Payroll in Tally.ERP 9

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Payroll in Tally.ERP 9

 Payroll in Tally.ERP 9

 
Table of Contents
Payroll in Tally.ERP 9
Salient Features
Configuring Payroll in Tally.ERP 9
Enabling Payroll in Tally.ERP 9
Creating Payroll Masters
Employee Setup
Payroll Masters
Pay Heads
Gratuity
Salary Details Setup
Processing Payroll in Tally.ERP 9
Attendance Vouchers
Payroll Vouchers
Accounting for PF Contributions
Employees' Pension Scheme
Employees' Deposit Linked Insurance scheme
Create Employer PF Contribution Masters
Salary Details Setup
Processing Employer PF Contribution
Processing PF Admin Expenses
Payment of Provident Fund
Accounting for Employer ESI Contributions
Processing Employer ESI Contribution
Payment of ESI
Accounting for Income Tax
Configuring Income Tax Details
Creating Income Tax Masters
Creating TDS Ledger
Computing and Deducting TDS
Payment of Professional Tax
Processing Professional Tax Payment
Payroll Reports
Expat Reports
Payroll Statutory Reports
 
Payroll in Tally.ERP 9
 
Payroll refers to a series of accounting transactions involved in the process of paying employees for the services rendered after taking all statutory and non-statutory deductions into account.
Salient Features
The salient features of the Payroll functionality in Tally.ERP 9 are as narrated:
It is fully integrated with accounts to give you the benefits of simplified Payroll processing and accounting
 
It consists of user-defined classifications and sub-classifications (related to the employees, employee groups, pay components, departments etc.
 
It provides the facility to create user-defined earnings and deductions Pay Head
 
It allows flexible and user-defined criteria for simple to complex calculations
 
It allows unlimited grouping of Payroll masters
 
It supports user-defined production units i.e. attendance/production/time-based remuneration units
 
It provides flexible payroll processes based on departments/groups/ employees/periods or pay components
 
It provides comprehensive cost centre as well as employee-wise costing reports
 
It ensures an accurate and timely Salary Processing, Employee Statutory Deductions, Employer Contributions and Income Tax with the help of predefined processes
 
It provides auto-fill facility for various processes viz. Attendance, Payroll, Employer Contributions, and Income Tax to expedite voucher entry
 
It facilitates an accurate computation and deduction of Income Tax, ESI, EPF, Professional Tax, Gratuity etc.
 
It facilitates generation of statutory forms, challans and returns of Income Tax, EPF, and ESI in the prescribed formats
 
It allows drill-down facility to the voucher level for any kind of alteration
 
It facilitates computation of arrears pertaining to prior period
 
It also facilitates calculation of employee loan details
 
Configuring Payroll in Tally.ERP 9
Payroll in Tally is user-friendly and can handle all the functional, accounting and statutory requirements of the Payroll department.
Enabling Payroll in Tally.ERP 9
Activation of the Payroll feature in Tally is a one-time enablement. Create a new company and follow the steps give to enable Payroll in Tally.
Let us consider an example by creating the company Universal Enterprises in Tally.
Company Setup
Go to Gateway of Tally > Company Info. > Create Company
In the Company Creation screen,
Select the required country from the List of Countries provided in the Statutory compliance for field
 
Enter the required date in the Financial Year from field
 
Type the desired data in the respective field then press Enter to create the company
 
 
 Figure 1. Company Creation screen
Enable Payroll
Go to Gateway of Tally > F11: Company Features > F1:Accounting Features
In the F11: Accounting Features screen:
Set Maintain Payroll to Yes
 
Set More than ONE Payroll/Cost Category to Yes
 
 
 Figure 2. Accounting Features screen
 
The option More than One Payroll/Cost Category is set to Yes, when separate cost categories are created to allocate employee cost.
Enable Payroll Statutory Features
Go to Gateway of Tally > F11: Company Features > F3: Statutory & Taxation
In F3: Statutory & Taxation Features screen:
Set Enable Payroll Statutory to Yes
 
Enable Set/Alter Payroll Statutory Details to Yes
 
 
The Statutory and Taxation Features screen is displayed as shown:
 
 Figure 3. F11: Statutory and Taxation Features screen
 
 
The Enable Payroll Statutory option in F3: Statutory and Taxation screen will appear
only when Maintain Payroll option is enabled in F1: Accounting Features (under F11:
Features)
In the Payroll Statutory Details screen,
Enter the Provident Fund and Employee State Insurance details of the company
 
 
 Figure 4. Payroll Statutory Details screen
 
 
The field Standard Working Days (per month) denotes the consistent pay period to be considered for ESI calculation. If this field is left blank, the calculation is done based on the calendar days in each month
 
Press Enter to accept the Payroll Statutory Details screen. Press Enter again to accept the F11: Statutory and Taxation screen
 
Creating Payroll Masters
The Payroll functionality in Tally.ERP 9 requires minimal configurations for processing payroll. Payroll involves calculation of amounts that are due to an employee(s)
On hourly wages
 
Pay on fixed basis such as certain amount per week, per month and so on
 
Pay to sales persons on commission
 
Reimbursement of expenses such as travel expenses, either as paid by the employee or based on per item rate
 
Pay on number of pieces produced/ manufactured/ sold
 
It is therefore important to quantify the following payroll information for the purpose of computation of payments to employees:
Employee Masters
 
Payroll Masters
 
Pay Heads
 
Salary Details
 
It takes five easy steps to process payroll and generate a payslip in Tally.ERP 9.
 
 Figure 5. Payroll Cycle
Let us create the above payroll masters in Tally.ERP 9.
Employee Setup
The employee master records employee information.
Employee Group Master
There could be a requirement to classify individual employees into employee groups based on their dealings with multiple departments, functions, divisions or activities.
To create an Employee Group:
Go to Gateway of Tally > Payroll Info. > Employee Groups > Create (Under Single Group)
In the Employee Group Creation screen,
Select the required cost category and employee group as shown:
 
 
 Figure 6. Employee Group Creation screen
Employee Master
You can create individual employee masters with or without grouping them, under the Employee Group master.
Tally.ERP 9 allows you to enter employee contract, statutory, expat and other employee related details in the employee masters.
To enter the statutory, expat and contract details enable the following options:
Go to Gateway of Tally > F12: Configure > Payroll Configuration
Set the required options to Yes:
The Payroll Configuration screen is displayed as shown:
 
 Figure 7. F12: Payroll Configuration screen
 
 
You can also configure the above settings from the Employee Creation screen in Tally.ERP 9 by pressing F12: Configure.
Create the following Employee Masters:
Employee Name
Department
Date of Joining
Rahul Sharma
Administration
01-04-2012
Tania Sinha
R&D
01-04-2012
Rajesh Narayan
Sales
01-04-2012
Girish Chandan
Sales
01-04-2012
Go to Gateway of Tally > Payroll Info > Employees > Create (under Single Employee)
Specify the details in the respective fields
 
The completed Employee Creation screen will be displayed as shown:
 
 Figure 8. Employee Creation screen
 
 
 
When a employee leaves the job, you can enter the date and the reason for leaving in the alteration mode of the Employee Creation screen.
Similarly create the employee masters for the remaining employees.
Payroll Masters
Pay components are calculated based on payroll units, hence it is necessary to create the following payroll masters in Tally.ERP 9.
Payroll Units
 
Attendance/ Production Types
 
Payroll Units
A payroll unit is the unit of measurement based on which pay heads are calculated that can be classified into two types:
Simple Payroll units
 
Compound Payroll units.
 
Simple payroll units are individual units such as days, months, hours etc., while compound payroll units are a combination of two simple payroll units, e.g. hour of 60 minutes, month of 26 days. Essentially, pay components are calculated based on simple or compound payroll units.
Creation of Simple Payroll Units
Simple units are individual units and have no relationship with other unit of measurement. To create a simple unit in Tally.ERP 9,
Go to Gateway of Tally > Payroll Info. > Units (Work) > Create
The Type of unit is by default specified as Simple
 
Specify the required Symbol (e.g. Hrs, Kg etc.)
 
Enter the Formal Name for the unit (e.g. Hours, Kilograms etc.)
 
Specify the Number of Decimal Places
 
Complete the Unit Creation screen as shown:
 
 Figure 9. Simple Unit Creation screen
Similarly create Minutes as another simple unit.
Creation of Compound Payroll Units
Compound units are a combination of two simple units that have an arithmetical relationship with each other. To create hours of 60 minutes as a compound unit in Tally.ERP 9.
In the unit creation screen,
Press Backspace and select Compound as the Type of unit
 
Enter the First Unit, the Conversion and the Second Unit
 
Complete the Unit Creation screen as shown:
 
 Figure 10. Compound Unit creation screen
Attendance/ Production Types
Attendance/Production type masters are used to record the nature of attendance/production such as time and work rate. Tally.ERP 9 lets you create Attendance types based on time (such as Present and Absent) or based on work (such as Piece productions, Sales performance etc.).
Create the following Attendance types in Tally.ERP 9:
Name
Under
Attendance/Production Type
Period Type
Present
Primary
Attendance/ Leave with Pay
Days
Absent
Primary
Leave without Pay
Days
Overtime
Primary
Production
Hrs of 60 Mins
Creation of Attendance Type
Go to Gateway of Tally > Payroll Info. > Attendance/ Production Types > Create
Specify the details as shown:
 
 
 Figure 11. Attendance/Production Type Creation
Similarly, you can create the following attendance types in Tally.ERP 9:
Absent taking Leave Without Pay as the Attendance Type
 
Calendar month taking User Defined Calendar Type as the Attendance Type
 
Overtime Production Type taking Production as the Attendance Type
 
Pay Heads
Pay Heads broadly comprise of Earnings and Deductions from an employee's point of view, and are considered to be an expense and liability from an employer's point of view. In Tally.ERP 9 each pay head is created as an individual ledger account and is to be grouped under the respective Expense, Liabilities or Assets group. Tally.ERP 9 offers present Pay Head types such as:
Earnings for Employees
 
Deductions for Employees
 
Employees' Statutory Deductions
 
Employers Statutory Contributions
 
Employer's Other charges
 
Bonus
 
Gratuity
 
Loans and Advances
 
Reimbursements to Employees
 
Tax paid by Employer on Perquisites
 
 
 
In Tally.ERP 9, Pay Heads marked with the above preset pay head type will be available during Payroll processing. Any Pay Head type marked as Not Applicable will not be considered while processing Payroll.
I. Earning Pay Head
Create the following Earning Pay Heads in Tally.ERP 9:
Pay Head
Name
Pay Head
Type
Under
Affect Net
Salary
Name to Appear in
Pay-Slip
Use for
Gratuity
Calculation Type
Calculation of Period/
Production Type
Basic Pay
Earnings
for
Employees
Indirect
Expenses
Yes
Basic
Yes
On Attendance
Months
House Rent
Allowance
Earnings
for
Employees
Indirect
Expenses
Yes
HRA
No
As Computed
Value
-
Conveyance
Earnings
for
Employees
Indirect
Expenses
Yes
Conveyance
No
Flat Rate
Months
Overtime Pay
Earnings
for
Employees
Indirect
Expenses
Yes
Overtime
Pay
No
On Production
Overtime
Variable
Pay
Earnings
for
Employees
Indirect
Expenses
Yes
Variable
Pay
No
As User Defined
Value
-
While creating the above Pay Heads, set the option Set/Alter Income Tax Details to No in the Pay Head Creation screen.
i. Basic Pay Head Creation
Go to Gateway of Tally > Payroll Info. > Pay Heads > Create
In the Pay Head Creation screen,
Type Basic Pay as the Name of the Pay Head
Select the Pay Head Type as Earnings for Employees
Specify the group as Indirect Expenses in the Under field
Set the option Affect Net Salary to Yes
Enter the Name to appear in Payslip as Basic
Set the option Use for Gratuity to Yes and Set/Alter Income Tax Details to No
Select the Calculation Type as On Attendance
Select Present in the Attendance/Leave with Pay field
Select Months in the Calculation Period field
Select the calculation basis in the Per Day Calculation Basis field as User Defined
Specify Months of 26 Days
Select Normal Rounding as Rounding Method
Specify the Rounding Limit as 1
The completed Basic Pay Head Creation screen will appear as shown:
 
 Figure 12. Completed Basic Pay Head Creation screen
ii. House Rent Allowance Pay Head Creation
In the Pay Head Creation screen,
Type House Rent Allowance as the Name
Select Earnings for Employees in the Pay Head Type field
Specify the group as Indirect Expenses in the Under field and set Affect Net Salary to Yes
Enter the Name to Appear on Payslip as HRA
Set the options Use for Gratuity and Set/Alter Income Tax Details to No
Set the Calculation Type as As Computed Value. The Calculation Period will be pre-filled with Months by default
Select Rounding Method as Normal Rounding and the Limit as 1
Under Computation Info., select On Specified Formula under Compute
Select Basic Pay as the Pay Head in the Computation on Specified Formula screen
Enter the date as 1-Apr-2012 under Effective From field
Keep the From Amount and Amount upto fields as blank and select Slab Type as Percentage
Enter Value Basis as 40% and accept the voucher
 
The completed Pay Head Creation screen will appear as shown:
 
 Figure 13. Completed HRA Pay Head Creation screen
iii. Conveyance Pay Head Creation
Create the Conveyance Pay Head in the similar way as Basic Pay. However, select the Calculation Type as Flat Rate
The completed Conveyance Pay Head Creation screen will appear as shown:
 
 Figure 14. Completed Conveyance Pay Head Creation screen
iv Overtime Pay Head Creation screen
Create the Overtime Pay Head with Calculation Type as On Production and Production Type as Overtime.
v Variable Pay Head Creation
Similarly create Variable Pay Head with Calculation Type as User Defined Value.
II. Deduction Pay Heads
Go to Gateway of Tally > Payroll Info. > Pay Heads > Create
Create the following Deduction Pay Heads:
Pay Head
Name
Pay Head
Type
Statutory
Pay Type
Under
Affect Net Salary
Name to
Appear in
Payslip
Calculation Type
Computation
Method
Employee' s PF Contribution @ 12%
Employees' Statutory Deductions
PF Account
(A/c No. 1)
Current Liabilities
Yes
EPF @ 12%
As Computed Value
On Specified Formula
Employee's ESI Contribution
@ 1.75%
Employees' Statutory Deduction
Employee State
Insurance
Current
Liabilities
Yes
Professional Tax
As Computed
Value
On Specified Formula
(Basic Pay + House Rent
Allowance+ Conveyance +Overtime Pay (or Current Earnings Variable Pay)
Professional Tax
Employees' Statutory Deduction
Professional Tax
Current
Liabilities
Yes
Professional Tax
As Computed
Value
On Current Earnings Total
Employee's PF Contribution @12% Pay Head Creation
In the Pay Head Creation screen:
Type Employee's PF Contribution @ 12% as the Name of the Pay Head
Select Employees' Statutory Deductions as the Pay Head Type and PF Account (A/c No. 1) as
the Statutory Pay Type
Select the group as Current Liabilities in the field Under
Set Affect Net Salary to Yes
Specify EPF @ 12% in the field Name to Appear in Payslip
The Calculation Type field is updated with As Computed Value by default
Select Normal Rounding as Rounding Method and set the Limit as 1
Select On Specified Formula as the Compute method
Select Basic Pay Head in the Computation on Specified Formula screen
Enter the Effective From date as 1-04-2012 and 6,500 in the Amount Upto column 
Select Percentage in the Slab Type column and specify 12% as the Value Basis percentage
Enter to accept the Amount Upto as 0 (blank) and select the Slab Type as Value 
Enter 780 in the Value Basis field and accept the Pay Head Creation screen
 
The completed Employee's PF Contribution @ 12% Pay Head Creation screen appears as shown:
 
 
 Figure 15. Completed Employee's PF @ 12% Pay Head Creation screen
Employee's ESI Contribution @ 1.75% Pay Head Creation
Create the Employee's ESI Contribution @ 1.75% Pay Head in the similar manner as creation of Employee's PF Contribution @ 12% Pay Head.
 
Select Employee State Insurance in the Statutory Pay Type field
 
In the Computation On Specified Formula screen, select Add Pay Heads Basic Pay, House Rent Allowance, Conveyance and Overtime in the Pay Head Column
 
Specify the Effective From date as 1-Apr-2012, the Slab Type as Percentage and the Value Basis as 1.75%
 
The completed Employee's ESI Contribution @ 1.75% Pay Head Creation screen appears as shown:
 
 Figure 16. Completed Employee's ESI Contribution @ 1.75% Pay Head Creation screen
Professional Tax Pay Head Creation
Similarly create Professional Tax Pay Head by selecting On Current Earnings Total in the Compute field and specify the required slab rates.
The completed Professional Tax Pay Head Creation screen appears as shown:
 
 Figure 17. Completed Professional Tax Pay Head Creation screen
Gratuity
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. Gratuity is calculated as follows:
 
Gratuity is calculated at the end of each financial period to assess the possible liability of the company towards its employees. We need to create Gratuity Expenses (Provisional) Account in order to get provisional Gratuity liability report for the employer at any given period.
Gratuity Pay Head Creation
Ledger
Pay Head Type
Under
Gratuity Expenses (Provisional)
Gratuity
Provisions (Current Liabilities)
In the Pay Head Creation screen,
Enter the Name of the Pay Head as Gratuity Expenses (Provisional)
Select Gratuity in Pay Head Type field. Enter the Slab Rate details in the Gratuity Calculation
sub-screen
In the Slab Rate details for Gratuity Calculation screen,
Specify Gratuity Days of a Month as 26
 
Enter 1 and 60 (months) in the From and To fields under the Number of Months column
 
Specify 0 in the field Eligibility days for Gratuity Calculation per year
 
Similarly, select 61 and 120 in the From and To fields
 
Specify 15 in the Eligibility days for Gratuity Calculation per year field
 
Press Enter to accept 121 in the field From
 
Specify 15 in the field Eligibility days for Gratuity Calculation per year
 
Specify the group as Provisions (Current Liabilities) in the field Under and press Enter
 
Ensure that the option Set / Alter Income Tax Details is set to No
The completed Gratuity Pay Head Creation screen will appear as shown:
 
 Figure 18. Completed Gratuity Expenses Pay Head Creation screen
Salary Details Setup
The Salary Details masters contain information on the Employee Group/ individual employee pay structure, comprising both earnings and deductions pay components for the applicable period. Pay structure constituting the Pay Heads and the basis of calculation should be similar for the employees falling under the same group, but pay values need not be same. Tally.ERP 9 lets you to set up individual employee salary details with all parameters applicable for employee groups.
To define Salary Details for employees,
Go to Gateway of Tally > Payroll Info. > Salary Details > Create
Select Rahul Sharma from the List of Employees.
In the Salary Details screen,
The Effective date is entered as 01-04-2012 by default based on the Date of Joining entered in the Employee Master
 
Select Basic Pay as the Pay Head from the List of Pay Heads and specify the Rate as 7,000
 
The Attendance units, Pay Head Type and Calculation Type appear by default, based on the pay head definitions
 
Select House Rent Allowance as the second Pay Head
Select Conveyance as the next Pay Head, specify 500 as Rate
Select Overtime Pay as the Pay Head and specify 40 as the Rate
Select Variable Pay as the Pay Head
Select Professional Tax against the Pay Head
Select Employee's PF Contribution @ 12% and Employee's ESI Contribution @ 1.75% as Pay Heads
Select the Gratuity Expenses (Provisional) ledger
The completed Salary Details Creation screen for Mr. Rahul Sharma is displayed as shown:
 
 Figure 19. Completed Salary Details screen
Similarly, create the pay structure for other employees as per the details specified in the table as shown:
Pay Head
Tania Sinha
Rajesh Narayan
Girish Chandan
Basic Pay
12,000
20,000
18,000
House Rent Allowance
40%
40%
20%
Conveyance
-
2,500
2,000
Overtime Pay
-
150
150
Variable Pay
User-Defined
Professional Tax
Applicable as Slab Rates
Employee's PF Contribution @ 12%
Applicable as Slab Rates
Employee's ESI Contribution @ 1.75%
Applicable as Slab Rates
Gratuity Expenses (Provisional)
Applicable as Slab Rates
You can create Salary Details for a group such as Sales and inherit the details for the employees under that group.
To create Salary Details for a Group:
Go to Gateway of Tally > Payroll Info. > Salary Details > Create
Select Sales from the List of Group / Employees
Select the Pay Heads from the List of Pay Heads applicable to this group
Leave the Rate field empty if there is no standard rate
To set the Salary Details for an employee to Sales group, follow the steps as given:
Select the required employee name from the List of Group / Employees
Enter 1-04-2012 in the Effective From date field
Select Copy From parent Value from the Start Type options under Pay Head
The Pay Structure (comprising of Earning & Deductions pay heads) defined for the respective Group is pre-filled automatically
Enter the values for each Pay Head for the employee, as per the details mentioned in the table
Press F12: Configure, set the option Allow to Override Slab Percentage to Yes, to enter the respective user-defined pay rates to compute HRA
The completed Salary Details screen of Girish Chandan is displayed as shown:
 
 Figure 20. Completed Salary Details- Girish Chandan screen
Processing Payroll in Tally.ERP 9
Payroll Processing comprises of the following activities:
Recording of Attendance (on time/work)
 
Processing Payroll Vouchers
 
Payment of Salaries
 
To record these three payroll transactions, Tally.ERP 9 comes with default preset payroll vouches namely Attendance Voucher, Payroll Voucher and Payment Voucher. These voucher are used to capture information related to payroll processing.
Attendance Vouchers
An attendance voucher is used to record the attendance data and production units of the employees. Tally.ERP 9 offers the flexibility to record a single attendance/production voucher per employee per day or collectively for a month. You can also record multiple attendance vouchers in any other variation for all employees. In Tally.ERP 9, the auto-fill facility (Alt+A) is used to pre-fill the required Attendance/Production types data for the selected employee group/ employee for the specified period.
Illustration 1:
On 30-04-2012, the attendance records of Universal Enterprises is as shown in the table:
Attendance/ Production Types
Rahul Sharma
Tania Sinha
Rajesh Narayan
Girish Chandan
Present Days
26
18
20
22
Overtime Hours
720 Mins
-
360 Mins
-
Enter separate attendance vouchers to record Present Days and Overtime Hours for the above scenario.
Go to Gateway of Tally > Payroll Vouchers > Press Ctrl+F5 for Attendance Voucher
In the Attendance Voucher Creation screen,
Press F2 and specify the date as 30-4-2012
Press Alt+A (Attendance Auto Fill) to pre-fill employee payroll details
In the Attendance Auto Fill screen,
Specify the Voucher Date and select Primary Cost Category as Cost Category
 
Select All Items as Employee/ Group
 
Select Present as Attendance Type in the Attendance/ Production Type field
 
Specify the Default Value to Fill as 0 and accept the changes in the screen
 
The employees belonging to the respective Employee Group are displayed automatically in the Attendance Voucher Creation screen. Specify the number of days present in the Value column, as given in the table
The completed Attendance Voucher Creation to record Present Attendance is displayed as shown:
 
 Figure 21. Completed Present Attendance Voucher screen
In the same way, create an attendance voucher for Overtime hours. You can change any attendance value for a specific employee in the Voucher Alteration mode.
 
 While using Auto fill option, separate attendance vouchers need to be entered for attendance on Work and attendance on Production.
 Negative attendance of employees need to be recorded if Absent is opted as Attendance type.
 Days with Loss of Pay (LOP) are taken as a Deductible with respect to the Earnings Pay Head type and, as a Payable with respect to the Deductions Pay Head type.
Payroll Vouchers
A payroll Vouchers enables you to compute all the employee-related transaction such as earnings and deductions for a particular Pay Head. Earnings and Deductions are computed based on the definitions specified in the Payroll masters. Tally.ERP 9 enables you to pass payroll vouchers individually for a single employee or even an entire employee group by using the Auto-Fill (Alt+A) facility.
You can disburse the salaries to employees in any of the following modes using Tally.ERP 9:
Direct Remittance- salary can be disbursed in cash or by cheque
 
Bank Transfer- the salary is transferred to the employee's bank account directly and the list of the disbursement is printed separately
 
Cash or Direct Remittance
Illustration 2:
On 30-04-2012 Universal Enterprises processed Payroll for all its employees and disbursed Variable Pay to the following employees.
Particulars
Rahul Sharma
Tania Sinha
Rajesh Narayan
Girish Chandan
Variable Pay
1,500
-
1,000
-
Create a Payroll Voucher to process Variable Pay
Go to Gateway of Tally > Payroll Vouchers > Ctrl+F4: Payroll
Press Alt+A (Payroll Auto Fill feature) to pre-fill the employee payroll details
In the Payroll Auto Fill screen,
Select User Defined in the Process for field
 
Enter the From and the To date for the
 
Select the required Employee Category
 
Select the Employee/ Group from the List of Employees/Group
 
Select the required Payroll Ledger from the List of Ledger Accounts
 
Specify the Variable Pay for Rahul Sharma and Rajesh Narayan.
The completed Payroll Voucher Creation screen is displayed as shown:
 Figure 22. Completed Payroll Voucher Creation screen-Variable Pay
Similarly, enter a payroll voucher to process the salary for employees by selecting Salary in the Process for field in the Payroll Auto Fill screen.
The completed Salary Payroll Voucher Creation screen will be displayed as shown:
 
 Figure 23. Completed Payroll Voucher Creation screen-Salary
Bank Transfer
Salaries can be disbursed directly to the employees by transferring their salaries directly to their bank account by intimating the bank through a payment advice. Tally.ERP 9 offers predefined salary process that enables processing salaries through bank transfers.
Illustration 3:
On 31-05-2012, Universal Enterprises processed salaries payable to their employees for the month of May through bank transfer. The attendance records displayed the following details:
Attendance / Production Types
Rahul Sharma
Tania Sinha
Rajesh Narayan
Girish Chandan
Present Days
25
20
26
21
  Overtime Hours
-
-
-
120 Mins
(2hrs x 60mins)
The details of the Variable Pay disbursed for the month of May is as follows:
Particulars
Rahul Sharma
Tania Sinha
Rajesh Narayan
Girish Chandan
Variable Pay
500
-
-
1,200
Create Attendance Voucher
Create the Attendance Voucher for the Present Days and Overtime Hours for the employees as per the table in the example.
Create Salary Payable Ledger
Create the Salary Payable Ledger as per the following table, before passing the salary payment voucher:
Ledger
Pay Head Type
Under
Salary Payable
Not Applicable
Current Liabilities
Create Payroll Voucher to process Variable Pay
Create the Variable Pay Payroll Voucher to specify the variable pay for the employees as per the table given in the example. In the Payroll Auto Fill screen select Salary Payable ledger in the Payroll Ledger field.
Create Payroll Voucher for processing Salary
Create the Payroll Voucher for processing the salary by using the Payroll Auto Fill feature. In the Payroll Auto Fill screen select Salary Payable ledger in the Payroll Ledger field.
After you process the salary payroll voucher, the salary for the month of May 2012 gets transferred to the Salary Payable ledger. The amount is reversed at the time of payment of salaries.
Salary Payment/Disbursement
A Payment Voucher in Tally.ERP 9 can be used to disburse salaries to employees. After the salary is transferred to the Salary Payable ledger, a regular payment voucher can be passed or you can automate using the preset salary payment process with the Auto Fill feature offered in Tally.ERP 9.
Illustration 4:
On 31-05-2012, Universal Enterprises paid the salaries due for the month of May 2012
Create the necessary bank accounts before processing the salary payment.
Go to Gateway of Tally > Accounting Vouchers > Press F5: Payment Voucher
Press F12: Configure and ensure that the option Use Single Entry mode for Pymt/Rcpt/Contra is set to Yes
In the Payment Voucher screen, press F2 and change the voucher date to 31-05-2012
Pre-fill the employee Payroll details by pressing Alt+A
In the Payment Auto Fill screen
Select Salary Payment in the Process for field
Specify the date, employee category, employee group
Select the required bank name in the Bank/ Cash Ledger field
Select the required payroll ledger in the Payroll Ledger field
Enter the bank details in the Bank Allocations for screen and enter the narration of the transaction in the Narration field
 
The completed Payment Voucher screen will be displayed as shown:
 
 Figure 24. Completed Payment Voucher screen
 
You can generate a separate payroll voucher for salary payable and payment, in case a partial payment is made to a particular group of employees. The payment amount to be given to the employees can be modified when required in Tally.ERP 9.
Accounting for PF Contributions
The Employees' Provident Funds and Miscellaneous Provisions Act is a social security legislation which administers provident fund, family pension and insurance to employees. The Act covers three schemes namely: PF (Provident Fund scheme), EPS (Employees' Pension Fund Scheme), EDLI (Employees Deposit Linked Insurance scheme).
Under the Employees' Provident Fund scheme, both the employees and employer contribute to the fund at the rate of 12% of the basic wages, dearness allowance, cash value of food concession and retaining allowance (if any), payable to employees per month. The rate of contribution is 10% in the case of following establishments:
Any covered establishment with less than 20 employees
 
Any sick industrial company as specified in the relevant section of Sick Industrial Companies (Special Provisions) Act, 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction
 
Any establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and
 
Any establishment engaged in manufacturing of (a) Jute (b) Breed (d) Coir and (e) Guar Gum Industries/ Factories
 
Employees' Pension Scheme
The Employers' contribution of 8.33% is credited to the fund of Pension Scheme. The balance of 3.67% (1.67% in case the contribution is 10%) is diverted toward the employee's name in Provident Fund account. The contribution of 8.33% is applicable on a maximum salary of Rs. 6,500.
Employees' Deposit Linked Insurance scheme
The scheme is designed to provide life insurance benefits to employees who are already covered under PF/EPS. The employer has to pay contribution of 0.50% from the total wages of employee. In addition, administrative charges of 0.1% of total wages are incurred.
To configure the statutory features such as EPF, ESI etc.:
Go to Gateway of Tally > F11: Statutory & Taxation
Illustration 5:
On 30-04-2012, Universal Enterprises processed Provident Fund contributions for the month of April 2012 and paid the amount in full to EPFO.
Follow the steps as given to process the employer's contribution towards Provident Fund:
Create Employer PF Contribution Masters
 
Alter/Modify Salary Details
 
Processing Employer PF Contribution
 
Processing PF Admin Expenses
 
Payment of Provident Fund
 
Create Employer PF Contribution Masters
The following ledgers need to be created for appropriate reporting and accounting in Tally.ERP 9:
Employer Contributions Pay Head
 
Employer PF Admin Charges
 
PF Payable Ledger
 
PF Admin Expenses Ledger
 
Employee Contributions Pay Head
Pay Head
Name
Pay Head Type
Statutory
Pay Type
Under
Affect Net
Salary
Calculation
Type
Employer
EPS @ 8.33%
Employer's Statutory
Contributions
EPS Account
(A/c No. 10)
Indirect Expenses
No
As Computed
Value
Employer
EPF Contribution @ 3.67%
Employer's Statutory
Contributions
PF Account
(A/c No. 1)
Indirect Expenses
No
As Computed
Value
 
Employer Contribution EPS @ 8.33% Pay Head Creation
Go to Gateway of Tally > Payroll Info. > Pay Heads > Create
In the Pay Head Creation screen,
Type the Name of the Pay Head as Employer EPS @ 8.33%
Select Employer's Statutory Contributions in the Pay Head Type field
In the Statutory Pay Type field, select EPS Account (A/c No. 10)
Select the Group as Indirect Expenses and set Affect Net Salary to No
The Calculation Type and Calculation Period field is pre-filled with As Computed Value and Months respectively
Select the Rounding Method as Normal Rounding and the rounding Limit as 1
Select On Specified Formula in the Compute field
In the Computation On Specified Formula screen,
Select Basic Pay for the Add Pay Head function from the List of Pay Heads
 
In the Pay Head Creation screen specify the Effective From date as 1-4-2012 and the Amount Upto as 6,500
Select Percentage as the Slab Type from the List of Slabs and specify 8.33% in the Value Basis field
The value in the From Amount column is pre-filled with 6,500. Skip the Amount Upto field and leave it blank
Select Value as the Slab Type and specify 541 in the Value Basis field
The completed Employer EPS @ 8.33% Pay Head Creation screen is displayed as shown:
 
 Figure 25. Completed Employer EPS Pay Head Creation Screen
Employer Contribution EPF @ 3.67% Pay Head Creation
Similarly, create Employer Contribution EPF @ 3.67% Pay Head by selecting Statutory Pay Type as PF Account (A/c No. 1). In the Computation on Specified Formula sub-screen,
Select Employee's PF Contribution @ 12% from the List of Pay Heads as the Add Pay Head function
 
Select Subtract Pay Head in Function and under Pay Head column select Employer EPS @8.33% from the List of Pay Heads
 
In the Pay Head Creation screen, enter Effective From date as 1-04-2012, Slab Type as Percentage and Value Basis as 100%
 
You can also define the criteria for computation of Employer's PF Contribution @ 3.67% Pay head, by selecting Basic Pay in the Computation on Specified Formula sub-screen. and defining the percentage as 3.67% in the Pay Head Creation screen.
Employer PF Admin Charges
Pay Head Name
Pay Head
Type
Statutory
Pay Type
Under
Affect Net
Salary
Calculation Type
PF Administrative
Charges
Employer's Other Charges
Admin
Charges (A/c No. 2)
Current Liabilities
No
As Computed Value
ELDI Contribution
@ 0.5%
Employer's Other Charges
EDLI Contri-
bution (A/c No. 21)
Current Liabilities
No
As Computed Value
ELDI Administrative Charges @ 0.01%
Employer's Other Charges
EDLI Admin
Charges (A/c No. 22)
Current Liabilities
No
As Computed Value
PF Administrative Charges @ 1.10% Pay Head Creation
Go to Gateway of Tally > Payroll Info. > Pay Heads > Create
In the Pay Head Creation screen,
Type the Name of the Pay Head as PF Administrative Charges @ 1.10%
Select Employer's Other Charges in the Pay Head Type field
Select Admin Charges (A/c No. 2) in the Statutory Pay Type field
Specify Current Liabilities group in the Under field and set Affect Net Salary to No
The Calculation Type is automatically pre-filled with As Computed Value and Calculation Period as Months
The Rounding Method is defaulted to Normal Rounding and Limit as 1
On PF Gross is defaulted automatically in the Compute field
Enter the Effective From date as 1-04-2012 and the Amount Upto column as 6,500
Specify the Slab Type as Percentage and enter 1.10% in the Value Basis field
The completed PF Administrative Charges @ 1.10% Pay Head Creation screen is displayed as shown:
 
 Figure 26. Completed Pay Head Creation - PF Admin Charges
EDLI Contribution @ 0.5% Pay Head Creation
Similarly, create EDLI Contribution @ 0.5% Pay Head
Specify the Statutory Pay Type as ELDI Contribution (A/c No. 21)
Under Computation Info. section,
Enter the Effective From date as 1-04-2012 and the Amount Upto as 6,500
 
Select the Slab Type as Percentage and enter 0.50% under the Value Basis column
 
EDLI Administrative Charges @ 0.01% Pay Head Creation
Similarly, create EDLI Administrative Charges @ 0.01% Pay Head
Specify the Statutory Pay Type as ELDI Administrative Charges (A/c No. 22)
Set the Minimum Rs. 2/Employee field to No
Under Computation Info. section,
Enter the Effective From date as 1-04-2012 and the Amount Upto as 6,500
 
Select the Slab Type as Percentage and enter 0.01% under the Value Basis column
 
PF Payable Pay Head Creation
Create the PF Payable Pay Head to process the Employer's PF Contribution
Go to Gateway of Tally > Payroll Info. > Pay Heads > Create
Type PF Payable in the Name field
In the Pay Head Type field select Not Applicable
Specify the Group as Current Liabilities in the Under field
PF Admin Expenses Ledger Creation
Similarly, create the PF Admin Expenses ledger to process ELDI Contribution, ELDI Admin Expenses, and PF Admin Charges as suggested in the following table:
Go to Gateway of Tally > Accounts Info. > Ledgers > Create
Ledger
Under
PF Admin Charges
Indirect Expenses
Salary Details Setup
Once the employer contributions pay head are created, they should be incorporated into the employee's salary to include these pay heads while processing the salary. The Salary Details of the employees need to be altered in order to include the Employer Contributions pay heads. This will in-turn automate the PF computation depending on the monthly payments made to the employees.
While including the Employer Contributions Pay Heads in the Salary Details master, the order in which the Pay Heads should be incorporated should be on the basis of the calculation criteria.
 
To alter and update the employee's Salary Details,
Go to Gateway of Tally > Payroll Info. > Salary Details > Alter
Select the required employee from the List of Groups / Employees
Add the Pay Heads Employer EPS @ 8.33% and Employer EPF @ 3.67%
The completed Salary Details Alteration screen for Rahul Sharma is as shown:
 
 Figure 27. Salary Details Alteration Screen- Rahul Sharma
Similarly, include employer PF pay heads in the Salary Details masters for all the employees.
Processing Employer PF Contribution
You are required to process Employer PF Contributions and PF Admin Charges separately in Tally.ERP 9. You can then make the payment towards PF comprising of Employees' PF Contribution, Employer PF Admin Expenses through a combined challan.
To process the Provident Fund, you need to create a payroll voucher.
Go to Gateway of Tally > Payroll Vouchers
Press Ctrl+F4 for Payroll Voucher
Press F2, enter the date as 30-04-2012
Press Alt+A (Payroll Auto Fill) to automate the employee payroll details
In the Payroll Auto Fill sub-screen,
Select PF Contribution from the Process List
 
Specify the From and To dates as 1-04-2012 and 30-04-2012 respectively
 
Select Primary Cost Category in the Employee Category field
 
Select All Items in the Employee/Group field
 
From the List of Ledger Accounts in the Payroll Ledger field
 
The values for PF Contributions are pre-filled in the Payroll Voucher screen
The completed Payroll Voucher for PF Contribution is as shown:
 
 Figure 28. Payroll Voucher Creation - PF Contribution
Processing PF Admin Expenses
Illustration 6:
On 30-04-2012, Universal Enterprises processed PF Admin Expenses for the month April 2012.
Create Journal Voucher to process the PF Admin Expenses
Go to Gateway of Tally > Accounting Vouchers > Press F7: Journal Voucher
Specify the voucher date as 30-04-2012
Press Alt+A (Other Charges Auto Fill) to pre-fill Employer's Other Charges details
Enter the From and To dates as 1-04-2012 and 30-04-2012
 
Select the Employee Category as Primary Cost Category and All Items in the Employee/Group field
 
Select PF Admin Expenses ledger in the Expense Ledger field
 
Select PF Admin Charges @ 1.10% ledger in the Admin Charges (A/c No. 2) field
 
Similarly, select EDLI Contribution @ 0.5% and EDLI Admin Charges @ 0.01% in the EDLI Contribution (A/c No. 21) and EDLI Admin Charges (A/c No. 22) fields respectively
 
In the Employer PF Expenses voucher creation screen type the details of the transaction in the Narration field
The completed Employer PF Expenses voucher is as shown:
 
 Figure 29. Completed PF Expenses Voucher screen
Payment of Provident Fund
Once the Employee and Employer contributions are processed in the manner as discussed in the earlier sections, the total amount payable to EPFO is accumulated separately in three ledger accounts namely: PF Payable Account (Employer Contributions), Employee PF Contributions and the PF Admin Charges ledger, in Tally.ERP 9. Hence a payment voucher is required to be passed when making a payment to the EPFO.
Illustration 7:
On 30-04-2012, Universal Enterprises made the payment for EPF, EDLI Admin Expenses, EDLI Contribution, and PF Admin Charges for the month of April 2012.
To process the payment of PF,
Create PF payment voucher:
Go to Gateway of Tally > Accounting Vouchers > F5: Payment Voucher
Press F2, specify 30-04-2012 as the Voucher Date
Press Alt+A (Payroll Auto Fill) to pre-fill Provident Fund details
Select PF Challan in the Process for field
 
Enter the From and To date as 1-04-2012 and 30-04-2012 respectively
 
Specify the Voucher Date as 30-04-2012. (This field is pre-filled if the voucher date is specified during voucher entry.)
 
Select Primary Cost Category as the Employee Category and All Items in the Employee/Group field
 
Select HDFC Bank in the Bank/Cash ledger field and PF Payable ledger in the Payroll ledger field
 
In the Payment Voucher Creation screen, set the option Provide Details to Yes. In the Provide Details sub-screen,
Specify the Cheque/DD No. as 547253 and the Cheque/DD Date as 30-04-2012
 
Specify the Depositor Name, the Bank Name and the BSR Code
 
Enter the Transfer Voucher Date as 30-04-2012 and Transfer Voucher Number as 11
 
In the Payment Voucher Creation screen, type the details of the transaction in the Narration field
In the Bank Allocations for screen, enter the Received from, Transaction Type, Amount, Instrument No. and Date details (The Bank Allocations details are pre-filled by default)
The completed PF Payment Voucher screen is as shown:
 
 Figure 30. Completed PF Payment Voucher screen
Print PF Challan
From the Payment Voucher screen, after accepting the PF Payment Voucher,
Press Page Up key, the Alt+P for Voucher Printing
Press Backspace to Alter the Voucher Printing screen
Select Yes in the Print Challan field
Enter Total No. of Subscribers (A/c.1), the Total No. of Subscribers (A/c.10), the Total No. of Subscribers (A/c.21)
The completed PF Voucher Printing screen appears as shown:
 
 Figure 31. PF Voucher Printing Screen
The printed PF Combined Challan of Universal Enterprises for the month of April 2012, is shown:
 
 Figure 32. Printed PF Payment Challan
Accounting for Employer ESI Contributions
ESI Contribution constitutes of the amount payable by the employee as well as the employer and is the amount payable to the corporation by the principal employer. The ESI contributions constituting the employers' share and the employees' share should be calculated and remitted by the employer on or before 21st of the subsequent month. The employer's share of contribution @ 4.75% in respect of every employee should be paid by the principal employer, and the employee's share @ 1.75% should be recovered by deducting from their wages for the respective salary period. In case the daily average wage of an employee is Rs. 70, he is exempt from payment of his share of ESI contribution. The employer however, has to pay the employers' share of 4.75% of the salary payable to the employees.
The statutory features in Tally.ERP 9 can be configured in F11: Statutory & Taxation (F3) Features.
Illustration 8:
On 01-06-2012, the list of new joinees and their salary details are as given:
 
Employee Name ,Department ,Date of Joining
 
Priya ,Administration ,05-06-2012
 
Brijesh
Sales
08-06-2012
 
The Salary details for the two new employees is listed in the table:
 
Pay Head
Priya
Brijesh
 
Basic Pay
4,000
6,000
 
House Rent Allowance
40%
40%
 
Conveyance
800
700
 
Overtime Pay
Variable Pay
User-Defined
 
Gratuity Expenses (Provisional)
Only for reporting purpose
 
Employee's PF Contribution @ 12%
Application based on Slab Rates
 
Employee's ESI Contribution @ 1.75%
Application based on Slab Rates
 
Professional Tax
Application based on Slab Rates
 
Employer EPS @ 8.33%
Application based on Slab Rates
 
Employer EPF @ 3.67%         
Application based on Slab Rates
 
Create the two new employees and their salary details. Process their salaries, and PF Contribution for the month of June 2012.
To process the employer contribution for Employees' State Insurance, follow the steps as given:
Create Employer ESI Contribution Masters
Alter/Modify Salary Details
Processing Employer ESI Contribution
Payment of ESI
Creating Employer ESI Contribution Masters
For appropriate reporting and accounting of Employees' State Insurance (ESI) the Employer and Employee's contribution need to be recorded separately in Tally.ERP 9.
Create the ledgers as mentioned in Tally.ERP 9
Employer Contribution Pay Head
 
ESI Payable Ledger
 
Create Employer ESI Contribution @ 4.75% Pay Head
Pay Head Name
Pay Head Type
Statutory Pay Type
Under
Affect Net Salary
Calculation
Type
Employer ESI @ 4.75%
Employer Statutory
Contributions
Employee State
Insurance
Indirect Expenses
No
As Computed
Value
Go to Gateway of Tally > Payroll Info. > Pay Heads > Create
Create the Employer ESI @ 4.75% Pay Head in the similar method as narrated in the previous scenarios.
In the Pay Head Creation screen,
 
Select Pay Head Type as Employer's Statutory Contributions and select Statutory Pay Type as Employee State Insurance
 
Select Indirect Expenses in the Under field. The Calculation Type and Calculation Period are pre-filled automatically.
 
Select the required Rounding Method and Limit
 
Select On Specified Formula as the computation method under the Compute field
 
 In the Compute sub-screen,
 
Select Basic Pay, House Rent Allowance, Conveyance and Overtime Pay Heads in the Add Pay Head function respectively
 
In the Pay Head Creation screen,
 
Specify the Effective From date, the Slab Type and Value Basis percentage
 
The completed Employer ESI @ 4.75% Pay Head Creation screen will appear as shown:
 
 Figure 33. Completed Employer ESI Pay Head
 
Create ESI Payable Ledger
Create the ESI Payable Ledger as indicated in the table shown:
Ledger Name
Pay Head Type
Under
ESI Payable
Not Applicable
Current Liabilities
Salary Details Setup
The employer contribution Pay Head ledgers should be included in the salary details of the employee, for automated employer contribution calculation based on monthly payments to the employees. Alter the salary details of the employees to include the employer contributions pay heads.
To Alter the Salary Details of an Employee,
Go to Gateway of Tally > Payroll Info. > Salary Details > Alter
Select the required employee from the List of Groups/Employees
 
Tab down to the last line and select Employer ESI @ 4.75% Pay Head
 
The completed Salary Details Alteration screen for Brijesh appears as shown:
 
 Figure 34. Salary Details Alteration screen
Similarly, update the Salary Details for all the other employees to include Employer ESI @ 4.75 Pay Head.
 
While, including the Employer Contribution Pay Heads in the Salary Details master, the order of precedence in which the Pay Heads are included on the basis of their calculation criteria i.e.,
 Earning Pay Heads
 Deduction Pay Heads
 Employee PF Contribution Ledgers
 Professional Tax or Income Tax Ledger (if any)
 Employer PF Contribution Ledgers
 Employer ESI Contribution Ledgers
 Gratuity (Gratuity is calculated on Basic Pay + DA, hence Gratuity Pay Head can be sequenced in the Salary details of an Employer in any order).
Illustration 9:
On 30-06-2012, the attendance records of Universal Enterprises displayed the following details:
Attendance/Production Types
Brijesh
Priya
Rahul Sharma
Tania Sinha
Rajesh Narayan
Girish Chandan
Present Days
23
25
24
20
22
26
Overtime Hours
120 Mins
360 Mins
720 Mins
360 Min

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