Payroll setup

Payroll setup

Menu Path : Setup >  Payroll Setup > Payroll Setup
Accessible to : Application Administrator

If you have multiple companies activated then you will have to setup some parameters at a group level and some at company level. If there is single company then all parameters will be setup only at the company level.

Payroll Setup > Group level parameters



1. Gratuity duration - here the period of employment after which employee is eligible for gratuity is defined. For more details refer article on Gratuity payment, since there are different interpretations of the Gratuity law and some companies prefer to pay gratuity for a shorter term employment we have given this option. You can modify the eligibility condition as per your company's policy. The "Default" condition is applied when no other condition is applicable. If multiple conditions are applicable then the condition with minimum period is applied, for this purpose a month is taken to be 30 days.

Any changes in the basis here will impact the in-process full and final where gratuity calculation has not been done.


2. Allow changes in Other Income - if selected as Yes then employees can update their Other Income declaration multiple number of times within one financial year, if you select No then employees can update their Other Income record only once in the financial year

3. Email tax statement - if selected as Yes then a tax statement is emailed to the employee along the salary slip

4. Days for tax declaration - this parameter allows you to control the number of days the system gives to a new joiner to update his tax saving declaration

5. Upload of document mandatory for tax saving submissions - when this parameter is activated then employee will not be able to submit a tax saving submission form without uploading a supporting document

6. Check for leave when LTA is claimed - as per Government rules employees need to take 3 days of leave during the period when LTA is claimed, the leave which is to be taken can be specified here


7. Notice Period recovery to be tax free - if this parameter is selected as Yes then notice period recovered during full and final is reduced from employee's taxable income

8. Override TDS and PT recommendation by System - this parameter allows you to control if Payroll Manager can override the TDS and Professional Tax recommended by system during payroll and full and final processing. If Always is selected then TDS and PT can be modified during all processes, if "Except during March payroll or Full and Final" is selected then TDS and PT cannot be modified during the March payroll or during the Full and Final

9. Allow Payroll Manager to override recovery/payout recommendations during Full and Final - through this parameter you can control if the Payroll Manager has to option to override the recovery / payout recommendations which are made by the Functional team during Separation and also whether he can override the recovery / payouts which are pending as per system

10. If no PAN then deduct tax at higher of 20% or slab rate - as per law if an employee is taxable bracket and has not provided PAN number then TDS should be deducted at a rate of 20% or at the rate as per the slabs whichever is higher. This parameter will enable this option, no Cess is deducted if tax is deducted at the rate of 20%. If this parameter is left as No then irrespective of whether PAN number is provided or not the TDS and Cess deduction will happen as per the taxable income and slabs as it is done for employees who provide PAN number. If this parameter is not activated then the employee level parameter "PAN is inoperative" will not be visible. This parameter is applicable for both Regular and Retainer employe

11. Include separated employees in regular payroll - if this parameter is selected as yes then the employee will be included in regular payroll in his last month. Full and Final will be treated as next month's payroll from a compliance perspective. This parameter should be used if you are not able to finish Full and Final which includes last month's payroll by 7th of the next month (TDS deadline). But enabling this parameter will lead to an issue in March as for all employees whose last working day is in March will have a full and final in April which would include them in the next financial year's compliances. Selection of this parameter can be changed if no payroll or full and final is in process.

12. Rounding of salary - if this parameter is enabled then salary which is paid out on a monthly basis is rounded to the nearest number and there will be payouts in decimals

Payroll Setup > Company level parameters

In this section the parameters are to be defined for each company separately. You will see the company drop-down only if multiple companies are activated in your organization.

1. First Payroll Month - this is the month from which payroll for the company is to be run, this is a very important field and cannot be changed once selected and used. Relevant data for all prior months will have to be uploaded using the YTD upload option

2. Cancellation of confirmed payroll / finalized full and final - if you want to give the option of cancelling a confirmed payroll or finalized full and final to the payroll manager then you can activate this parameter. Refer to the article on Cancelling confirmed payroll or finalized full and final for more details.

3. Professional Tax - The professional tax is imposed at the state level. However, not all the states impose this tax; some of the states which impose this tax are – Karnataka, West Bengal, Andhra Pradesh, Maharashtra, Tamil Nadu, Gujarat and Madhya Pradesh. Professional Tax is deducted either on a monthly or a six-monthly basis. The deduction is based on wages calculated either on monthly basis or six-monthly slabs. The six month periods also change across states. This compliance is activated by default.

Employee Provident Fund - this includes EPF, EPS and EDLI deductions as per Government norms. Refer to the article on PF, EPS and EDLI for more details. There are multiple parameters which need to be further configured if you enable the EPF parameter.

4. Is Company Participating in EPF - Use this parameter to enable PF for your company. Once PF is activated at the company level for each new employee PF would be selected as Yes by default. The parameters given below are visible only when this parameter is selected as Yes
4.1 Are Voluntary Provident Fund Declaration Allowed - Employees can declare VPF only when this parameter is activated
4.2 Allow closure of VPF declarations in the middle of financial year - Once VPF deduction is started it cannot be stopped before the end of financial year unless this parameter is selected as Yes
4.3 Employer’s Deduction - employer's contribution can be set as “Statutory Limit” or “Same as Employee”. Employee's contribution is managed from employee page, refer to article on Employee payroll detail management for more details. EPF, EPS and EDLI are calculated on the basis of Basic Salary and whatever additional heads are selected from Deduction and Encashment grid.
4.5 Deduct PF on arrears - this parameter helps you control if you want to deduct PF on salary arrears which are paid due to back dated salary increment.
4.5.1 ECR Arrear file creation - when arrear is paid and PF is deducted on arrear then this parameter will control whether the arrear is deducted by "Arrear Month" or by "Arrear Payout Month". Refer article on Provident Fund, Pension Scheme and EDLI deductions - Example 1 in the section 3 on PF deduction due to arrears.
4.6 Participation in ABRY scheme - Refer section 4 of article on Provident Fund, Pension Scheme and EDLI deductions for details on the ABRY scheme
4.7 Reduce Statutory Limit based on LWP - Use this parameter if you want to reduce the Statutory Limit due to LWP. If in a month's payroll there is LWP deduction then the Statutory Limit will be reduced, calculation of Statutory Limit will be on the basis of the heads selected in Deduction and Encashment grid.


5. Employees State Insurance Corporation (ESIC): In this section you can manage the parameters related to ESI. Once you activate ESI on your company then you have to enable at employee level also. For more details on how to setup ESI please refer to the article on ESI India Payroll


Labor Welfare Fund : Please refer to the article on Labor Welfare Fund Deductions for more details of state wise deductions
6. Is company participating in LWF  - when this parameter is activated in setup then all employees who are mapped to states where LWF is applicable will get mapped automatically as Yes
6.1 LWF deduction to be recovered from employee - if this parameter is No and LWF participation is Yes at employee level then while processing the salary LWF will not be deducted from employee's salary but both employee and employer contribution will be paid by the employer. In the LWF challan however the employee and employer contribution will be be shown as per the statutory norms.

7. NPS

7.1 Employer Deductions - If you want to deposit NPS as employer's contribution into employee's account you can use this parameter. Once it is enabled you can choose if NPS Employer Deduction needs to be modelled as a part of salary or not. Refer to the section on CTC in the article on Setting up Salary Heads for more details. You can also deduct a fixed monthly NPS charge which is levied by the service provider from employee's salary.
7.2 Employee Deductions - If you want to allow employees to declare and get NPS Employee Contribution deducted in their salaries then you can activate this parameter.
8. Payment of Statutory Bonus : Bonus act rate is between 8.33% to 20%. This rate will be applicable on Calculation ceiling (per month) Rs 7,000 or Minimum wage for schedule employment fixed by government


9. Leave encashment needed - if selected as Yes then leave encashment feature is activate
9.1 Tax-free leave encashment - as per law leave encashment received during retirement or resignation is exempt from tax within some norms, here you can select the types of separations which would be included for calculating the tax-free leave encashment
Refer article on Leave Encashment Payout for more details

10. LWP deduction needed - only if this parameter is activated the Leave without pay deduction is done in payroll. When this parameter is enabled for the first time you can select the date from which you want to use this feature.


The date which is inputted here is stored as the "Effective Date" for this feature. LWP in the system before this date will not be included in the payroll.
There are four more parameters which are made visible if this parameter is selected as Yes
10.1 Convert pending attendance into LWP - if this parameter is selected as yes then all the days with a status of pending attendance are treated as absent and automatically converted in LWP after validation by Payroll Manager. For this parameter also you can set an Effective Date


10.2 LWP creation linked to leave policy - if this parameter is selected as yes then automatic creation of LWP linked to missing attendance is done and the LWP is also created on Weekly Off and Compulsory Holidays based on the leave policies of the preceding and succeeding leaves. If this parameter is not visible please get in touch with your Account Manager
10.3 Deducted LWP withdrawal allowed - if this parameter is selected as No then once a LWP is deducted in payroll it cannot be withdrawn
10.4 Leave cut off date - Attendance and leave data only up to the cutoff date is considered in they payroll. For example - if cutoff date is 25th and payroll is being processed on 28th and employee is on approved Leave Without Pay on 26th and 27th, the LWP deduction for these two days will be done in next month's payroll. Refer article on LWP Deduction and Encashment.

11. Payroll Claim / Reimbursement cut off date - employees can submit reimbursement claims only till this cut off date every month


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