Wage Type

A wage type is one line on a payslip: basic salary, house rent, income tax, a provident fund share, a loan instalment. Nothing is paid or deducted in PeopleNest except through a wage type, so this is the screen the whole payroll stands on.

Where

Payroll › Setup › Wage Type

Who uses it

The implementation consultant, with the finance manager in the room

When

After the categories and groups, before Salary Structure

Needs first

Wage Type Category, Wage Type Group

What it is for

Open this screen for every line the payslip has ever shown, and for the lines the system produces by itself: income tax, overtime, a loan recovery, the two halves of a provident fund.

A wage type does not say who gets it or how much. That is the Salary Structure and the Pay Rate. What a wage type says is what kind of money this is, and four fields carry that between them: the direction, the indicator, the taxable tick and the unit. Get those four right and the payroll run behaves. Get the direction wrong and you have an allowance that deducts, or a deduction that pays.

The payslip order also lives here, on the Sort number, and so do the accounts the payroll journal posts to.

Every field, in plain words

Basic Data

Field	What it means	What to put in it	Notes
Wage Type	The code you will pick everywhere else	1000 for basic salary, 1100 for house rent, 5000 for income tax	Required. Number the earnings in one range and the deductions in another, it makes every later screen easier
Name	What the man reads on his payslip	House Rent Allowance	Required
Pay Channel	Which payment run this line belongs to, Primary or Secondary. A payroll run is launched for one channel and picks up only the wage types on it	Primary for everything, unless a second payment run is genuinely used	Leave it on Primary unless two separate payments are made in the same month
Block	Stops the wage type being used	Leave it clear	Read the warning under "What it is connected to" before you tick it on a wage type already in use

Wage Breakup

Field	What it means	What to put in it	Notes
Wage Type Unit	What the amount on this wage type is measured in	M Month for a monthly salary line	Required. The values are listed below and in full on Value lists
Wage Type Group	The folder the wage type is filed under	EARN	Required. Pick from the list
Wage Type Category	What kind of pay this is. The category holding the Salary Basic constant is how the run finds basic salary	BASIC on the basic salary wage type	Required. Pick from the list. A wage type with no category is skipped by the payroll run entirely
Wage Type indicator	A second classification, used together with the direction to work out the gross earnings figure	E Earning on basic and on all allowances	Required. The values are listed below and in full on Value lists
Wage Type Direction	Whether this line adds to pay, takes away from pay, or only prints	D Debit on an allowance, C Credit on a deduction	Required. The most important field on the screen. The values are below, in full on Value lists
Sort	The order the line appears in on the payslip	10 for basic, 20 for house rent, 500 for income tax	Required. The number must not already be in use on another wage type
Taxable	Whether this line is part of the figure income tax is worked out on	Tick it on basic and on every cash allowance. Leave it clear on an employer contribution	See the table under the lists
Debit Account	The account the payroll journal debits for this line	The salaries and wages expense account	Pick from the chart of accounts
Credit Account	The account the payroll journal credits for this line	The salaries payable account	Pick from the chart of accounts. A Salary Structure can override both accounts for the staff on that structure

The three coded fields

• Direction: D Debit adds to pay, C Credit reduces net pay and is the only value that does, and a third value whose code is a star is the company cost that prints on the payslip without being deducted. That third value has no label in the system today, so it shows as a blank row below Credit and you have to count the rows to pick it.
• Indicator: E Earning, B Benefit, T Tax, O Other.
• Unit: M Month, Y Yearly, H Hour, Q Quantity. Nearly every salary line is Month, and the overtime wage types are Hour.

The full list, with the reason to pick each value, is on Value lists.

How Direction and Taxable work together

The figure income tax is worked out on is built from the wage types that are on the earning side, Debit or the star value, and that have Taxable ticked. That gives three separate outcomes from two fields, and it is worth saying them out loud at a setup meeting.

Direction	Taxable	What happens
D Debit	Ticked	Paid to the man and taxed. Basic salary, cash allowances
D Debit	Clear	Paid to the man and not taxed
C Credit	Either	Deducted from net pay. A credit line is never part of the tax base, whatever the tick says
Star	Clear	Printed on the payslip, not deducted from the man, and not taxed. This is what an employer contribution share should be

How to configure it

1. Create Wage Type Category and Wage Type Group first. Both are required here.
2. Create basic salary. Code 1000, name Basic Salary, unit M Month, category BASIC, indicator E Earning, direction D Debit, Sort 10, Taxable ticked.
3. Create each allowance the same way, with its own category and its own Sort number: house rent 1100 Sort 20, medical 1200 Sort 30, transport 1300 Sort 40, canteen subsidy 1400 Sort 50.
4. Create income tax. Code 5000, direction C Credit, indicator T Tax, Taxable clear, Sort 500.
5. Create the deduction lines the system itself writes: a loan recovery, an advance recovery, an ad hoc deduction. All C Credit, indicator O Other.
6. Create the contribution pairs. For a provident fund, one wage type for the employee share with direction C Credit, and one for the employer share with the direction set to the blank third row and Taxable left clear. Name them plainly, Provident Fund - Employee and Provident Fund - Employer, because they look identical on a report otherwise.
7. Create the overtime wage type with unit H Hour, direction D Debit, indicator E Earning.
8. Fill the debit and credit accounts on each one, or leave them blank and set the accounts per structure on Salary Structure.
9. Save each one, then read the list in Sort order and check it matches the payslip the client expects.

Scenarios

"Our provident fund shows the company share on the payslip but it must not reduce the man's pay"

Two wage types, not one. The employee share is C Credit with Taxable clear, and it comes off his net pay. The employer share uses the blank third direction value with Taxable clear, and it prints without being deducted. Then name both of them on the Contribution Scheme, which is what works the amounts out.

"The tax is being calculated on a figure that is too high"

Check which wage types have Taxable ticked. Every Debit line with the tick is in the tax base, including the ones that are thought of as reimbursements. A line that should be paid but not taxed is Debit with Taxable clear.

"We pay the factory overtime by the hour and the office gets a fixed allowance"

Two wage types. The factory one has unit H Hour and is named on an Over Time Category. The office one has unit M Month and sits on the office Salary Structure as a fixed amount.

"This allowance should not count towards gross"

Set its indicator to B Benefit and leave the direction on D Debit. It is still paid, and it no longer forms part of the gross earnings figure the run reports.

What it is connected to

• Needs Wage Type Category and Wage Type Group in place first.
• Named on Salary Structure, Pay Rate, Contribution Scheme, Gratuity Policy, Loan Type, Over Time Category and Payroll Tax Slab.
• Read by the payroll run for every amount it produces, and by Recurring Payments and Deductions when it builds a man's pay from his structure.
• Blocking a wage type that is already on somebody's pay does not behave the way it reads. The line stops appearing on the payslip, and the amount stays inside the gross and net totals. Take the wage type off the Salary Structure and off the man's recurring pay instead of blocking it. Separately, a blocked wage type named on a Contribution Scheme stops that contribution being worked out at all.

If something looks wrong

• "It will not save, it says the sort number already exists" - another wage type already uses that Sort number. Every wage type needs its own.
• "A deduction is showing on the payslip but net pay has not changed" - the direction is not C Credit. Only Credit reduces net pay.
• "An allowance is on the salary structure but nobody is getting it" - the wage type has no category, so the payroll run does not see it.
• "The employer contribution is being taken out of the man's salary" - the employer share wage type is C Credit. It should be the blank third direction value, the row under Credit.
• "A line vanished from the payslip after we blocked the wage type, but the totals did not change" - that is what blocking does. Remove the wage type from the salary structure and from the man's recurring pay instead.