In Indian companies components of reimbursements are added to the salary, these can be claimed by employees through submission of vouchers with supporting documents, this article explains the underlying logic of how these heads are managed and how to create reimbursement heads in setup.

For each head which is created you need to define the settlement period, the settlement period can be -
1. Monthly : if the head is not claimed during the month the amount due is paid in the monthly payroll after deducting tax
2. Quarterly : amount due is paid at the end of quarter, after deducting tax
3. Semi-annual : amount due is paid in September payroll, after deducting tax
4. Annual : amount due is paid in March payroll, after deducting tax
5. Multi-year : amount due is carried forward to next year and is added to next year's eligibility amount in April

The eligibility for the first month is created as soon as the salary structure is created (approved if approval process is in place), it is not linked to the payroll process. Subsequent eligibility is created on 1st of every month. If any LWP (leave without pay) is approved for current or previous months then eligibility will be reduced immediately provided the reimbursement head is included against LWP in Deductions and Encashment grid. This would be a reduction and through a similar logic a LWP reversal will lead to a higher accrual approval of the reversal.

Reimbursement claim category head can be removed from the salary structure from back date even if employee has claimed the full amount which was eligible to him. On removal of the head there would be a recovery from payroll (or full and final) of the excess amount which was claimed by the employee through vouchers.

To create these heads

1. Go to Reimbursement tab

There are two tables, in the first table system defined heads like LTA or Perquisite heads are visible. These are system defined heads and can be added from the first tab on this page Salary Heads. In the second table you can create new heads.

You can specify which role will have access to the reimbursement claim approval / verification and payment pages. This is done on Common Setup > Role Mapping Setup > Payroll Activities. Refer to the article on Role Mapping for more details.

Once reimbursement head has been created here you can map it with salary templates and also directly in any employee's salary. Once it is been used in salary template or a salary structure it cannot be edited.

Refer to the document on "Creating salary for a new joiner" and "Updating salary structure" to understand how to use this head in a salary structure.

1. If LWP is for a future month then the eligibility will be reduced on 1st of the month of the LWP
   
2. If the payroll claim head is mapped to LWP in Payroll setup (Deduction and Encashment table) then the eligibility of the head might become negative if a large number of days are updated as leave without pay for past months. In this case employee will not be able to submit any new claims, submitted claims cannot be approved and approved claims cannot be sent forward for payment
   
3. There might be cases where LWP is updated for a previous financial year or for a period where there was claim head which is no longer in the salary structure. In this case the the head will start appearing with a negative eligibility and will be recovered in payroll based on the payout frequency
   
4. If salary is modified and the reimbursement head is reduced or removed from a back date then vouchers which are in Submitted / Approved / Payment in Process but advice not generated will be cancelled if the Net Available amount is becoming negative. Vouchers for which advice has been generated or advice has been confirmed as paid will not be cancelled but change in the value of the head will be allowed, as a result of this the Net Available amount can become negative in such a scenario