Runtime HRMS supports multiple type of salary components to suit different business needs. Read on to know more about various types of salary components.
Salary components or Salary heads are the various types of salary given to employees. Common salary components are Basic Salary, House Rent Allowance (HRA), Dearness Allowance (DA) etc.
In Runtime HRMS, you can create multiple salary components, each having a Unit Type which determines the way salary is calculated for that component. There are 5 different Unit Types as follows:
- Payable Days
- Payable Hours
- Payable Units
- Fixed Salary
- Variable Salary
Each Unit Type of salary component is explained in following paragraphs:
Components where Unit Type is ‘Payable Days’ use no. of paid days in a month to calculate employee salary. To understand this case, let’s consider this example:
Mr. Vivek has Basic Salary (Payable Days) as 15,000 per month. The month has 30 days and Mr. Vivek came to work for 16 days only. There were 4 weekly offs (paid). Thus, total number of payable days would be 16+4 = 20 days. In this case, Mr. Vivek’s Basic Salary would be calculated as follows: Salary per day: 15,000 / 30 = 500 Salary for 20 days: 500 x 20 = 10,000
Salary Components with ‘Payable Hours’ as Unit Type are linked to the no. of hours worked by an employee based on his/her time punches. Time punches can be captured from various sources as follows:
- Remote Punch using Workman mobile app
- Attendance Sync Utility (integrated with a Biometric Device)
- Excel Import
- Manual Entry
The employee work hours are bifurcated in following segments:
- 1.Shift Hours
- 2.Early Coming Hours
- 3.In-Office Hours
- 4.Lunch or Break Time
- 5.Out-Of-Office Hours
- 6.Late Going Hours
For each ‘Payable Hours’ Component, you can choose to pay for one or more of the 6 work hours mentioned above. As an example, consider that you want to pay your employees for In-Office hours and call it ‘Basic Wages’. To do this, define a Salary Component named ‘Basic Wages’ and select Unit Type as ‘Payable Hours’. Here’s an example how this works:
Let’s suppose Mr. Vivek (one of your employee), has a shift starting at 9:00 AM and ending at 6:00 PM every day. Total shift hours in a month of 30 days would be 30 x 9 = 270 hours. However, Mr. Vivek came late by 1 hour on 5 days. Thus, his total In-Office hours worked out to be 270 – 5 = 265 hours. If Mr. Vivek’s ‘Basic Wages’ are defined as 15,000 per month, his hourly wages will be calculated as follows:15,000 divide by 30 (days) = 500 per day 500 divide by 9 (shift hours) = 55.55 per hour Salary for the month = 55.55 x 265 hours = 14,722
If a month has 31 days, the daily and hourly salary would be calculated as follows:15,000 divide by 30 (days) = 483.87 per day 500 divide by 9 (shift hours) = 53.76 per hour
‘Payable Units’ salary components are useful when payment is based on variable units and a fixed rate per unit. Common examples of this component are:
- Conveyance Allowance (Units = number of km. traveled)
- Production Wages (Units = number of units produced)
- Sales Incentive (Units = number of sales closed)
To use this type of component, you need to specify a fixed rate as part of salary structure of the employee. For e.g., in case of Conveyance Allowance, the rate could be INR 5 per km. Thereafter, you need to input number of units every month for employees who are eligible for this allowance. This input can be made using Data Capture > Salary Units or it can be imported from excel file for multiple employees.
Here’s an example of salary calculation for Payable Units component:
Mr. Vivek gets Conveyance Allowance @ INR 5 per km. for official travels. At end of a month, Mr. Vivek submits a declaration that he has traveled 350 km. in the month for official purposes. After verification of the declaration the HR manager inputs 350 as no. of units for Conveyance Allowance for the given month. Conveyance Allowance payable to Mr. Vivek will be calculated as follows: INR 5 (rate) x 350 (units) = 1,750
Fixed Salary components, as the name suggests, allow you to define a fixed amount of salary to be paid to an employee every month. The amount is defined in employee’s salary structure and paid in full every month, irrespective of attendance and time data. Thus, even if an employee is absent for full month, the fixed salary will be payable to him/her every month, unless revised in salary structure.
Variable Salary is used to pay any amounts which are not based on days, hours, units etc. Some common examples of Variable Salary could be ‘Mobile Reimbursement’ or ‘Medical Reimbursement’ where the amount payable each month is not known in advance, unless a bill is submitted by the employee. In such cases, the HR Manager needs to input the amount payable to employees every month using Data Capture > Salary – Variable option. While entering the amount, you have option to copy the amount from previous month also and make changes as necessary. The variable salary can also be imported using excel file bulk upload.
Using the different types of components explained above, one can create any type of salary structure to suit the business needs. Salary Structures are a combination of salary components with amount or percent split between the different components. Salary Structures can be pre-defined for different grades and can be allocated to employees on joining or promotions. Learn more about Salary Structures.