Payroll

What is Payroll?
Payroll is the process of paying a company's employees. It includes
tracking hours worked, calculating employees' pay, and distributing payments
1. What Payroll in Tally Prime?
Tally Prime offers predefined processes to automate payroll, and integrates with
accounting. It also allows users to define classifications for reporting on
employees, groups, pay components, and departments

2. What is Payroll Master?

Tally Prime offers various features that allows you to implement and
process payroll. You can use the Payroll Info. menu to create different payroll
masters required for computing earnings and deductions for employees.
The following masters can be created in Tally Prime to successfully record the
Employee Details:
1. Employee Category
2. Employee Groups
3. Employees
4. Unit
5. Attendance/Production
6. Pay Head
7. Payroll Vouchers

3. What is 'Employee Setup' for Payroll in Tally Prime

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.

'Payroll Masters' for Payroll in Tally Prime

Pay components are computed based on the Payroll Units. A payroll Unit is
similar to a Unit of Measure used in the Inventory module. Tally Prime uses
payroll units to calculate pay components for a given period. You can create
Simple and Compound payroll units depends, measured on
attendance/production such as Time, Work, or Quantity.
Payroll Units example
(i) Simple Payroll Units-
a. Hours (Hrs)
b. Minutes (Mins)
(ii) Compound Payroll Units-
a. Hrs of 60 Mins
Attendance / Production Types
(i) Present Attendance Types
a. Present {Attendance/Leave with Pay} Day
b. Absent Leave with Pay Days
c. Overtime {Production} Hr of 60 Mins
4. Earning 'Pay Heads' for Pay Roll in Tally Prime
Create the following Earnings Pay Heads:

Calculatio
Pay Name to Calculatio
Affect n Period/
Pay Head Head Appear Use for n
Under Net Pro-
Name Typ in Pay Gratuity Typ
Salary duction Ty
e Slip e
pe
Indirect
Earnings for On
Basic Pay Expense Yes Basic Yes Months
Employees Attendance
s
Indirect
House Rent Earnings for As Compute
Expense Yes HRA No —
Allowance Employees d Value
s
Indirect
Conveyanc Earnings for Conveyan
Expense Yes No Flat Rate Months
e Employees ce
s
Indirect
Earnings for On Producti
Overtime Pay Expense Yes Overtime No Overtime
Employees on
s
Indirect As User
Earnings for Variable
Variable Pay Expense Yes No Defined —
Employees Pay
s Value
5. Deduction Pay-Heads for Pay Roll in Tally Prime
The following Deduction Pay Heads.

Name
Affec
Pay Head Pay Head Statutory to Computation
t Net Calculation
Under Appear
Name Type Pay Type Sala Type Method
in Pay
ry
Slip

Employee Employees’ PF Account Current Yes EPF @ As On

s’ PF 12% Computed Val
Statutory (A/c No.1) Liabiliti Specified Formul
Contributi ue
Deductions es
on @ 12%

Employee Employees’ Employee Current Yes ESI @ On Specified Basic Pay + Hou
s’ ESI Statutory State Formula Rent Allowance +
Liabiliti 1.75%
Contributi Deductions Insurance Conveyance +
es
on @ Overtime Pay (or
Current Earnings
1.75%
Variable Pay)

Profession Employees’ Professional T Current Yes Professio As Computed On Current

al Tax Statutory ax n Value
Liabiliti Earnings Total
Deductions
es Tax

6. Gratuity Pay-Head Setup for Payroll in Tally Prime

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:

 Ledger Pay Head Type Under

Gratuity Expenses (Provision Gratuity Provisions (Current

al)
Liabilities)

Salary Details Setup for Payroll in Tally Prime

The Salary Details masters contain information on teh Employee Group/
individual employee pay structure, comprising of both earnings and deductions
pay components for the applicable period.
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 Prime 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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8. Attendance Voucher for Payroll in Tally Prime
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 teh flexibility to enter teh 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
teh option of recording one attendance/ production voucher per employee per
day or collectively for a month or any other variation theirof for all teh
employees.
In Tally.ERP 9, teh auto-fill facility (Alt+A) is used to prefill teh required
Attendance/Production types data for teh selected employee group/ employee for
teh specified period.

Example 1:

On 30th April, 2009 the attendance records of M/s. Spectrum Solutions displayed
teh following details:

Attendance/ Produc Vijay Kumar Rahul Mahesh Ajay

- tion Types

Present Days 26 22 15 17

Overtime hours 900 Min 720 Min

(15hr x 60min) (12hr x
60min)

In teh above scenario, separate attendance vouchers are required to be entered

for recording

Present days and Overtime hours.

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9. "Payroll Voucher" for Payroll in Tally Prime
A payroll voucher is used to record all employee-related transactions. It enables
you to compute all teh values for the respective Pay Heads (Earnings and
Deductions).

The calculations are made on teh basis of teh definitions specified in teh 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 teh Auto Fill facility (Alt+A).
In Tally.ERP 9, the disbursement of salaries can be effected in any of teh 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

teh list of disbursement is printed separately

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10. Payment of Salaries ( Salary Disbursement) for Payroll in Tally Prime
In Tally.ERP 9, a Payment voucher can be used to effect salary disbursement to
employees. Teh payment voucher for teh salaries payable may be passed
through regular payment voucher or automated using teh preset Salary Payment
process available in Tally.ERP 9 for error free data input during Payroll Payment
entry wif teh 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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11. Accounting for Employer PF Contribution for Payroll in Tally Prime
Illustration 1:
On 30th April, 2009 M/s. Spectrum Software Solutions processed Provident Fund
contribu- tions for teh month of April 2009 and paid the amount in full to EPFO.

Teh 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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11 (A) . Create Employer PF Contribution Masters
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

me. Employer Contributions Pay Head

Pay Head Pay Head Type Statutory Under Affect Calculation

Pay Net
Name Type
Salary
Type

Employer EPS Employer’s Stat EPS Account Indirect No As computed

u- tory value
@ 8.33% (A/c No.10) Expenses
Contributions

Employer Employer’s PF Account Indirect No As computed

EPF Statu- tory (A/ value
Expenses
Contributions
@ 3.67% c No.1)