Managing salary components

Modified on Thu, 18 Apr 2024 at 06:25 PM

Available for plans : Foundation, Growth, Strength.

Employee salaries are typically divided into multiple components. Some of these components are recurring or added to the salary every month. Some of these are also ad-hoc components that are usually one-off or not regularly included in the salary structures.

TABLE OF CONTENTS

Adding a salary component to the global repository
Adding a recurring salary component
Adding an Ad-hoc salary component
Adding the component to a pay group
Configuring a salary component in a pay group
Deleting a component from the pay group
Editing or deleting a salary component in the global repository

Keka allows you to create and add custom salary components. In this document, we will look at how you can create new salary components, make it available for specific pay groups, and more.

The process

In the Keka HR Portal, salary components have a specific flow to them. Salary components both ad-hoc and recurring should be added to the global repository of salary components first and then added to the pay group. Finally, it can be assigned to the various salary structures you are creating for each pay group.

Let’s now see how you can add or edit a salary component in the global repository and how it can be added to the pay group.

Adding a salary component to the global repository

There are 2 types of salary components in Keka.

Recurring components: These are components paid to the employee in each pay cycle, irrespective of employee performance or any other criteria. These are components such as basic, HRA, Dearness Allowance etc. These can be taxable, or tax exempted up to a limit as defined by the Income Tax regulations.

Some components that are common and mandatory for all salary structures will already be defined by the system. Such components will not be open to modification and the same will be indicated with the help of lock icons.

Ad–hoc components: These are salary components added to or deducted from the employee’s salary as and when needed. These include components like Joining Bonuses, Salary Advance Recovery, Referral bonuses, Asset damage recovery, etc.

Let’s see how you can add recurring and ad-hoc components.

Adding a recurring salary component

To add a recurring salary component to a pay group, navigate to Payroll (1)>> Settings (2).

Go to the Components (3) tab and select Recurring Components (4).

Click on Add New Component to begin adding the new component. This will open the Add New Salary Component window.

You can select the appropriate Component Type, add a Component Name, enter the Maximum Limit Per Annum, add a Description, and select if the component is tax exempted.

Here’s a brief explanation of the various fields on this window.

Component type

There are various component types included in Keka by default which you can choose from. Here are the various component types.

Allowance – Allowances are recurring components that are paid to the employee every month. These include payments like the House Rent Allowance (HRA), Leave Travel Allowance (LTA), Professional allowance etc.
Reimbursable components – These are components reimbursable by the employee based on their usage. These components are shown on Form 16 of the employee as a separate line item and will be marked as exempted or not exempted and will also be a part of income tax calculations. Employees need to submit proof of expenditure to claim these reimbursable components. The portion of the reimbursable components not claimed will be paid out to the employee as a taxed component.
Deductions – Any component of the employee salary that is deducted every month will be categorized as deductions. These do not include statutory deductions such as Provident Fund (PF), Employee’s State Insurance Scheme (ESI), or Labor Welfare Fund (LWF) deductions. Meal vouchers and food coupons, Life insurance and medical insurance premiums etc. are examples of deductions.
Reimbursements- Reimbursements are components that the employees can claim based on their expenditure in this category up to the yearly limit specified. The amount that was paid as reimbursements will not be shown on Form 16. The unpaid portion of this reimbursement will be added to the special allowance. Any reimbursement that shouldn’t be shown on Form 16 can be categorized as reimbursement while any component that can be shown on Form 16 should be categorized as reimbursable components.

Select the option from the above options to indicate the correct component type.

Maximum limit per annum

The Maximum Limit Per Annum field allows you to set a maximum value for this component. No employees will be paid above this maximum value.

Tax implications and proof requirements

You can set a component as tax-exempt per the income tax regulations. If you choose to mark a component as tax-exempt, you will have to select an income tax section according to which this component has been declared as tax-exempt. You will also have to enter the maximum limit up to which tax exemption can be claimed.

You can also select the checkbox Requires submission of document proof (or bills) to claim for tax exemption if you want your employees to submit bills or documents when raising a claim for reimbursements. This option is not available when you are adding a deduction component.

After you've entered all the necessary details, click Add Component to finish adding the component.

Adding an Ad-hoc salary component

Select the Ad-hoc Components tab from the Components tab. Click on the arrow next to the Add Ad-hoc allowances button and select if you want to add an Ad-hoc Allowance, Ad-hoc deduction, or Bonus.

If you are adding an Ad-hoc Allowance, the Add Ad-hoc Allowance window opens depending on the option you have chosen. You can then add a Name for the component, add a Description, and select if the component is Tax Exempted.

If the component is tax-exempt, you will also have to select the income tax section and the maximum limit of exemption.

When you are adding a new Ad-hoc Deduction, in the Add New Ad-hoc Deduction window, you will be prompted to add a Name for the component and add a Description if needed.

You can also select if the deduction affects the employee's gross salary. This means this amount will be deducted from the employee's gross salary when calculating tax.

If you add a new bonus, you will only have the option to enter a Name and a Description for the same.

Once you are done adding the details, click Add Allowance (Or Add Deduction or Add Bonus) to complete adding the new component.

Adding the component to a pay group

Now that you have created the components in the system, it is time to add these components to the pay group.

Go to Payroll (1) >> Settings (2).

In the Pay Groups (3) tab, select the pay group to which you want the new salary component added. Click on the Configure (4) icon.

Go to the Salary Components tab and select Recurring Components (or Ad-hoc Components if you are trying to add this)

Click on Add Recurring Component (or Add Ad-hoc Components)

From the list of new components, find the new component you created. Click on Add to add the component to the pay group.

Repeat the steps described above to add all the various ad-hoc and recurring components you want to add to your pay group.

Configuring a salary component in a pay group

To configure a salary component in the pay group and add additional options, from the Salary Components tab, find the component you want to edit from the Recurring Components or Ad-hoc Components tab.

To edit the component, click on the Edit icon.

This will open the Edit Salary Component window. You can use this window to configure a host of additional options for the component.

Let us look at some of these options.

This component is a part of the Flexible Benefits Plan/Boquet of Benefits (BoB)

If a component is declared as a part of the Flexible Benefits Plan (FBP) or Boquet of benefits (BoB), the employee can claim this amount under various expenses by submitting proof or bills. This allows the employee to decide how this amount is allocated. If the expense is tax-exempt, the employee gets the benefit of that. In case it is not, the employee gets taxed for the portion of the payment that is unclaimed. In the other options, you can also choose how the claim amount should be paid out and what to do with the unclaimed amount under this head.

Include this component in arrears calculation.

In case there are salary revisions and arrears that need to be paid out due to back-dated salary revisions or if you have put your salary on hold, the arrear amount will also include a portion assigned to this component.

Allow this component to be customized and overridden at the employee level.

Selecting this option will give the admin the option to add a custom value at the employee level which overrides the value that has been defined in the global repository or the salary structure. Enable this option if you want to give different employees different amounts for the same component depending. If you do not want this value to be overridden, disable this option.

Pay this component outside the Regular salary of employees. A separate payment statement will be created.

You can choose to pay allowances, reimbursements, and bonuses outside of the regular salary. Selecting this option will remove this component from the bank statement that will be generated when you process the payroll for the pay group. A separate bank statement will be generated for this payment.

When you choose to pay this component outside the regular salary, you also get an additional option to Hide component in pay slip (and exclude from gross earnings calculation in pay slip). Selecting this option will hide this component from the pay slip and tax calculations.

This component value is not impacted by Loss of Pay (LOP), due to employee’s attendance or Unpaid leave

This option allows you to determine the value of the component based on the payable days in the month. If you choose this option, the total value will be prorated to the number of days that the employee is getting paid for this month. Aspects like Loss of Pay (LOP), Unpaid leave, and other such factors which impact the pay will be considered while calculating the total permissible value of the component that the employee will be eligible for.

Adjust the difference amount (Paid value - Actual value due to LOP) against Special Allowance

Claim settings

There are some claim settings for the component that you can configure here too.

How frequently can the component be claimed?

This option determines the frequency of claims. Even when the component is a recurring component, you can choose to restrict the employee from making monthly claims and have them raise one aggregate claim for the entire year. You can also allow employees to make monthly claims. Depending on your need, select the relevant option from the ones listed on the page.

What is the maximum amount that can be claimed in a single instance?

There are 2 options available to you in this case.

Limited to accrued amount only – This allows the employees to claim reimbursement for the component based on the value that has been accrued so far in the year. Say the employee gets INR 1000 a month (Annual limit INR 12,000/-) towards a particular reimbursable component. If the employee is claiming the reimbursement 5 months into the year, this option limits them from claiming a maximum amount of INR 5000/- only.
Any amount but not exceeding annual quota – Selecting this option will allow the employee to claim reimbursement for their expenses that can be categorized under this component up to the annual quota irrespective of when they are making the claim. In the above example, the employee can claim a reimbursement of any amount up to INR 12,000/- (1000*12) at any point.

If you choose this option, an additional option shows up which allows you to choose how the approved claim amount is paid out. You can choose to pay the entire amount at once or only pay the accrued amount and divide the rest as equal monthly payments.

Continuing the example we discussed above, if the employee makes a claim for INR 8000 in August, the accrued amount is INR 5000/- which will be paid out in August. The remaining amount of INR 3000/- will be paid out at INR 1000/- a month for the next three months.

What happens to the remaining unclaimed amount (if any) at the end of Every Month?

You have 3 options to choose from here.

Paid out as taxable – The entire unclaimed amount will still be paid out to the employee but as a taxable component.
If you choose to pay the unclaimed amount as a taxable amount, you can also choose to include the component under special allowance or under the same component in the pay slip.

Carried forward – The amount will be carried forward to the subsequent months. The employee can make a claim for a larger amount in the subsequent months in this case.
Void (never paid) - The unclaimed amount is voided and not paid to the employee or carried forward.

What happens to the unclaimed amount (if any) at the end of the financial year?

You can also configure what happens to the amount at the end of the financial year if you are choosing to carry forward the amount each month. There are 2 options available.

Paid out as taxable – This will pay the entire unclaimed portion of the reimbursement as a taxable payment.

Void (never paid) - The unclaimed amount will be voided and not paid out to the employee.

Select the relevant settings from the options available to further configure the salary component for the pay group. Click Update to save the changes.

Deleting a component from the pay group

To delete a component from the pay group, go to Payroll (1) >> Settings (2).

In the Pay Groups (3) tab, select the pay group to which you want the new salary component added. Click on the Configure (4) icon.

Go to the Salary Components tab and select either the Recurring Components or Ad-hoc components tab to find the component you want to delete. Click the Delete icon in the Actions column corresponding to the component.

On the confirmation screen, click Delete to delete the component from the pay group.

Editing or deleting a salary component in the global repository

You can edit the basic details of a salary component from the global repository of salary components.

To do this, navigate to Payroll (1) >> Settings (2) and select the Components tab (3).

From here, select either the Recurring Component tab or the Ad-hoc Component tab to find the component you want to edit.

Click on the Edit icon to begin editing the component.

In the Edit Salary Component window, you can make changes to the component details such as the Name, Description, Maximum Limit, Tax Exemption status and need for proofs. Click Update to save the changes.

To delete a component, find the component in the Recurring Components tab or the Ad-hoc Components tab and click on the Delete icon under the Actions column.

On the confirmation screen, select Delete to remove the component from the global repository.

That brings us to the end of the document. Hope you are able to create, configure, and assign salary components to various pay groups. Have more questions? Reach out to us and we will be glad to help you!