What to enter | Required |
|---|---|---|
| Code | Short code for this component. Overtime must be coded OT and payroll tax TDS, or payroll cannot find them. | Yes |
| Name | Name shown for this component on the slip and in the salary posting narration. | Yes |
| Type | Type earning or deduction, in lower case. It decides whether pay is added or taken off, and the posting side. | Yes |
| Taxable | (not explained yet) | No |
| Statutory | (not explained yet) | No |
| Posting Ledger | The account this component posts to in the salary journal. Left blank, a default salary account is used. | No |
| Display Order | Order the component appears in on a slip. It has no effect on any amount. | No |
| Notes | (not explained yet) | No |
How it works
A salary structure is built from components, and pay policy rules and one-off adjustments point at them. On a slip, earnings add up to the gross and deductions are taken off it.
When a slip is posted, each component's amount goes to the account set on it. If you leave that blank, the amount falls into a default account. Several components then end up in one place and the salary journal becomes hard to read. Set the account on every component you actually use.
Type the component type as earning or deduction, in lower case. It decides whether the money is added or taken off, and which side of the journal it posts to.
Two codes are read literally
Two components are found by their exact code, not by their name:
- Overtime must be coded OT. Without it, overtime hours are priced and then thrown away, with no line on the slip and no warning.
- Payroll tax must be coded TDS. Without it, the tax working has nowhere to put the tax it calculated.
Change either code and that line quietly stops appearing on everybody's slip. You can change the name freely, but leave the code alone.
The tax treatment is not set on this screen
Every component needs a tax treatment, and there is no field for it here. It matters for two reasons. A component without one is not counted as income at all. And once any Compensation Policy is in use, payroll refuses to run for the whole organization until every component has one. The refusal names the components that are missing it.
If you meet that refusal, note the names it gives you and ask whoever set up your system to complete them. Nothing on this screen will clear it.
Tips and common mistakes
- Do not delete a component that has been used. Slips already posted point at it.
- One component should be the basic pay that percentage lines are worked out from. If none is, every percent-of-basic line comes out at zero.
- Display order changes where a line sits on the slip, and nothing else.
Related guides
- Salary Structure, where components are given amounts and percentages
- Tax Heading, the tax treatments components are tied to
- Overtime Policy, which needs the component coded OT
- Salary Slip, where the lines appear and post