Runtime HRMS supports multiple type of salary components to suit different business needs. Read on to learn 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.
Types of Salary Components
There are primarily 4 types of salary components that can be created in Runtime HRMS:
1. Day Based
2. Rate Based
3. Time Based
Each type of component is explained in following paragraphs:
Day Based components are those where employee salary is defined as a fixed amount for the month. The amount payable every month is calculated as per number of days payable in the month. To understand this case, let’s consider this example:
Suppose there is a Day Based salary component named ‘Basic Salary’.
Ram, one of your employee, has Basic Salary as 15,000 per month
The month has 30 days and Ram came to work for 16 days only. There were 4 weekly offs (paid days). Thus, total number of payable days will be 16+4 = 20 days.
In this case, Ram’s Basic Salary will be calculated as follows:
Salary per day: 15,000 / 30 = 500
Salary for 20 days: 500 x 20 = 10,000
Important: You can configure a component to calculate daily rate as per actual number of days or fixed number of days. When using actual number of days, salary will be divided by 30, 31, 28 or 29, as per the number of days in month. When using fixed number of days, you can specify any number for e.g. 25 to calculate daily rate.
Rate based components are useful when payment is based on variable units every month. Common examples of this component are:
A) Conveyance Allowance (Units = number of kms travelled)
B) Production Wages (Units = number of units produced)
C) 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, Rate could be Rs. 2 per km.
Thereafter, you need to input number of units every month for each employee. This input can be made from the user interface for each employee one by one or it can be imported from excel also.
Let’s take an example to understand this case.
Suppose Ram gets conveyance allowance @ Rs.2 per km travelled in the month. At end of a month, Ram submits his claim for travelling 350 kms in the month. The HR manager inputs 350 as no. of units.
Conveyance Allowance will be calculated as follows:
Rate x Units = 2 x 350 = Rs.700 for the month
Time based components are linked to the no. of hours worked by an employee based on in/out time data. Time data can be captured from various sources as follows:
A) Gatekeeper mobile attendance (Read More)
B) Excel Import
C) Static IP (Pull from Biometric Database)
D) Attendance Sync Utility (Sync Biometric Database)
You can learn about all above utilities in the Attendance related topics of this documentation.
Once the attendance data for employees is available in Runtime HRMS, you can define rules to calculate amount payable.
Usually, employee time data is divided in following parts:
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 Time based Component, you can choose to pay for one or more of 6 time parts described above.
As an example, consider that you want to pay your employees for hours worked after their shift end as Overtime. In this case, you can define a Salary Component named ‘Overtime’ and configure ‘Late Going Hours’ to be paid.
Now, suppose, Ram’s shift ends at 6:00 PM every day, but he worked till 7:00 PM on 10 days in the month. So, his total Late Going Hours will be 10 hours. If his Overtime Rate is Rs. 100 per hour, his total Overtime will be 10 x 100 = Rs. 1000 for the month.
Manual Components are, as the name state, completely manual entry. Some common examples of Manual Components could be ‘Mobile Reimbursement’ or ‘Medical Reimbursement’. In this case, you just need to input amount payable to employees every month and this amount will be added to employees’ salary without any further calculation.
While entering the amount, you have option to copy the amount from previous month also and make changes as necessary.
The amounts can also be imported from Excel file.
Types of Rate Calculation
Apart from the types of salary components described above, there is also a setting to define rate calculation for each component. There are following types of rate calculations possible:
1. Monthly Rate (Actual Days)
2. Monthly Rate (Fixed Days)
3. Daily or Unit Rate
As mentioned earlier in this article, Rate calculation is used to calculate daily rate of payment and is applicable for all types of components except ‘Manual’ components.
Monthly Rate (Actual Days)
When you select Monthly Rate (Actual Days), you need to define salary for an employee at a monthly level. To calculate daily rate, the system will divide salary by actual number of days in the month which can be 30, 31, 28 etc. as per period.
Monthly Rate (Fixed Days)
In this case, salary is again defined at monthly rate but daily rate is calculated by dividing the monthly salary with a fixed number of days for e.g. 25. The actual number of days in month/period are ignored in this case and the division always happen as per fixed days defined.
Daily or Unit Rate
When selecting this type of rate, the salary needs to be defined as daily rate of unit rate. For e.g. in case of Conveyance Allowance, you need to define salary as rate per kilometre.
Define your Salary Structure
Using the above 4 types of components and 3 types of rate calculation methods, you can create almost any type of salary component to suit your business needs.
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