Payroll Processing in Tally Prime & Erp-9

What is Payroll?

Payroll :-Payroll Accounting is the features of Calculating and distributing wages, Salaries and Withholding to Employees and certain agencies.

It is essentially the Calculation, Management, Recording and analysis of employee’s Compensation. In addition payroll accounting also includes recording for benefits and withholding taxes and deduction related to compensation.

It is Useful for small and medium type businesses.

How to Enable Payroll Accounting feature in Tally Prime/Erp-9

Step1: For Prime – Create new Company>GOT>F₁₁

Maintain Payroll - Yes

Enable Payroll Statutory – Yes

Fill All option in this Screen and Press “Ctrl+A”

Step1: For Erp-9 – Create new Company>GOT>F₁₁>F₁

Maintain Payroll – Yes

More Than One Payroll/Cost Category – Yes

Step 2 : GOT>F₁₁>F₃

Enable Payroll Statutory – Yes

Set/Alter Payroll statutory details – Yes

Fill All option in this Screen and Press “Ctrl+A”

How to do Payroll Processing in Tally Prime/Erp-9

Step 2 : Employee Group Master

Part 1 : Create Employee Group

Process for Prime: - GOT>Create>Employee Group

Process for Erp-9:- GOT>Payroll Info>Employee Group>Create

Category	Name	Under
Primary Cost Category	Sales Department	Primary
Primary Cost Category	Accounts Department	Primary
Primary Cost Category	Marketing Department	Primary

Part 2 : Create Employee Master

Process For Prime :- GOT>Create>Employee

Process For Erp-9 :- GOT>Payroll Info>Employee>Create

Category	Name	Under	Date of Joining
Primary Cost Category	Shivam Roy	Sales Department	01/01/2021
Primary Cost Category	Mohan Pandey	Sales Department	01/01/2021
Primary Cost Category	Anil Sharma	Sales Department	01/01/2021

Note - Fill All Other Details of All Employees

Step 3: Payroll Master

Part 1: Create Payroll Units (Simple & Compound)

Process For Prime: - GOT>Create>Units (Work)

Process For Erp-9:- GOT>Payroll Info> Units (Work)>Create

Type	Symbol	Formal Name	Number of Decimal Places
Simple	Hrs	Hours	2
Simple	Mints	Minutes	0
Compound	Hrs of 60 Mints	Not Applicable	0

Part 2: Create Attendance/Production Types

Process For Prime: - GOT>Create>Attendance/Production Types

Process For Erp-9:- GOT>Payroll Info> Attendance/Production Types >Create

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 Mints

Note – “User Defined Calendar type” type Used For Accounting defined to Own work days (e.g. – 26 Days)

Step 4: Pay Heads

Part 1: Create Earning Pay Heads

Process For Prime: - GOT>Create>Pay Heads

Process For Erp-9:- GOT>Payroll Info> Pay Heads >Create

Name	Pay head Type	Under	Affect net Salary	Name to Appear in Payslip	Use of Gratuity	Calculation type	Calculation Period
Basic Salary	Earning for Employees	Indirect Expense	Yes	Basic Salary	Yes	On Attendance	Months
Conveyance	Earning for Employees	Indirect Expense	Yes	Conveyance	No	Flat Rate	Months
House Rent Allowance	Earning for Employees	Indirect Expense	Yes	HRA	No	As Computed Value	Months
Overtime	Earning for Employees	Indirect Expense	Yes	OT Pay	No	On Production	Overtime
Bonus	Bonus	Indirect Expense	Yes	Bonus	No	As user defined value	No
Variable Pay	Earning for Employees	Indirect Expense	Yes	Variable Pay	No	As user defined value	No
Gratuity Expense	Gratuity	Provision	No	No	No	No	No

Note – HRA Calculated “On Specific Formula” That is On Basic Salary

50%- in Metro city And 40% - in Non-Metro city of Basic Salary

What is gratuity?

After having served your employer for five years or more you become entitled to a payment called “gratuity". This is a lump sum tax-free benefit that you are entitled to when you leave for another job or retire. Both government and non-government employees are entitled to gratuity. However non-government employees come under the Payment of Gratuity Act (1972), which makes it mandatory for all employers with more than 10 employees on their payrolls to give gratuity to employees who are retiring or quitting, if they have put in five years of service with the employer. Both government and non-government employees are entitled to gratuity.

Formula for Calculation of Gratuity

Gratuity = (15 X Last Drawn Salary X Number of Completed Years of Services)/26

Ex- Let us Assume Mr.-X’s Last Drawn Salary was ₹77000. If he Worked for 13 Years, Then his Gratuity Will be – (15 X 77000 X 13)/26 = ₹577500

Slab Rate For Gratuity

Gratuity Days For a Month – 26 Days
From	To	Eligibility day as Calculation
0	60	0
61	120	15
121		15

Part 2: Create Employee Deduction Pay Heads

Process For Prime: - GOT>Create>Pay Heads

Process For Erp-9:- GOT>Payroll Info> Pay Heads >Create

Name	Pay head Type	Statutory Pay Heads type	Under	Affect Net Salary	Name to Displayed in Pay slip	Calculation type	Computation Method
Employee PF Contribution @12%	Employee’s Statutory Deduction	PF Account No.1	Current Liability	Yes	EPF@12%	As Computed Value	On Specified Formula (12%)
Employee’s NPS @10%	Employee’s Statutory Deduction	National Pension Scheme (Tier- 1)	Current Liability	Yes	Employee’s NPS @10%	As Computed Value	On Specified Formula (10%)
Employee's ESI Contribution @0.75%	Employee’s Statutory Deduction	Employee State Insurance	Current Liability	Yes	Employee's ESI Contribution @0.75%	As Computed Value	On Specified Formula (0.75%)
Income Tax	Employee’s Statutory Deduction	Income Tax	Current Liability	Yes	Income Tax	As Per Income Tax Slab	No
Professional Tax	Employee’s Statutory Deduction	Professional Tax	Current Liability	Yes	PT Tax	As Computed Value	On Current Earnings Total

Note 1:- EPF,NPS & EPS will be Calculated on (Basic Salary +DA)-

If Basic Salary + DA <15000 – 12%/month & if Basic Salary + DA>15000 - ₹1800/month

Note 2:- ESI will be calculated on (Basic Salary + DA +Conveyance + HRA + Overtime)

Note 3 :- Professional tax Calculated by Following Slab on Basic Salary

Amount Greater than	Amount Up To	Slab type	Value
0	5000	Value	0
5000	8000	Value	60
8000	10000	Value	100
10000	15000	Value	150
15000		Value	200

Part 3: Create Employer’s Contribution Pay Heads

Process For Prime: - GOT>Create>Pay Heads

Process For Erp-9:- GOT>Payroll Info> Pay Heads >Create

Name	Pay head Type	Statutory Pay Heads type	Under	Affect Net Salary	Calculation type	Computation Method
Employer's EPF @3.67%	Employer's Statutory Contributions	PF Account (A/c No. 1)	Indirect Expenses	No	As Computed Value	On Specified Formula (3.67%)
Employer ESI @3.25%	Employer's Statutory Contributions	Employee State Insurance	Indirect Expenses	No	As Computed Value	On Specified Formula (3.25%)
Employer EPS @8.33%	Employer's Statutory Contributions	EPS Account (A/c No. 10)	Indirect Expenses	No	As Computed Value	On Specified Formula (8.33%)
Employer NPS @10%	Employer's Statutory Contributions	National Pension Scheme (Tier - I)	Indirect Expenses	No	As Computed Value	On Specified Formula (10%)
PF Admin Charges @ 1.10%	Employer's Other Charges	Admin Charges (A/c No. 2)	Current Liabilities	No	As Computed Value	On PF Gross (1.10%)
Employer EDLI Contribution @0.5%	Employer's Other Charges	EDLI Contribution (A/c No. 21)	Current Liabilities	No	As Computed Value	On PF Gross (0.50%)
EDLI Admin Charge @0.01%	Employer's Other Charges	EDLI Admin Charges (A/c No. 22)	Current Liabilities	No	As Computed Value	On PF Gross (0.01%)

Step 5: Salary Details

Part 1: Create/Define Salary Details

Note- Salary details use for Define structure of Salary of any persons or group of Persons or Department.

Process For Prime: - GOT>Alter>Define Salary>Select ‘Employee or Group’

Process For Erp-9:- GOT>Payroll Info>Salary Details >Create> Select ‘Employee or Group’

Shivam Roy (01/01/2021)
Pay Heads	Rate
Basic Salary	₹5,000
HRA
Conveyance	₹2,000
Overtime	50/Hrs
Variable Pay
Bonus
Employee PF Contribution @12%
Employee's NPS @ 10%
Employee's ESI Contribution 0.75%
Professional Tax
Income Tax
Gratuity Expense
Employer's EPF @3.67%
Employer ESI @3.25%
Employer NPS @10%
Employer EPS @8.33%

Note – Define Salary Details of “Mohan Pandey & Anil Sharma” As Same Way Above

Mohan Pandey’s Basic Salary – ₹6000 & Anil Sharma’s Basic Salary - ₹16000

Step 6: Processing Payroll

Part 1 : Attendance Voucher

Attendance Voucher – It is used to record Employee’s attendance date based of Attendance/Production types (Present or Absent or Overtime by days or Hours).

Process for Prime:- GOT>Voucher>F₁₀>Attendance

Process for Erp-9:- GOT>Payroll Voucher>Ctrl+F₅

Date – 31/01/2021

Name	Present	Absent	Overtime
Shivam Roy	27 Days	3 Days	14 hours
Anil Sharma	26 Days	4 Days	12 hours
Mohan Pandey	24 Days	6 Days	13 hours

Note- You can use Autofill Attendance by Pressing “Alt+A in ERP or Ctrl+F in Prime”

Part 2 : Payroll Voucher

Note :- Payroll Voucher – Payroll Voucher used for make dues for Salary of Employee before Payment Of Salary

Process 1: Create Payable Pay Heads

Process For Prime: - GOT>Create>Pay Heads

Process For Erp-9:- GOT>Payroll Info> Pay Heads >Create

Name	Pay Head type	Under
PF Payable	Not Applicable	Current Liabilities
NPS Payable	Not Applicable	Current Liabilities
ESI Payable	Not Applicable	Current Liabilities
Salary Payable	Not Applicable	Current Liabilities

Process 2: Payroll Voucher Processing (User Defined)

Process for Prime:- GOT>Voucher>Ctrl+F₄>Ctrl+F

Process for Erp-9:- GOT>Payroll Voucher>Ctrl+F₄>Alt+A

Date – 31/01/2021

Type of Transaction	Payroll Autofill
Process For	User Defined
From (Blank for Beginning)	01/01/2021
To (Blank For End)	31/01/2021
Employee Category	Primary Cost Category
Employee/Group	Sales Department
Sort by	Employee Name
Payroll/Bank/Cash Ledger	Salary Payable

Name	Variable Pay	Bonus
Mohan Pandey	₹200	₹200
Anil Sharma	₹300	₹200
Shivam Roy	₹200	₹300

Process 3: Payroll Voucher Processing (Salary)

Process for Prime:- GOT>Voucher>Ctrl+F₄>Ctrl+F

Process for Erp-9:- GOT>Payroll Voucher>Ctrl+F₄>Alt+A

Date – 31/01/2021

Type of Transaction	Payroll Autofill
Process For	Salary
From (Blank for Beginning)	01/01/2021
To (Blank For End)	31/01/2021
Employee Category	Primary Cost Category
Employee/Group	Sales Department
Sort by	Employee Name
Payroll/Bank/Cash Ledger	Salary Payable

Process 4: Payroll Voucher Processing (PF Contribution)

Process for Prime:- GOT>Voucher>Ctrl+F₄>Ctrl+F

Process for Erp-9:- GOT>Payroll Voucher>Ctrl+F₄>Alt+A

Date – 31/01/2021

Type of Transaction	Payroll Autofill
Process For	PF Contribution
From (Blank for Beginning)	01/01/2021
To (Blank For End)	31/01/2021
Employee Category	Primary Cost Category
Employee/Group	Sales Department
Sort by	Employee Name
Payroll/Bank/Cash Ledger	PF Payable

Process 5: Payroll Voucher Processing (NPS Contribution)

Process for Prime:- GOT>Voucher>Ctrl+F₄>Ctrl+F

Process for Erp-9:- GOT>Payroll Voucher>Ctrl+F₄>Alt+A

Date – 31/01/2021

Type of Transaction	Payroll Autofill
Process For	NPS Contribution
From (Blank for Beginning)	01/01/2021
To (Blank For End)	31/01/2021
Employee Category	Primary Cost Category
Employee/Group	Sales Department
Sort by	Employee Name
Payroll/Bank/Cash Ledger	NPS Payable

Process 6: Payroll Voucher Processing (ESI Contribution)

Process for Prime:- GOT>Voucher>Ctrl+F₄>Ctrl+F

Process for Erp-9:- GOT>Payroll Voucher>Ctrl+F₄>Alt+A

Date – 31/01/2021

Type of Transaction	Payroll Autofill
Process For	ESI Contribution
From (Blank for Beginning)	01/01/2021
To (Blank For End)	31/01/2021
Employee Category	Primary Cost Category
Employee/Group	Sales Department
Sort by	Employee Name
Payroll/Bank/Cash Ledger	ESI Payable

Part 3 : Journal Voucher

Process : Journal Voucher Processing (PF other Charges)

Process for Prime:- GOT>Voucher>F₇>Ctrl+F

Process for Erp-9:- GOT>Accounting Voucher>F₇>Alt+A

Date – 31/01/2021

Type of Transaction	PF Other Charges
From (Blank for Beginning)	01/01/2021
To (Blank For End)	31/01/2021
Employee Category	Primary Cost Category
Employee/Group	Sales Department
Expense Ledger	PF Admin Expenses
Admin Charge( A/c No.2)	PF Admin Charges @ 1.10%
EDLI Contribution ( A/c No.21)	Employer EDLI Contribution @0.5%
EDLI Admin Charges ( A/c No.22)	EDLI Admin Charge @0.01%

Part 4 : Payment Voucher

Process 1 : Payment of Salary

Process for Prime:- GOT>Voucher>F₅>Ctrl+F