Initial Setup

Before you can process your first payroll, you need to configure the Payroll module. This section guides you through the essential setup steps in the correct order.

Important

Complete these setup steps in order. Each step builds on the previous one. Skipping steps may cause errors during payroll processing.

Payroll Onboarding Wizard

The system provides a guided 5-step onboarding wizard to help you set up payroll correctly. Access it from the Payroll Dashboard.

Guided Setup

The onboarding wizard tracks your progress and ensures you complete all prerequisites before generating payroll. Each step must be completed before you can proceed to the next one.

Setup Overview

The initial setup consists of 5 main steps:

1. Add Active Employees

2. Configure Salary Components

3. Configure Statutory Settings (PF, ESI, PT, TDS)

4. Assign Employee Salary Structures

5. Add Employee Bank Details (Optional but Recommended)

1. Add Active Employees

   Before setting up payroll, you need to have active employees in the system. Employees are managed through the HR module.

   How to Add Employees:

   1. Go to HR → Employees → Add New Employee

   2. Fill in employee details (name, designation, department, joining date, etc.)

   3. Set employee status to "Active"

   4. Click "Save"

   Prerequisite

   You must have at least one active employee before you can proceed with payroll configuration. Only employees with "Active" status will appear in payroll processing.

2. Configure Salary Components

   Salary components are the building blocks of employee compensation. They include earnings (like Basic Salary, HRA) and deductions (like PF, TDS).

   How to Add Salary Components:

   1. Go to Payroll → Configuration → Salary Components

   2. Click "Add New Component" button

   3. Fill in the component details:

      • Component Name: e.g., "Basic Salary", "HRA", "PF"

      • Component Type: Earning or Deduction

      • Calculation Type: Fixed Amount or Percentage

      • Calculation Base: If percentage, select base (e.g., Basic Salary)

      • Is Statutory: Check if it's PF, ESI, PT, or TDS

      • Affects Gross: Check if it should be included in gross salary

   4. Click "Save"

   Recommended Components

   Earnings: Basic Salary, HRA, Conveyance Allowance, Medical Allowance, Special Allowance
   Deductions: Provident Fund (PF), Employee State Insurance (ESI), Professional Tax (PT), TDS

Component Examples:

3. Configure Statutory Settings

   Configure statutory compliance settings for PF, ESI, Professional Tax, and TDS.

   Provident Fund (PF) Settings:

   1. Go to Payroll → Configuration → Statutory Settings → PF

   2. Enter your organization's PF registration number

   3. Set employee contribution rate (default: 12%)

   4. Set employer contribution rate (default: 12%)

   5. Set PF wage ceiling (currently ₹15,000)

   6. Enable/disable PF for specific employees

   ESI Settings:

   1. Go to Payroll → Configuration → Statutory Settings → ESI

   2. Enter ESI registration number

   3. Set employee contribution rate (default: 0.75%)

   4. Set employer contribution rate (default: 3.25%)

   5. Set ESI wage ceiling (currently ₹21,000)

   Professional Tax Settings:

   1. Go to Payroll → Configuration → Statutory Settings → PT

   2. Select your state

   3. System will auto-configure PT slabs based on state rules

   4. Review and adjust if needed

   TDS Settings:

   1. Go to Payroll → Configuration → Statutory Settings → TDS

   2. Set financial year

   3. Configure tax slabs (auto-populated based on current IT rules)

   4. Set standard deduction amount

   5. Configure HRA exemption rules

   Annual Review

   Review and update statutory settings at the beginning of each financial year as rates and limits may change based on government notifications.

   Critical Step

   Statutory configuration is mandatory before generating payroll. Without proper PF, ESI, PT, and TDS settings, payroll calculations will be incorrect and may lead to compliance issues.

4. Assign Employee Salary Structures

   After creating salary components and configuring statutory settings, assign salary structures to employees with specific amounts or percentages.

   How to Assign Salary Structure:

   1. Go to Payroll → Configuration → Employee Salary Structure

   2. Select an employee from the dropdown

   3. Click "Add Component" for each salary component

   4. Enter the amount or percentage for each component

   5. Review the CTC (Cost to Company) calculation

   6. Set the Effective From Date

   7. Click "Save Structure"

   Bulk Import

   You can import salary structures for multiple employees using Excel. Download the template, fill in the data, and upload it back. This saves time when setting up many employees.

5. Add Employee Bank Details (Optional but Recommended)

   Bank details are required to generate salary payment files and transfer salaries electronically.

   How to Add Bank Details:

   1. Go to Payroll → Configuration → Bank Details

   2. Select an employee

   3. Click "Add Bank Account"

   4. Enter bank information:

      • Bank Name

      • Branch Name

      • Account Number

      • IFSC Code

      • Account Type (Savings/Current)

   5. Mark as "Primary Account" if employee has multiple accounts

   6. Click "Save"

   Validation

   The system validates IFSC codes and account numbers. Ensure you enter correct information to avoid payment failures.

   Optional Step

   While bank details are optional, they are highly recommended for electronic salary transfers. You can still generate payroll without bank details if you plan to pay salaries through cash or cheque.

Setup Checklist

Before processing your first payroll, ensure you have completed all mandatory steps:

• Step 1: Added at least one active employee

• Step 2: Created all required salary components (earnings and deductions)

• Step 3: Configured statutory settings (PF, ESI, PT, TDS) - MANDATORY

• Step 4: Assigned salary structures to all active employees

• Step 5: Added bank details for employees - OPTIONAL

• Verified attendance data is available

Mandatory vs Optional Steps

Steps 1-4 are mandatory and must be completed before you can generate payroll. Step 5 (Bank Details) is optional but highly recommended for electronic salary transfers.

Ready to Process Payroll?

Once you've completed all setup steps, you're ready to generate your first payroll! Proceed to the Monthly Processing section to learn how.