How to Configure Bonus Components in Payroll | Workwisely

Bonus Components

Bonus is a salary component that forms part of the employee’s Cost to Company (CTC). It is included in the overall CTC structure but may be paid annually, half-yearly, or at specific intervals as defined by organizational policy or statutory norms. The bonus amount is considered taxable and will be shown in the employee’s payslip and payroll reports as per government regulations.

Configuring Bonus Components

  • Navigate to Settings → Payroll → Salary Components → Bonus.

  • Click +Add Bonus button.

  • A pop-up window will appear Enter the Bonus Name, Period(Monthly, Quarterly, Half Yearly and Annually).

  • Choose the Calculation Type either Percentage or Fixed Amount .

  • Click Save.


Fig: Add Bonus Component

Fields Description

Title

Description

Earnings Type

It refers to the category of salary components that contribute to an employee’s gross pay.

Earnings Name 

It refers to the title or label assigned to a specific type of allowance provided to employees as part of their compensation package. 

Flexible Benefit Plan Component

A flexible benefits package enables employees to tailor their benefits to suit their personal needs and preferences. It typically provides a range of options, allowing employees to allocate their benefits within specified limits. This approach helps optimize benefits for tax efficiency, often including tax-saving options, thereby maximizing tax benefits and minimizing taxable income. Employees can review and adjust their selections during open enrollment periods.

Benefits Association

This refers to the association of various employee benefits with specific components of their compensation package. Ex. Unpaid leave, Provident Fund, Overtime, Special Wages, Notice Pay, Bonus, Advance Salary, Leave Encashment, Compensatory of,f etc

Unpaid Leave

If unpaid leave is associated with a particular component, then taking unpaid leave in a month will result in a deduction from that component's value.

Example: If an employee's monthly conveyance allowance is 3,000/-, and they take one day of unpaid leave, the conveyance allowance for that month will be reduced to 2,900/-.

All other benefits (like overtime, special wages, notice pay, advance salary, etc.) are associated with a specific component or allowance type, these components will indeed be included for calculation during the payroll run.

Benefit Association for Provident Fund

When Provident Fund is enabled in the Benefit Association, you must specify how the system should consider employee salaries for EPF (Employees’ Provident Fund) contributions. The available options are:

  • Always- This ensures that every employee covered under PF rules will have the contribution calculated on their actual PF wage, even if it exceeds ₹15,000.

  • Only when PF Wage is less than ₹15,000/- This ensures that if the statutory limit is less than ₹15,000, the system will consider the relevant components for PF wage and perform the calculation only for that month.

Tax Inclusion

Define whether an allowance or component or earning type is taxable or non-taxable.

Period

To define the frequency or duration for which an allowance is applied. The period includes Monthly, Quarterly, Half-Yearly, and Annual.

Perquisites/Perks

It refers to the non-monetary benefits or advantages provided to employees in addition to their salary. These can be taxable or non-taxable depending on the laws and company policies.
Example- Company Car, Food Coupon, Fuel and Maintenance, etc.

As Is Payment

If the flag is enabled, the component associated with unpaid leave will remain fixed regardless of the unpaid leave taken. This means that even if unpaid leave is tagged to a particular component in the allowance type, the component amount will not be reduced and will stay as a fixed amount.

Example: If the conveyance allowance is 3,000/- per month and the flag is enabled, taking unpaid leave will not affect this allowance. The employee will continue to receive the full 3,000/- regardless of any unpaid leave taken.

Calculation Type

It can be defined either as a percentage or a fixed amount based on how the allowance is calculated or structured within the organization.

Percentage- When an allowance is set as a percentage, the amount is calculated based on a certain percentage of a specific value, such as Basic Salary.

Example-Support Allowance is set at 20% of the Basic Salary. If the Basic Salary is 30,000/-, the Support Allowance will be calculated as 30,000 × 20% = 6,000.

Amount- When an allowance is set as an amount, it is a fixed value that is assigned to the employee.

Example -Meal Allowance is configured as 2000/-.

Custom Formula- Allows you to define a user-specific calculation formula for a salary component based on other components or conditional logic.

Example- basic_salary * 0.40 = HRA

  • Add Component- Allows you to include existing salary components(such as Basic, HRA or allowances) in the formula. These components are used as variables to calculate the custom salary component value.

  • Add Function- Enables you to apply predefined mathematical or logical functions(eg: SUM, IF,MAX etc) within the formula to create complex calculations based on business rules and payroll policies.

  • Add Operator- Provides mathematical symbols(such as +,-,*) to define relationships and perform calculations between components and values in the formula.

Status 

It refers to the current state of an allowance type and how it is applied within the system.
Active- The allowance type is active and is currently being applied to employees.
Inactive- The allowance type is not in use or has been deactivated.


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