Salary Component
Salary Component
Companies pay their workers salary in exchange for the work they do. Salary Components are the several parts that make up the Salary Structure.
Employees' pay usually includes things like basic pay, allowances, bonuses, deductions, incentives, arrears, reimbursements, and more. In ERPNext, each of these parts is set up as its own Salary Component. The current version of Frappe HR lets you define, group, and manage these things with a lot of freedom. For example, you can use rule-based calculations, formula-based reasoning, and payroll account and tax integration.
1. Making a Salary Component
To make a new Salary Component:
Go to the Salary Component list and click New.
Put in its name and abbreviation, which are used in reports and formulae.
(Optional but beneficial for documentation) Enter a description of the salary component.
In the Accounts table, type in the name of the company and the Default Account for the Salary Component.
Keep the document.
You can utilise the Salary Component in Salary Structures, Additional Salaries, and Employee Benefit Claims once it is stored.
2. Characteristics
In addition to the required fields listed above, the following are some of the other and better features of the Salary Component in the current version of ERPNext/Frappe HR.
2.1 Condition and Formula
This field lets you establish more complicated guidelines for how to calculate a Salary Component. You can create conditions and formulas that tell the system how to figure out the value of the component depending on other payroll fields.
To set the formula, tick the box next to "Amount based on formula." When turned on, you can type in mathematical, logical, or Python-based expressions along with other things like base salary or system variables like startdate, enddate, or payment_days.
You can also sync the new Condition and Formula values in any Salary Structures that already use this component by clicking the Update Salary Structures button.
You can uncheck the "Amount based on formula" option and type the amount directly into the Amount field if the component is set to a fixed amount.
Frappe HR now has more complex functions and operators for constructing formulas, such as if, and, or, not, date-based logic, rounding functions, and casting functions.
Here are some math and date functions:
# For example, basic = 1220.32
# int: cast the amount as an integer. int(basic) returns 1220.
# flt - cast the amount as a float with precision flt(basic, 1) yields 1220.3
# round: rounds the value using Banker's Rounding. round(basic) # returns 1220
# rounded - rounds based on the System Settings method specified rounded(1220.5, rounding_method="Commercial Rounding") # returns 1221
# ceil - rounds up ceil(basic) # returns 1221
# floor - rounds down floor(basic) # returns 1220
# getdate/date - changes the startdate of the salary slip into a date object 300 if getdate(startdate). month == 2 else 200
ERPNext now features hierarchical dependency, which means that one Salary Component can depend on another, and the numbers are automatically computed based on the order of dependency.
2.2 More Properties
We use the following properties to narrow down how each Salary Component behaves and how it is accounted for. You can turn these on by checking boxes on the document.
Payable: Decide if the Salary Component is money that the employee will get.
* Depends on Payment Days:* If checked, the component will figure out how much to pay based on the actual working and payment days of the payroll period.
Is Tax Applicable: For Earning Components.This option makes sure that the component is included in the calculation of income tax.
Deduct whole Tax on Specified pay cheque Date: If this box is ticked and the item is used through Additional Salary (like a lump sum bonus), the whole tax on that amount will be taken out of the month's pay cheque.
Round to Nearest Integer: Rounds the calculated amount to the nearest whole number so that it can be used with accounting systems.
Statistical Component: This marks the component as unpaid. Its value won't be included in total earnings or deductions, but other components can still see it.
Do Not Include in Total: This hides the component from the total compensation that is owed. It is used for benefits that are included in CTC but not paid in cash, like the use of a company automobile.
Variable depending on Taxable Salary: The value of the component is calculated automatically depending on the taxable income and tax bracket (like TDS).
Exempted from Income Tax: This marks this part as fully free from income tax, which is helpful for local statutory exemptions.
Disabled: This element can't be used in new constructions without losing historical information.
2.3 Benefits that can be changed
If the component type is an Earning Component, this field will only show up. Flexible Benefits let businesses offer benefit plans that are good for employees and may be claimed or chosen as part of their CTC.
To define a Flexible Benefit:
Check the box next to "Enable Is Flexible Benefit."
Give the Max Benefit Amount (Yearly), which is the most money you can get in a year.
Choose the Eligible Employee Group, which is optional if it applies.
Some other things are
Pay Against Benefit Claim: Turn this on if the component will only be paid once the employee has filed a confirmed Employee Benefit Claim.
Only Tax Impact (Cannot Claim But Part of taxed Income): This means that the benefit is taxed even if it isn't claimed.
Make a Separate Payment Entry for Each Benefit Claim: This lets the system automatically make a separate payment entry for each claim submission instead of putting it all together with normal wages.
Carry Forward Unclaimed Amount: (added in v15) You can set this on so that employees can carry over unused benefit balances to the next payroll cycle or financial year.
Flexible Benefits can be used with Employee Tax Declarations to follow the rules set by local tax authorities. ERPNext will automatically change taxable income