Salary Management System
Complete guide to salary structures, payroll processing, calculations, payslip generation, and payment disbursement.
Salary Structure Configuration
Salary Components
Each employee salary can include the following components:
Basic Salary
The fixed base component of an employee's compensation.
100% of CTC × 40%HRA (House Rent Allowance)
Allowance provided for employee housing expenses.
40-50% of BasicConveyance Allowance
Allowance for employee commute expenses.
Fixed amount or %Medical Allowance
Fixed allowance for medical expenses.
Fixed amountSpecial Allowance
Additional compensation to make up CTC.
Balance amountPerformance Bonus
Variable pay based on performance metrics.
As per policyDeductions
Provident Fund (PF)
Employee contribution to statutory provident fund.
12% of BasicProfessional Tax
State tax on professional income.
As per state rulesTDS (Income Tax)
Tax deducted at source on salary.
As per tax slabsESI
Employee State Insurance (if applicable).
1.75% of GrossPayroll Processing Workflow
Month-End Attendance Processing
Finalize attendance records for the month. Resolve any pending corrections or leave approvals.
Generate Payroll Preview
Run payroll preview to see calculated salaries, deductions, and net pay for all employees.
Review & Adjust
Review individual employee salaries, add one-time adjustments, or apply special deductions.
Lock Payroll
Lock the payroll to prevent further changes. This requires OTP verification for security.
Generate Payslips
Automatically generate individual payslips in PDF format.
Disburse Payments
Process bank transfers or cash payments and update payment records.
Salary Calculations & Deductions
Standard Salary Formula
Net Salary = Gross Salary - Total DeductionsGross Salary = Basic + HRA + Conveyance + Medical + Special Allowance + BonusesAttendance Impact on Salary
| Scenario | Calculation | Example |
|---|---|---|
| Full Month Present | 100% of Salary | ₹50,000 × 1.0 = ₹50,000 |
| Half Day (1) | Full Day - 0.5 Day Pay | ₹50,000 - (₹50,000/22 × 0.5) |
| Absent (1 Day) | Full Day Salary Deducted | ₹50,000 - (₹50,000/22 × 1) |
| Late Arrival (Minutes) | Pro-rated Deduction | Per company policy |
| Leave (Paid) | No Deduction | Full Salary Paid |
| Leave (Unpaid) | Full Day Salary Deducted | ₹50,000 - (₹50,000/22 × days) |
Overtime Calculation
Standard Overtime Formula
When an employee works beyond their scheduled hours and no explicit OT rate is defined in their profile, the system uses the following formula:
OT Payment = Hourly Rate × OT Multiplier × Hours WorkedHourly Rate = Monthly Salary ÷ (Working Days × max Daily Hours)Standard Calculation: ₹50,000 ÷ (22 days × 8 hours) = ₹284.09/hourOT Multipliers by Work Type
The system applies different multipliers based on the type of overtime work:
| Work Type | OT Multiplier | Description | Example (₹284.09/hr) |
|---|---|---|---|
| Weekday Overtime | 1.5× | Regular overtime on working days | ₹284.09 × 1.5 = ₹426.14/hr |
| Weekly Rest Day | 1.5× | Working on weekly off (first 8 hours) | ₹284.09 × 1.5 = ₹426.14/hr |
| Weekly Rest Day (after 8hrs) | 2× | Working on weekly off beyond 8 hours | ₹284.09 × 2 = ₹568.18/hr |
| Public Holiday | 2× | Working on gazetted holidays | ₹284.09 × 2 = ₹568.18/hr |
| Night Shift Premium | +20% | Work between 10PM - 6AM (additive) | ₹284.09 × 1.5 + 20% = ₹511.36/hr |
| Emergency Call-out | 2× | Unscheduled emergency response | ₹284.09 × 2 = ₹568.18/hr |
When Hourly Rate × OT Multiplier is Applied
This calculation method is triggered in the following scenarios:
- No Custom OT Rate: Employee profile does not have an explicit overtime rate configured
- Standard Pay Employees: Monthly salaried staff without hourly wage contracts
- Default Company Policy: Company defaults apply when individual settings are not configured
- New Employees: Staff during their initial probation period without finalized compensation structure
Types of Salary Extensions in Indian Context
Beyond standard overtime, Indian payroll regulations and common practices recognize several types of extended work compensation:
Double Duty
Performing duties of two roles simultaneously. Compensation at 2× hourly rate or additional fixed allowance.
Formula: Hourly Rate × 2 × HoursNight Shift Allowance
Fixed or percentage-based allowance for regular night shift work (10PM - 6AM). Typically ₹50-200 per night shift.
Fixed: ₹100/night or % of BasicHoliday Working
Working on gazetted holidays under the Shops and Establishments Act. Minimum 2× wages for such work.
Formula: Hourly Rate × 2 × Hours + Day WagesWeekly Off Replacement
Compensatory off or wages when weekly rest day is working. Either a substituted day off or overtime payment.
Option A: Comp Off | Option B: 1.5× WagesEmergency On-Call
Being available for emergency calls outside work hours. May include fixed stipend + overtime for actual work.
₹500-1000/week on-call + OT for callsOutstation Duty (DA)
Travel or work at locations away from base. Includes Travel Allowance, Daily Allowance, and outstation OT.
DA: ₹300-800/day + OT × MultiplierCalculation Examples
Example 1: Weekday Overtime
Scenario: Employee with ₹45,000/month works 3 extra hours on a Tuesday.
- Hourly Rate: ₹45,000 ÷ (22 × 8) = ₹255.68/hr
- OT Multiplier: 1.5× (Weekday)
- OT Payment: ₹255.68 × 1.5 × 3 = ₹1,150.56
Result: Employee earns ₹1,150.56 for 3 hours of overtime
Example 2: Holiday Work
Scenario: Employee with ₹60,000/month works 8 hours on Independence Day.
- Hourly Rate: ₹60,000 ÷ (22 × 8) = ₹340.91/hr
- OT Multiplier: 2× (Public Holiday)
- OT Payment: ₹340.91 × 2 × 8 = ₹5,454.56
- Holiday Bonus: +₹2,727.28 (Day wages included)
Result: Total holiday compensation: ₹8,181.84
Example 3: Night Shift with Overtime
Scenario: Employee with ₹40,000/month works night shift OT from 10PM - 2AM (4 hours).
- Hourly Rate: ₹40,000 ÷ (22 × 8) = ₹227.27/hr
- Base OT (1.5×): ₹227.27 × 1.5 = ₹340.91/hr
- Night Premium (20%): ₹340.91 × 0.2 = ₹68.18/hr
- Final Rate: ₹340.91 + ₹68.18 = ₹409.09/hr
- Total OT Payment: ₹409.09 × 4 = ₹1,636.36
Result: Night OT with premium: ₹1,636.36
Example 4: Weekly Off Extended Work
Scenario: Employee with ₹50,000/month works 10 hours on their weekly off.
- Hourly Rate: ₹50,000 ÷ (22 × 8) = ₹284.09/hr
- First 8 hours (1.5×): ₹284.09 × 1.5 × 8 = ₹3,409.08
- Next 2 hours (2×): ₹284.09 × 2 × 2 = ₹1,136.36
- Total OT Payment: ₹3,409.08 + ₹1,136.36 = ₹4,545.44
Result: Weekly off OT: ₹4,545.44 for 10 hours
Legal Framework (India)
These calculations comply with Indian labor laws including the Minimum Wages Act, Shops and Establishments Act, and Factory Act provisions:
- Maximum OT Hours: Cannot exceed 50 hours per month ( Maharashtra Shops Act) or as per state-specific limits
- OT Rate Minimum: Cannot be less than 1.5× of normal wages as per the Payment of Wages Act
- Weekly Rest: One day of rest per week is mandatory, with overtime wages if work is performed
- Holiday Work: Must be paid at least 2× the normal rate plus a compensatory day off (in some states)
Payslip Generation & Distribution
Payslip Contents
- Employee Information (Name, ID, Department, Designation)
- Pay Period (Month/Year)
- Earnings (Basic, HRA, Allowances, Bonuses)
- Deductions (PF, TDS, ESI, Loans, Advances)
- Attendance Summary (Days worked, Leaves, Absents)
- YTD (Year-to-Date) Earnings & Deductions
- Net Pay Amount & Bank Details
Distribution Methods
Automatic email delivery to employee's signuped email with PDF attachment.
Portal Access
Employees can download from their self-service portal anytime.
SMS Alert
SMS notification with payment confirmation and payslip link.
Payment Disbursement Process
Supported Payment Modes
Bank Transfer (NEFT/IMPS/RTGS)
Automatic transfer to employee bank accounts.
Cash Payment
Manual cash disbursement with receipt tracking.
Cheque Payment
Traditional cheque payment with clearance tracking.