How monthly payroll is calculated

Payroll is a month at a time. You enter each person’s salary structure, then process that month. The run uses the attendance, paid leave, holidays, and approved loan installments already stored for the company. It does not invent a salary.

Salary structure

For each employee, save basic pay, HRA, and special allowance. Those three add up to gross pay. Also save any fixed other deduction, the TDS percent, PF percent, ESI percent, professional tax, and the overtime multiplier. The structure applies from the date you set. Process the month only after the structures for that month are saved.

Present, paid leave, and loss of pay

Working days come from the month, minus Sundays and company holidays. A person is paid for present days plus approved paid-leave days, up to the working-day count. The rest are absent days.

Loss of pay is one day’s gross for each absent day:

loss of pay = (basic + HRA + special allowance) ÷ working days × absent days

Example. Gross is ₹30,000 and the month has 20 working days. The person was present 18 days and had 1 paid leave day. Absent days are 1. Loss of pay is ₹1,500. Pay after loss of pay is ₹28,500.

Tax and other deductions

TDS is the TDS percent multiplied by pay after loss of pay. In the example, 10 percent TDS is ₹2,850. A fixed other deduction is subtracted as well.

Provident fund uses earned basic, which is basic × (present days + paid leave) ÷ working days. The PF wage is capped at ₹15,000 even if earned basic is higher. PF is that wage multiplied by the PF percent on the salary structure. If the PF percent is 0, no PF is deducted.

ESI is calculated only when the ESI percent is greater than 0 and the pay used for ESI is ₹21,000 or less. Above that, ESI for the month is zero. Professional tax is the flat amount on the salary structure. An approved salary-advance installment is deducted as the loan amount for that month.

Net pay

Net pay is pay after loss of pay, plus overtime pay, minus TDS, other deductions, PF, ESI, professional tax, and the loan installment. Using the example above and no PF, ESI, professional tax, or loan, net pay is ₹25,150.

The payslip stores those figures. Correct the attendance or the salary structure and run the month again if a figure was wrong. Do not edit the payslip by hand and leave the attendance unchanged, or the next month will repeat the same mistake.

Who should run it

Running payroll is the payroll permission. A company admin sees it only when Super Admin has granted that permission to the Company Admin role. A custom role such as HR-Manager can run it only when that permission is ticked on the role. Employees can open their own payslips without that permission.