Payroll and Salary Setup

Frappe HR
1

A company basic is different for every employee so how I can function these:

  1. Basic salary is different for all employees, there is no HRA
  2. Company provide a benefit pool of 5% of salary added to the employees every month which is not payable every month. It is a benefit pool that employee will receive if exits a company.
  3. Company deducts PF of 10% of total salary not from basic
  4. Company pay monthly salary in 2 halves (bimonthly)

How can I setup this up?

2

Hi there. I’ll try to give some pointers where I can.

Disclaimer
I am not a professional accountant by trade, just a business owner who tried to figure this out for himself. I can’t be held responsible for any mistakes, errors or omissions as you try to implement this!
Disclaimer

  1. Basic salary for each employee will be set in the Salary Structure Assignment document.

  2. I do not have experience with that kind of benefit, but maybe someone else can point you in the right direction there!

  3. I believe PF (Providence Fund?) works like FUTA in the USA, where it is a tax the employer pays based on a percentage (6% here in the USA) of the total salary but it is not deducted from the employee’s pay? In my case, based on older forum posts, I had to set up two salary components for this to work properly:

FUTA- Employer Payable
Type: Deduction
All checkboxes cleared except for “Do Not Include in Total” which is checked
Description: This is the employer’s FUTA tax contribution tracked to the payable account. It’s limited to the first $7000 in taxable income per employee.
Accounts Linked to: FUTA Payable
Condition and Formula:
Condition: [I left this field empty]
Amount based on formula: Checked
Formula (please note the extra space at the end of the first and second lines, it is required!):

0 if ((gross_year_to_date - BS) >= 7000) else 
0.06 * (7000 - (gross_year_to_date - BS)) if (gross_year_to_date > 7000) else 
0.06 * BS

FUTA- Employer Expense
Type: Earning
All checkboxes cleared except for “Do Not Include in Total” which is checked
Description: This is the employer’s FUTA tax contribution tracked to the expense account. It’s limited to the first $7000 in taxable income per employee.
Accounts Linked to: FUTA Expense
Condition and Formula:
Condition: [I left this field empty]
Amount based on formula: Checked
Formula (please note the extra space at the end of the first and second lines, it is required!):

0 if ((gross_year_to_date - BS) >= 7000) else 
0.06 * (7000 - (gross_year_to_date - BS)) if (gross_year_to_date > 7000) else 
0.06 * BS

Some explanation: BS references another Salary Component I have called Basic Salary, which in my case is defined in the “Salary Structure” document simply as “Base”. You can substitute a different Salary Component in the formula that you define yourself for the “Total Salary” or whatever you need to do there. You will have to define your own Salary Component and use it in your “Salary Structure” document to be able to reference it as a variable in your Providence Fund formula.

  1. Payroll interval (like bimonthly) is defined in the “Salary Structure” document.

Hope this helps!

1 Like
3

Thank you

4

Hey there, good post. Setting up payroll and salaries can be a bit tricky, especially with different variables for each employee. Just keep in mind to make sure that you are in compliance with all legal and regulatory requirements for payroll and taxes. Keep accurate records and have a clear system for tracking these different variables. Just a word of caution, creating fake paystubs is illegal. You’d better stick with legitimate methods. Btw, thanks to you guys for sharing your thoughts on that. Let’s keep this thread updated.

5

Good points, @MeadowBoone .

I have found that the “Description” field in each Salary Component document to be a handy place to document the variables, reasons, and methodology for each component. Not only for compliance and regulatory reasons but also to make the system more understandable for others and to remember how everything is supposed to work when changes are needed. It would also be a good idea to document payroll processes and workflows in an internal wiki or processes and procedures document. Payroll is a complex beast!