Salary and wage types
A payslip is a list of named lines. Every line is a wage type. This stage builds the names, then the amounts, then the calendar the pay runs on.
This is the longest stage in the implementation and the one where a mistake is most expensive, because a wage type a payslip has already used cannot be quietly renamed or re-pointed.
Go slowly. Get the client's payslip format, in paper, before you open the first screen. Every line on that paper is a wage type and every line that is a sum of other lines is a wage type too.
The order
- Wage Type Category and Wage Type Group. Two short lists the wage types are filed under.
- Wage Type. The payslip lines themselves.
- Pay Rate. How a day or an hour is valued.
- Salary Structure. Which wage types a kind of employee gets, and in what proportion.
- Payroll Cycle, then Payroll Period. The calendar pay runs on.
- Pay Scale, Pay Area, Payroll Group. The slicers that let a big payroll be run in parts.
- Payroll Setting. The company-level switches, last.
Wage Type Category and Wage Type Group
Both are short lists of a code and a name, and both exist to file the wage types so that a payslip and a report can be grouped.
Wage Type Category is the broad class: earnings, deductions, employer cost, reimbursement. It also carries a Category Constant, which is how the system recognises a category it has to treat specially rather than guessing from the name.
Wage Type Group is the finer grouping within that: fixed allowances, variable allowances, statutory deductions, loan recoveries.
Keep both small. They are for grouping, not for describing.
Wage Type
A Wage Type is one named line that can appear on a payslip. Basic Salary. House Rent Allowance. Conveyance Allowance. Overtime. Provident Fund Employee Share. Income Tax. Loan Deduction. Each is one wage type, with a code you choose and will be reading for years.
The fields that decide how it behaves:
- Wage Type Direction, which says whether the line adds to pay or takes away from it. This is the single most important field on the screen. A deduction set up in the wrong direction prints as a deduction and increases the net.
- Wage Type Indicator, which says what kind of thing the line is, and is what the gross, the basic and the net are each built out of.
- Wage Type Unit, which says what the quantity on the line means: days, hours, a flat amount.
- The direction and indicator values themselves are in value lists. Read that page before setting up a wage type, because these two fields are where most payroll configuration errors are made.
- Taxable and Taxable Percentage, for the line that is taxed in part. An allowance that is half exempt is set up here and not worked round in the structure.
- Rate, Sort and Required On Print. Sort is what orders the lines on the payslip, so take five minutes over it: a payslip whose lines come out in creation order looks wrong to a client even when every number is right.
- Pay Channel, for a company that pays part of a salary through a different route.
- Posting Layer, Debit Account and Credit Account, which are where this line lands in the accounts. These can also be set per salary structure, which is the usual way, because the same allowance often posts to different accounts for a factory and for an office.
- The Wage Breakup tab, for a wage type that is itself made out of others.
Two rules worth insisting on with the client. One concept, one wage type: do not reuse an allowance code for something else because it happens to be unused. And never delete a wage type that has been paid; make it inactive instead, so the old payslip still explains itself.
Pay Rate
A Pay Rate is how a unit of time is turned into money. It carries a Value Percentage, the Calculation Hours and Calculation Days that the division is done against, and a switch for whether the calculation is on calendar days or on working days.
That last switch is a real policy question and the client has to answer it. Thirty days or twenty six changes every absence deduction in the company.
Pay rates are what the overtime lines on a policy profile point at, which is how overtime at one and a half times and overtime at double time become two rates rather than two pieces of arithmetic. A pay rate also carries conditions and reward settings, for the rate that only applies in certain circumstances.
Salary Structure
A Salary Structure is a named pay package: which wage types a kind of employee gets, and how much of each.
Its lines name a wage type, its direction, and either a Value or a Value Percentage. That is how a structure where house rent is forty five percent of basic is expressed as a percentage rather than as an amount that has to be recalculated every time basic changes.
The header also carries Tax On Net, which decides which base the tax is worked out on.
The second grid is the accounting grid: per wage type, the debit and the credit account. This is what Post Payroll reads at the end of the month, and it is the reason an assignment refuses to save when the structure's accounting dimensions are incomplete. Filling this in now avoids a failure on posting day, which is always the worst day to discover it.
A structure is named on a Position as its default and on each Employee Organization Assignment as the one actually used. The assignment wins.
Most clients need a handful of structures: worker, staff, officer, management, expatriate, contract. If the number of structures is approaching the number of employees, the percentages are being used as amounts and the design needs revisiting.
Payroll Cycle and Payroll Period
A Payroll Cycle is the rhythm: a code, a name and a Frequency. Monthly for most clients, and the same company may also have a weekly cycle for daily-waged workers.
A Payroll Period is the actual calendar inside a cycle. The header holds a Number of Periods and a payment date, and the lines are the periods themselves: a Pay Period, a Date From, a Date To and a Date Payment. The screen can generate a year of lines from the cycle's frequency rather than making you key twelve rows by hand.
This is the one most often forgotten, and the symptom arrives in January. A payroll run has to find a period covering the month it is being run for. If the new year's periods were never generated, the run cannot start, and the client reports it as the payroll being broken. Put it on the handover checklist, which is exactly what before you hand over is for.
A person's cycle comes from his Employee Policy Profile, and the payroll run only looks at people whose profile names the cycle being run.
Pay Scale, Pay Area and Payroll Group
Three short lists, each a code and a name, and all three exist for the same reason: a five hundred person payroll should not have to be run and checked as one lump.
Pay Scale and Pay Area are the slices the attendance sheet and the payroll run can be narrowed to, so that the factory and the head office can be processed and checked separately. Payroll Group is a further grouping for the same purpose.
A client that genuinely runs one payroll for everybody can key one of each and move on. A client with two plants will thank you for using them.
Payroll Setting
Payroll Setting is the company-level switches: a process code and a value per setting, whether a pay channel is required, and whether the gross and the basic are worked out per pay channel.
Fill it last, because most of its settings only make sense once you know what the wage types and the structures look like. Treat a change to it as a change to every payslip, which it is.
The rest of the payroll setup
Four more chains sit beside this stage. None is in the way of a first payroll run, and all four are usually wanted before go-live.
Tax. Payroll Tax Group and Payroll Tax Slab hold the slabs. Tax Adjustment and Employee Tax Payment handle the exceptions and the payments.
Overtime. Over Time Category names the kinds, Overtime Policy Setup sets the rules, and the policy profile maps each category to a pay rate. Employee Overtime and Process Overtime are the monthly work.
Loans. Loan Type and Loan Proof are the setup. Employee Loan Request, Employee Loan data and Employee Payroll Loan are the running of them.
Payment. Employee Bank Details and Employee Payment Method say where the money actually goes. Gratuity Policy is read by Final Settlement when somebody leaves.
And two screens that feed every run: Recurring Payments and Deductions for the standing instruction that repeats every month, and Employee Additional Payment Or Deduction for the one-off.
If something looks wrong
- "The payroll run produced nothing and reported no error" - there are no wage types, or the salary structure has no lines, or there is no pay period for the month.
- "The January payroll will not run" - the new year's periods were never generated on Payroll Period.
- "A deduction is printing but the net has not come down" - the wage type's direction is wrong. See value lists.
- "The gross is not what the client expects" - the indicator on one or more wage types is wrong. The gross is built out of indicators, not out of names.
- "The payslip lines are in a strange order" - the Sort values on the wage types.
- "Posting failed at the end of the month" - the salary structure's accounting grid is incomplete for one of the wage types the run used.
- "Everybody's absence deduction is slightly off" - the pay rate is dividing by calendar days where the client intended working days, or the other way round.