Payroll is defined as the process of paying salary to the company's employees. It includes earnings, deductions and leave management.
Delay in releasing salary can take a toll on the morale of the employees and ultimately affect the business productivity. With ProfitBooks, you can easily manage the payroll and make timely payments to the employees.
Using this payroll guide, we’ll walk you through the entire payroll process step by step.
✔ Steps Involved:
Setup Payheads (Salary Components)
Define salary structure for the Employees
👉 Onboarding Employees
Add Employees in the software. You can add a user from the Employee section. On this screen you will see list of all users in the system. You will be able to activate or deactivate the access of users from this screen. To add new user, please click on "New Employee" button on the right-hand corner.
Once you click on "New Employee", you will see following screen.
Please fill in the mandatory details like Name, Email ID and Username.
An automated welcome mail with username/password is sent on the email ID mentioned while creating the user. The employee can login into his account and use the self-service portal for leave request.
👉 Setup Payheads
Payheads are the salary component which constitutes an employee's pay structure. It may be earnings or deduction. Common payheads are Basic Allowance, House Rent Allowance, Dearness Allowance, Provident fund, etc.
To add Payheads, go to employess> Manage Payroll> Payheads.
Once you click on "New Payhead", you will see following screen.
1. Payhead Name: Name of the Payhead like Basic, DA, Professional Tax, etc.
2. Name appear in payslip: Name you want on the payslip for payhead. It can be same Basic, DA, etc.
3. Payhead type: There are 3 options-
Earnings - Basic, DA, HRA
Standard Deductions - ESI, Provident Fund, Professional Tax
Other Deductions - Parking Charges
4. Select account name: Select the account where you want to enter the salary expense. You can create different account under Indirect Expense (in charts of accounts), or you can enter it in Salary Expense Account.
5. Calculation type: Select whether the earning/deduction is fixed (irrespective of number of days present) or calculated (on number of days the employee was present in a month)
6. Applicable: whether it is Mandatory (Basic, DA, PT, etc.) or Optional (Parking charges, Bonus Pay, Variable Pay, etc.)
7. Affect net salary: Whether it will affect net salary, it's mostly yes.
👉 Define salary structure
Next step is defining the salary structure of the Employees that is adding the salary details in their respective accounts. Go to Employees, select the user for whom salary details need to be added. Fill the work details of the employee (Work Info> Joined on, is mandatory field).
Click on salary details> Define Now.
Add the effective date for salary cycle. The payheads added it Manage Payroll will appear here. Add the salary details for a month.
👉 Run Payroll
Go to Employees> Manage Payroll, for calculating salary and generating payslip for each employee.
Once you select the month, you will see following screen.
There are 3 steps for finalizing Payroll.
Step 1 Enter Attendance & Variable Pay
Mention the number of days the employee was absent for that month here.
Enter the variable payhead i.e., the optional payhead like parking, bonus, etc.
Step 2 Review Information
Enter the bank name from which salary is to be paid in "Account to pay from".
Enter the payroll date.
Step 3 Result
Check the details of the payroll for each employee.
Download the Payslip.
Confirm the amount that will be reflected in Bank Account Ledger and Expense Ledger.
Once the Payroll is Finalized, it cannot be deleted.
📄 Impact of Payroll in Respective Accounts
After the Payroll Finalization, entry of Salary reflects in Bank Account (Current Asset) and Salary Account (Indirect Expense).
Salaries & Wages Account
Note: The entries cannot be deleted after the finalization. Pass reverse entry (Journal Entry) in case of wrong amount.