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Payroll Employer Contribution

Hello Community, some times there is a case when setting up payroll some amount are applied for tax and future contributions from the company and do not enter in category as income or expenses for employee but is an expense for the company, but based in the employee salary. Is there any way to set up this with the current payroll capability ?

How about adding a custom field for holding that value after you do the math for it? You can use a custom script in order to get the value calculated.

hello indeed that’s a way of doing it but what about the accounting? as in new payroll functionality the income and deductions are related to a account for payroll process, this withholding should also be related for posting. any idea?

Can you please give me some example so that I have better understanding of your requirement?

thanks @KanchanChauhan here is an use case, in my exaple the company contribution may be linked to diferent account for accounting purpouse but all are tax based in employee earning, thats why they are generated at payroll procesing but they can not be earnning or deductions because dont affect the amount the employee recive.

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I think this is more of a chart of accounts thing and not so much a payroll thing. The US has similar tax structures where the employee pays for some and the company pays for some too. You would set the chart of accounts in a way to track the accounting of what employee pays vs company. Then in the salary components that you place on a salary structure you tell erpnext what account to use for the item and in the calculation section of the deduction you don’t have it come out of base.

thank you, but can you please explain how to set up? right now any component in the earnning or deduction section are automatically sum in gross_pay and total_deduction fields.

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That is a good question. I don’t use payroll in my erp install so I was going on theory. So all deductions are being pulled out of the pay? I thought the calcs made you start with base in the math. Let me see if I can test this out in my dev environment. Was thinking of going to erp for payroll in march, and I will need this too.

Ok got my dev system up and running. You are spot on, no mater what I do I can’t tell erp to NOT pull a deduction from the salary. Its almost like there needs to be a employer paid section to go along with earning and deductions. Like the erpnext folks opened a github issue

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its Great to know many other needs this funcionality as its a must for us too. hope te see it soon in the core!

@Randy_Lowery @James_Robertson We had a discussion about this request, we surely can provide a checkbox if amount needs to be included in net pay or not but not sure if it will reflected in Journal Entry or not, or how to handle that excluded amount. Can you throw some light on it?

What about a third section on the payslip? We currently have a earnings and deductions section that works off of the base salary. How about a third section for employer contributions that does not work off the base salary? Some of these things will show on the payslip the employee gets and some are not shown so there would need to be a check box for this option. Similar to how the pay components work today where you can set whether they are for earning or deduction section and what account gets credited/debited, we would then have salary components for employer contributions that is automatically not pulled out of base salary and can be shown on payslip or not.

In the US these are the employer contributions that often show on a payslip:

  • Health Insurance
  • 401K match or pension contribution
  • Group life insurance or other benefits

These are things that employers pay for that don’t typically show on a payslip

  • Medicare insurance
  • social security contribution
  • workers compensation expense

I am not sure how our friends in Canada work it or how other countries do it as well, but I’ll bet there are a number of similarities.

While we are on the subject of payslip improvements, may I make one other suggestion for deductions? Can you add a flag to the component for deductions to say if its pre-tax? in US we can have deductions that are pre-tax and then ones that come out post-tax. Formula for taxes is based on net salary (e.g. taxable wages) after pre-tax deductions are removed from base. This flag would help a lot in the calculations.

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HI @KanchanChauhan I do belive @James_Robertson is right about how to approach to this solution

  1. A new component type (Company Contribution)
    this can be mapped to any account as is working for the earning and deductions. (probably in this section there should be the option to select the debit an credit account that will be used later for posting and balance)
  2. New component Table in payslip for company contributions that gets the value from the payroll structure. How this new component is calculated should be user defined in formula as is working for incomes and deductions.
  3. the net pay amount the employee recive should not pull values from the new component Table.
  4. On validation and creation of journal entry the amount calculated should get posted to the corresponding accounts.
  5. An option or check box to include in print component in salary slip.
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I am from Canada and recently started looking at ERPNext for my consulting business and the employer paid amounts are a necessity if I want to use the payroll module. In Canada the 2 most common employer paid items are for Employee Insurance and Canada Pension Plan (CPP). Both of these have standard rates based on Base Salary with yearly maximums for the employee and employer.

For illustration purposes, if for example the employee base pay was $4000 and the employee portion of Canada Pension Plan was $200 then the company portion would also be $200. To keep it simple lets assume the employee is exempt from Employment Insurance and for the moment we will ignore Federal Income Tax

The net pay to the employee would be $3800 (4000-200) but the journal entry would need to be

                                   dr          cr

Wages Payable $4000
CPP Expense $200
Bank Account $3800
CPP Payable $400

The companies additional expense is recorded as CPP Expense but since both the company and employee portions must be submitted to the government the total for CPP Payable is $400

The employee slip would only show $4000 base salary, the $200 CPP employee portion and the net total of $3800.

Hope this helps clarify the Canadian requirements

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We have a similar behaviour in Spain, as the employer has to make contributions to National Insurance program and others gov protection programs for employees.

It would be great if this is added, as for now the salary slip is useless here.

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i think community should take a look to sage payroll how they build it covers all aspects of customization.

+1 from this end

I mean you have the same issues in India as well, related to PF accounts. How about for each deduction you add a check box and say, there is a company contribution to this account and if you click that check box a space opens up where you add the formula. Like for PF - employee pays 12% (or something) and company matches contribution. So you could say 100% as the employer match for that contribution. You will need the ability to manage that in a separate account (on your chart of accounts) for reporting and remittance purposes. Just give the ability to use any of the abbreviations in the salary structure in addition to simply selecting a percentage of the deduction item. The same Baaed on Formula, Loss of Pay options may also be built in for this component.

Hope that helps.

Thanks

Jay

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Any solutions so far?

Nothing yet, you would agree the Frappe team have been putting their best into v8 for us all :smiley:

Perhaps the community would consider paid development work for this to be pushed through? There is certainly a need for it.

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