Please i am confused while creating a SALARY STRUCTURE for a group of employees that earn the same BASIC but differences in deduction:
- They all have the same Basic salary
- They have the same compulsory deduction (Income tax and Housing fund)
- But Two out of the four has different non-compulsory deduction(They belong to two different cooperative society that takes deduction from there salary)
- One of them has an earning allowance that is not applicable to others.
How do i make One structure and assign all of the employees to it, below is their salary details:
- Annual Basic = 1,200,000 (Monthly Basic = 1,200,000/12 =100,000
- Medical Allowance 20,000
- Income Tax 1% of Basic
- National Housing Fund (NHF) 2% of Basic
- Medical cooperative 400
- Legal cooperative 500
Dr.Ben (Monthly Basic 100,000)
Income Tax 1% of basic
NHF 2% of basic.
Med.Coop Deduction 400)
Bar.Ken (Monthly Basic 100,000)
Income tax Deduction 1% of Basic.
NHF Deduction 2% of basic.
Legal Coop Deduction 500
Mr.Chris (Basic 100,000)
Income Tax Deduction 1% of Basic
NHF Deduction 2% of Basic
Mrs Julie (Basic 100,000)
Income tax Deduction 1% of Basic
NHF Deduction 2% of Basic
Should i create their BASIC here
Or should i create the Basic here
I want them to use one structure.
(PLEASE, I WILL SO MUCH APPRECIATE IF SOMEONE CAN USE THE INFO ABOVE TO CREATE A STRUCTURE FOR ME.
@michelle please kindly help me out. I have struggled for days trying to get this work.
@Ebuka_Joseph_Akeru this is the post. (Pls ignore the income Tax deduction of 1%, as the “Income Tax Slab” in the system supposed to take care of it.
Basic is a salary component. So you should create it under Salary Component. Also, the field in Salary Structure Assignment is “Base” and not “Basic”. If the entire formula is based on Base, then define it in Salary Structure Assignment. If it is based on Basic, then you need to create a Salary Component.
You can have the same salary structure for Chris and Julie. However, for the other two, you will have to create a separate Salary Structure.
Do by ay change is "Med.Coop Deduction " and “Legal Coop Deduction” dependent on any formula or condition?
Thank you @michelle
No, the “Med.Coop Deduction” and “Legal Coop Deduction” is not dependent on any formula. They are standard amount like the medical allowance.
The only difference is that:
Dr.Ben is a medical doctor, so he contributes 400 to their medical association monthly
While Br.Ken is a Lawyer and he contributes 500 to his law association monthly.
Should I still use one salary structure for both of them(since they have the same base)? or should I create a separate structure for each person since their association deductions vary?
Do you think it’s something CONDITION can handle? If yes, how do i write the condition if both are in the same salary structure?
In this case, you should use a different salary structure for the sake of simplicity. However, if their designations are set, then you can set that as a condition. Can you let me know the designations that you have specified in the employee master?
Medical Officer for Dr.Ben
Legal Adviser for Bar.Ken
Try having the same Salary structure and add the following for “Med.Coop Deduction” component. Keep the amount 400.
Do the same for the other component, but keep condition:
designation == "Legal Adviser" and amount as 500.
Hope this helps.
Thank you Michelle, you have actually helped me solve my problem 90%.
Don’t be offended if I ask you to help me solve the remaining 10%
Is Income Tax(Slab) calculated on BASE or BASIC?
If it’s on BASE,
In my country, we have some Relief allowances and Compulsory contributions that must be removed from the BASE amount before arriving at your taxable income.
Things like :
Consolidated Relief Allowance, which is (20% of Base + 200,000)
Employee Pension (8% of Base)
National housing fund (2.5% of Base)
Life Insurance. Etc
All these above must be removed from the Base to arrive at Taxable income for the year.
"How will I make the INCOME TAX SLAB recognize and remove these compulsory deductions above before it will calculate income tax on Base?
See my Income Tax Slab setup
You can set the same salary structure for all the employees, ensure that all the unique payments for staff are added to the structure but set to be zero, use the conditions field on the component to ensure that the right person is paid, i would advice you use the employee ID or employee name if you have multiple employees having the same designation
Income tax can be calculated on either base or basic, it solely depends on how you have structured the salary structure.
Okay. Thank you Ebuka
Please Can you write an example of the condition I can add for a component: NASU DUES (NSD)
For Employee No: SST/2018/005
Note: My Employee Record is created by" EMPLOYEE NUMBER"
Thank you Ebuka
So if i want it on Base, i should activate “Its Tax Applicable” on BASE and deactivate it on BASIC?
Likewise if i want it on Basic, I should activate it on BASIC and deactivate it on BASE?
No, The tax applicable checkbox only works when you are taxing components and not the gross, Nigeria Taxes the gross, you do not need to check that box, instead handle all tax calculations as components.
Hi @michelle, I came across this dicussion and maybe you can clear this up for me, what’s the difference between Basic salary component and Base in the salary structure assignment? I’ve been using the Basic Salary Component with the formula base * 1 to define employees’ basic pay with no clear understanding of why as long as it gets the required result. Is basic pay something different to base pay because ERPNext seems to imply that’s the case.
Here is an explanation I found online:
Basic salary is the amount paid to an employee before any extras are added or taken off, such as reductions because of salary sacrifice schemes (investments, dues, etc.) or an increase due to overtime or a bonus. Allowances, such as internet for home-based workers or contributions to phone usage, would also be added to the basic sala
Base salary is a fixed amount of money paid to an employee by an employer in return for work performed. Base salary does not include benefits, bonuses or any other potential compensation from an employer. Base salary is paid, most frequently, in a bi-weekly paycheck to an exempt or professional employee.
Thanks for clearing that up for me @michelle