Salary Component

Overview

Salary Component – Business Overview

Salary Component is a foundational setup document used to define every individual element that makes up an employee’s pay. It allows an organization to clearly structure earnings and deductions so that salaries are calculated, paid, reported, and analyzed in a consistent and transparent way.

In simple terms, Salary Component answers the question:
“What are the building blocks of employee pay in our organization?”

Purpose in Business Operations

Salary Component is used to: - Define all earnings (such as basic pay, allowances, incentives, bonuses) - Define all deductions (such as taxes, social contributions, loan repayments) - Ensure consistent salary calculation across all employees - Support accurate payroll processing, payslips, and financial reporting - Align payroll practices with company policies and legal requirements

Without well-defined Salary Components, payroll becomes inconsistent, difficult to audit, and prone to errors.

Prerequisites and Setup Requirements

Before using Salary Component effectively, the business should have: - A clear compensation policy outlining salary structure and benefits - Defined payroll cycles (monthly, bi-weekly, etc.) - Agreement on which components are earnings vs deductions - Clarity on which components are: - Fixed or variable - Paid regularly or occasionally - Alignment with legal, tax, and statutory requirements

Salary Component is usually configured early during payroll setup and reviewed periodically.

Typical Workflow and Business Usage

Define Salary Components
HR or payroll teams create Salary Components for each pay element used by the organization.
Assign Components to Salary Structures
Salary Components are grouped to form a complete salary package for roles or employees.
Apply to Employees
Employees are assigned salary structures that include the relevant Salary Components.
Run Payroll
During payroll processing, Salary Components determine how gross pay, deductions, and net pay are calculated.
Payslip and Reporting
Each Salary Component appears clearly on employee payslips and payroll reports, improving transparency.

Key Business Scenarios Where Salary Component Is Essential

Standardizing employee compensation across departments and locations
Introducing new allowances or benefits (e.g., travel allowance, performance bonus)
Managing statutory deductions required by law
Handling variable pay such as commissions or overtime
Auditing payroll and responding to employee salary queries
Supporting financial planning and cost analysis related to payroll expenses

Important Considerations for Users

Naming clarity is critical: Salary Component names should be easy for employees to understand on payslips.
Consistency matters: Avoid creating duplicate or overlapping components.
Legal compliance: Ensure statutory deductions and mandatory benefits are correctly defined.
Review regularly: Salary Components should be reviewed when policies, laws, or compensation strategies change.
Impact awareness: Changes to a Salary Component can affect multiple employees and payroll results.

In Summary

Salary Component is the backbone of payroll accuracy and transparency in Dafater. It ensures that every part of employee compensation is clearly defined, consistently applied, and easy to understand—supporting smooth payroll operations, employee trust, and regulatory compliance.

Basic Information

Module: Payroll
Document Type: Setup

Fields

Field Name	Label	Type	Required	Options	Description
salary_component	Name	Data	✓	-	Unique salary component name used across Dafater payroll processing
salarycomponentabbr	Abbr	Data	✓	-	Short abbreviation for payroll calculations and formulas
type	Type	Select	✓	Earning, Deduction	Defines whether component is an earning or a deduction
description	Description	Small Text		-	Business description explaining purpose of the salary component
dependsonpayment_days	Depends on Payment Days	Check		-	Calculates amount based on employee payable working days
istaxapplicable	Is Tax Applicable	Check		-	Indicates whether this component attracts applicable taxes
deductfulltaxonselectedpayrolldate	Deduct Full Tax on Selected Payroll Date	Check		-	Deducts entire tax amount on selected payroll period
variablebasedontaxablesalary	Variable Based On Taxable Salary	Check		-	Varies component value based on taxable salary amount
isincometax_component	Is Income Tax Component	Check		-	Marks component as part of income tax calculation
exemptedfromincome_tax	Exempted from Income Tax	Check		-	Specifies if component is exempt from income tax
roundtothenearestinteger	Round to the Nearest Integer	Check		-	Rounds calculated amount to nearest whole number
statistical_component	Statistical Component	Check		-	Used only for reporting, not affecting payroll totals
donotincludeintotal	Do Not Include in Total	Check		-	Excludes component from total salary calculation
donotincludeinaccounts	Do Not Include in Accounting Entries	Check		-	Prevents accounting entries for this salary component
removeifzero_valued	Remove if Zero Valued	Check		-	Automatically removes component when calculated amount is zero
disabled	Disabled	Check		-	Disables this salary component from further use
accounts	Accounts	Table		Salary Component Account	Defines accounting heads linked to this salary component
condition	Condition	Code		PythonExpression	Logical condition controlling when this component applies
amount	Amount	Currency		-	Fixed amount paid or deducted for this component
amountbasedon_formula	Amount based on formula	Check		-	Enables formula-based calculation instead of fixed amount
formula	Formula	Code		PythonExpression	Expression used to dynamically calculate component amount
help	Help	HTML		Help , , Notes: , , , Use...	Guidelines and examples for configuring conditions and formulas
isflexiblebenefit	Is Flexible Benefit	Check		-	Identifies component as employee flexible benefit
maxbenefitamount	Max Benefit Amount (Yearly)	Currency		-	Maximum yearly amount allowed under this benefit
payagainstbenefit_claim	Pay Against Benefit Claim	Check		-	Pays amount only when employee submits benefit claim
onlytaximpact	Only Tax Impact (Cannot Claim But Part of Taxable Income)	Check		-	Affects taxable income without allowing employee claims
createseparatepaymententryagainstbenefitclaim	Create Separate Payment Entry Against Benefit Claim	Check		-	Creates separate payment entry for approved benefit claims

Child Tables

Accounts (Salary Component Account)

Field Name	Label	Type	Options	Description
company	Company	Link	Company	Company within Dafater where this salary component account applies
account	Account	Link	Account	General ledger account used for posting this salary component
account_payable	Accrued Salaries Payable Account	Link	Account	Payable account in Dafater for accrued salaries related to component

Permissions

Role	Read	Write	Create	Delete	Submit	Cancel
HR User	✓	✓	✓	✓
Employee	✓

DocType	Relationship	Module
Additional Salary	Linked from	Payroll
Employee Benefit Claim	Linked from	Payroll
Employee Incentive	Linked from	Payroll
Gratuity	Linked from	Payroll
Leave Type	Linked from	HR
Retention Bonus	Linked from	Payroll
Salary Structure	Linked from	Payroll

Salary Component

Overview