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In Tally.ERP 9 activation of Payroll requires a one time simple setup. Create a new company in Tally.ERP 9 and follow the steps given below to enable Payroll. |
Case Study Company
M/s. Spectrum Software Solutions is engaged in the Software services Business. It is a Bangalore-based company with the following three major departments:
‡ Sales
‡ Administration
‡ R & D |
Step - 1 : Company Setup |
Step - 2 : Enable Payroll |
Step - 3 : Enable Payroll Statutory Features |
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The Employee Master records employee information – department, date of joining, date of leaving, ID number, designation, location, function, employee bank details, statutory details, Passport and Visa details, and so on.
Tally.ERP 9 provides the flexibility to create the Employees and Group them under specific Employee Group which in turn can be created under specific Employee Categories.
The following masters can be created in Tally.ERP 9 to successfully record the Employee Details:
‡ Employee Category
‡ Employee Groups
# Employees |
Step - 1 : Employee Group
Step - 2 : Employee Master |
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As discussed in the above section Pay components are computed based on the Payroll Units. Therefore, create the following Payroll masters in Tally.ERP 9:
Step - 1 : Payroll Units
(i) Simple Payroll Units
(ii) Compound Payroll Units
Step - 2 : Attendance / ProductionTypes
(i) Present Attendance Types
(ii) Absent Attendance Types
(iii) Overtime Production Types |
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Create the following Earnings Pay Heads:
Pay Head
Name |
Pay Head
Type |
Under |
Affect Net Sal- ary |
Name to Appear in Pay Slip |
Use for
Gratuity |
Calculation
Type |
Calculation Period/ Pro- duction Type |
Basic Pay |
Earnings for
Employees |
Indirect
Expenses |
Yes |
Basic |
Yes |
On Attend- ance |
Months |
House Rent Allowance |
Earnings for
Employees |
Indirect
Expenses |
Yes |
HRA |
No |
As Com- puted Value |
— |
Convey- ance |
Earnings for
Employees |
Indirect
Expenses |
Yes |
Convey- ance |
No |
Flat Rate |
Months |
Overtime
Pay |
Earnings for
Employees |
Indirect
Expenses |
Yes |
Overtime |
No |
On Produc- tion |
Overtime |
Variable
Pay |
Earnings for
Employees |
Indirect
Expenses |
Yes |
Variable
Pay |
No |
As User Defined Value |
— |
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Create the following Deduction Pay Heads.
Pay Head
Name |
Pay Head
Type |
Statutory
Pay Type |
Under |
Affect Net Salary |
Name to Appear in Pay Slip |
Calcula- tion Type |
Computation
Method |
Employees’ PF Contribu- tion @ 12% |
Employees’ Statutory Deductions |
PF Account (A/c No.1) |
Current
Liabilities |
Yes |
EPF @ 12% |
As Computed Value |
On
Specified For- mula |
Employees’ ESI Contri- bution @
1.75% |
Employees’ Statutory Deductions |
Employee State Insurance |
Current
Liabilities |
Yes |
ESI @
1.75% |
On Speci- fied For- mula |
Basic Pay + House Rent Allowance + Conveyance + Overtime Pay (or Current Earnings - Variable Pay) |
Profes- sional Tax |
Employees’ Statutory Deductions |
Profes- sional Tax |
Current
Liabilities |
Yes |
Profession
Tax |
As Computed Value |
On Current
Earnings Total |
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Apart from the above Pay Heads, create Gratuity Expenses (Provisional) Account in order to get provisional Gratuity liability report for the employer at any given period.
Gratuity refers to the monetary benefit given by the employer to the employee at the end of the employment for the services rendered over a period of employment either by law or otherwise. It is calculated provisionally at the end of each financial period to assess the possible liability of the company towards its employees. A Gratuity Provisional Account is created to capture the details required for the calculation of gratuity. Gratuity is calculated based on select salary components.
The formula used for Gratuity calculation is as follows: |
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Ledger |
Pay Head Type |
Under |
Gratuity Expenses (Provisional) |
Gratuity |
Provisions (Current
Liabilities) |
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The Salary Details masters contain information on the Employee Group/ individual employee pay structure, comprising of both earnings and deductions pay components for the applicable period.
Businesses having a common pay structure for a particular department or division or set of employees can define salary details for an employee group and classify individual employees under the specified group to inherit the parent pay values. The Employee Group master prefills the parent group values to the individual employee masters created under them. It reduces the possibility of erroneous data entry and expedites data entry. This categorisation also helps in gen- eration of Group-wise reporting.
Pay structure constituting the Pay Heads and basis of calculation should be similar for the employees falling under the same group, but pay values need not be the same.
Tally.ERP 9 also allows you to set up individual employee salary details with all parameters appli- cable for Employee groups. The individual employee masters with separate pay structures are usually created on a case-to-case basis. |
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There are three types of Payroll Vouchers namely Attendance Voucher, Payroll Voucher and Payment Voucher, which are by default preset in Tally.ERP 9 to record above Payroll transac- tions. |
An Attendance Voucher is used to record employees’ attendance data, based on Attendance/ Production types (i.e., present or absent days, overtime hours and so on).
An Attendance Voucher allows you to record the attendance/ production units for employees. Tally.ERP 9 gives you the flexibility to enter the attendance records through a single attendance voucher for a payroll period, or through multiple attendance vouchers as and when required within a payroll period. You also have the option of recording one attendance/ production voucher per employee per day or collectively for a month or any other variation thereof for all the employees.
In Tally.ERP 9, the auto-fill facility (Alt+A) is used to prefill the required Attendance/Production types data for the selected employee group/ employee for the specified period. |
Example 1:
On 30th April, 2009 the attendance records of M/s. Spectrum Solutions displayed the following details:
Attendance/ Produc- tion Types |
Vijay Kumar |
Rahul |
Mahesh |
Ajay |
Present Days |
26 |
22 |
15 |
17 |
Overtime hours |
900 Min
(15hr x 60min) |
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720 Min
(12hr x 60min) |
In the above scenario, separate attendance vouchers are required to be entered for recording
Present days and Overtime hours. |
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A payroll voucher is used to record all employee-related transactions. It enables you to compute all the values for the respective Pay Heads (Earnings and Deductions).
The calculations are made on the basis of the definitions specified in the pay head masters, pay structure and attendance entries. In Tally.ERP 9, you can pass payroll vouchers manually for indi- vidual employee as well as for the entire group/ organisation by using the Auto Fill facility (Alt+A).
In Tally.ERP 9, the disbursement of salaries can be effected in any of the following modes.
A - Direct Remittance– in cash or by cheque
B - Bank Transfer – a direct transfer is made to an employee’s bank account and the list of disbursement is printed separately |
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In Tally.ERP 9, a Payment voucher can be used to effect salary disbursement to employees. The payment voucher for the salaries payable may be passed through regular payment voucher or automated using the preset Salary Payment process available in Tally.ERP 9 for error free data input during Payroll Payment entry with the help of Auto Fill facility.
Example 4:
On 31st May 2009, M/s. Spectrum Solutions paid the salaries due for the month of May |
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Illustration 1:
On 30th April, 2009 M/s. Spectrum Software Solutions processed Provident Fund contribu- tions for the month of April 2009 and paid the amount in full to EPFO.
The same is accounted as shown:
In Tally.ERP 9, follow the steps given below to process Employer contribution towards Provident Fund:
11(A) - Create Employer PF Contribution Masters
11(B) - Alter/Modify Salary Details
11(C) - Processing Employer PF Contribution
11(D) - Processing PF Admin Expenses
11(E) - Payment of Provident Fund |
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In Tally.ERP 9, Employer contribution towards Employees’ Pension Fund (Employees’ Pension Scheme), Provident Fund, Admin Charges and other PF related ledgers are required to be created separately for appropriate Accounting and reporting. Create the following ledgers in Tally.ERP 9,
1. Employer Contributions Pay Head
2. Employer PF Admin Charges
3. PF Payable Ledger
4. Creation of PF Admin Expenses Ledger
I. Employer Contributions Pay Head
Pay Head
Name |
Pay Head Type |
Statutory Pay
Type |
Under |
Affect Net Salary |
Calculation
Type |
Employer EPS
@ 8.33% |
Employer’s Statu- tory Contributions |
EPS Account
(A/c No.10) |
Indirect
Expenses |
No |
As computed value |
Employer EPF
@ 3.67% |
Employer’s Statu- tory Contributions |
PF Account (A/
c No.1) |
Indirect
Expenses |
No |
As computed value |
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Once the required Employer Contribution Pay Heads and Admin Expenses ledgers are created, the salary details of the Employee should be altered to constitute the Employer Contribution pay head ledgers for automatic calculations based on the monthly payments made to the Employees. |
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In Tally.ERP 9, you are required to process Employer PF Contributions, PF Admin Charges sepa- rately and make the payment towards PF comprising of Employees’ PF Contribution, Employer PF Admin Expenses through a combined challan. |
Follow the steps explained .... |
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In Tally.ERP 9, once the process for Employee and Employer contributions to Provident Fund is implemented in the manner as discussed in earlier sections, the total amount payable to EPFO is accumulated separately in three Ledger Accounts, PF Payable Account (Employer Contributions), Employee PF Contributions and the PF Admin Charges Ledger. At the time of making the payment to EPFO, a payment voucher is required to be passed.
To process the payment of Provident Fund, follow the steps given below:
Step 1: Create PF Payment Voucher
Step 2: Print PF Payment Challan |
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On completion of this lesson, you will be able to
‡ Process Employer’s Contribution to Employees’ State Insurance (ESI)
‡ Payment of ESI Contributions
‡ Generate the ESI payment Challan |
As discussed earlier, the statutory features viz., EPF & ESI etc., are required to be configured in F11: Statutory & Taxation Features. In this section, we will discuss, recording of transactions related to computation and contribution of Employee State Insurance. |
follow the steps given below to process Employer contribution towards Employees’ State Insur- ance:
12(A)- Create Employer ESI Contribution Masters
12(B) - Alter/Modify Salary Details
12(C) - Processing Employer ESI Contribution
12(D) - Payment of ESI |
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In Tally.ERP 9, Employer and Employee’s contribution towards Employees’ State Insurance (ESI) are required to be created separately for appropriate Accounting and reporting. Create the following ledgers in Tally.ERP 9:
I Employer Contribution Pay Head
II ESI payable Ledger |
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Once the required Employer Contribution Pay Heads are created, the salary details of the Employees should be updated to constitute the Employer Contribution pay head ledgers for automatic calculations based on the monthly payments made to the Employees. |
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In Tally.ERP 9, you can process Employer ESI Contributions and make the payment towards ESI comprising of Employees’ and Employer’s ESI Contribution through a challan. To process the ESI Contribution for June 2009, follow the steps given below: |
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In Tally.ERP 9, once the process for Employee and Employer contributions to Employee’s state Insurance is implemented in the manner as discussed in earlier sections, the total amount payable to ESIC comprising of Employee’s Contribution as well as Employer’s contribution to ESI is accumulated separately in the ESI Payable Ledger. At the time of making the payment to ESIC, a payment voucher is required to be passed. |
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Tally.ERP 9 helps you track Salary Advance / loans given to employees and provides the flexibility to specify simple to complex criteria for Recovery of Salary Advances or loans viz., Flat or manual deduction and provision of lumpsum loan recovery and so on. Tally.ERP 9 also allows you to generate a Month wise break-up report for the amount of loan disbursed, recovery of instalments made and balance amount of Loan / Salary advance. Further, you can also use the Interest Cal- culation feature of Tally.ERP 9 to compute interest on loans to employee etc.
In Tally.ERP 9, tracking of Salary Advances / Loans paid to employees follow the steps given below:
(A) Creation of Masters
(B) Modify / Alter Salary Details
(C) Payment of Salary Advance
(D) Recovery of Salary Advance |
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Create a new company called Aman Motors, an Automobile dealer and also a manufacturer of Automobile Spare parts. Create the following masters and VAT related transactions: |
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(A) Pay Slip
(B) Pay Sheet
(C) Payroll Statement
(D) Payment Advice
(E) Payroll Register
(F) Employee Pay Head Breakup
(G) Pay Head Employee Breakup
(H) Attendance Sheet
(I) Attendance Register
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A Pay Slip refers to a document issued to an employee, which itemises each component of his/ her earnings and deductions and the net amount paid for a given pay period. It provides particu- lars on how the net amount has been arrived at i.e., how much money has been earned and how much tax / deductions have been made.
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Display Pay Slip
Go to Gateway of Tally > Display > Payroll Reports > Statements of Payroll > Pay Slip > Single Pay Slip |
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A Pay Sheet is a columnar report which displays the Group/Department-wise break-up of employ- ees’ earnings and deductions for the selected month.
Go to Gateway of Tally > Display > Payroll Reports > Statements of Payroll > Pay Sheet |
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A Payroll Statement is a columnar report which displays Group/Department-wise employees’
break-up of selected earnings or deductions, for a specified month or period.
Go to Gateway of Tally > Display > Payroll Reports > Statements of Payroll > Payroll Statement |
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A Payment Advice is an intimation letter containing the details of employees with their bank account numbers issued to the banker to transfer a specified sum (salaries earned) to the employees’ bank accounts.
As discussed earlier, the contents of the Payment Advice can be altered in F12: Payroll Configu- ration as per the employer’s requirements.
Go to Gateway of Tally > Display > Payroll Reports > Statements of Payroll > Payment Advice |
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A Payroll Register is a month-wise transaction summary report which displays the number of payroll vouchers passed during a particular month. Additional information can be appended into the Payroll Register, by inserting a new column with the required voucher type i.e., Attendance, Journal, Purchases, Sales and so on.
Go to Gateway of Tally > Display > Payroll Reports > Statements of Payroll >Payroll Register |
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An Employee Pay Head Breakup report is a columnar report which displays the Group/Depart- ment-wise employees’ breakup of a selected earnings or deductions pay head for a specified month/period. This report also displays the opening balance, debit and credit transactions and the closing balance for a specified period.
This report is also helpful in tracking loan outstandings and instalments deducted till date or for any specified period.
Go to Gateway of Tally > Display > Payroll Reports > Statements of Payroll >Employee Pay Head Breakup
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A Pay Head Employee Breakup report displays the sum of transactions and closing balance of the transacted groups for the selected employee.
Go to Gateway of Tally > Display > Payroll Reports > Statements of Payroll >Pay Head Employee Breakup |
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An Attendance Sheet is a columnar report which displays the details of Attendance/ Production types with the number of attendance/ production units achieved during a particular month or period.
Go to Gateway of Tally > Display > Payroll Reports > Attendance Sheet |
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An Attendance Register is a month-wise transactions summary report which displays the number of attendance vouchers passed during the month. You can append additional information by inserting a new column with the required voucher type, i.e. Payroll, Journal, Purchases, Sales and so on.
Go to Gateway of Tally > Display > Payroll Reports > Attendance Register |
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In Tally.ERP 9, you can display, print statutory forms and reports for Provident Fund (EPF), Employee State Insurance (ESI) and Professional Tax (PT) in the prescribed format as required by the statutes. The following Statutory reports are available in Tally.ERP 9: |
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You can view Payroll Statutory reports either from the Statutory Reports menu or Payroll Reports menu i.e., Gateway of Tally > Display > Statutory Reports > Payroll Reports or
Gateway of Tally > Display > Payroll Reports > Statutory Reports
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15 (A) Provident Fund (PF) Reports
15 (B) Employee's State Insurance (ESI) Report
15 (C) Professional Tax Reports
15 (D) Gratuity Report |
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The following Provident Fund Reports are available in Tally.ERP 9:
‡ EPF Computation report
‡ Form 5
‡ Form 10
‡ Form 12A
‡ PF Monthly Statement
‡ Form 3A
‡ Form 6 |
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The following ESI Reports are available in Tally.ERP 9:
‡ ESI Computation Report
‡ Form 3
‡ ESI Monthly Statement
‡ Form 5
‡ Form 6 |
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As discussed earlier, Professional Tax is applicable to those individuals or professionals in India who are involved in any profession or trade. The state government of each state governs and administers the levy and collection of Professional Tax in the respective State. The state is empowered with the responsibility of structuring as well as formulating the professional tax criteria for the respective state. Professional tax is charged on the incomes of Individuals, profits of business or gains in vocations as per the list II of the Indian Constitution.
In India, the professional tax slabs vary from state to state and some of the states have formulated different professional tax slabs for men, women and the senior citizens of the respective states. The rates depend upon the profession, years in the profession and the amount of income or turnover and so on.
In Tally.ERP 9, the Professional Tax Report is generated based on the Slab Rates defined in the Professional Tax Ledger and it captures the amount of Professional Tax deducted under each slab rate. |
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The Gratuity Report displays the provisional liability of an employer towards his employee in respect of gratuity payable at the time of cessation of employment either by resignation, death, retirement or termination.
The Gratuity Summary Report displays the gratuity amount payable in accordance with the pay components and formulae defined in the ledger master, as discussed earlier. In Tally.ERP 9, the Gratuity amount is calculated proportionately for eligible days in a year to the extent of completed months of service.
You can view the Gratuity Report either from Statutory Reports menu or Payroll Reports menu i.e., Gateway of Tally > Display > Payroll Reports > Statutory Reports or Gateway of Tally > Display > Statutory Reports > Payroll Reports.
Go to Gateway of Tally > Display > Payroll Reports > Statutory Reports > Gratuity Report |
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