To add a recurring allowance for a specific payroll group, click on Payroll Settings from the sidebar and open the Payroll Groups section.
Select the payroll group you want to update and go to the Salary Components tab.
Stay on the Recurring Components section, where all monthly fixed components are listed.
Click the Add New Component button on the top-right to create a new recurring allowance.
Enter the component name and choose Allowance as the component type.
Select the pay logic, such as Flat Amount or Percentage of CTC, and enter the required percentage or amount.
If applicable, define the maximum annual limit.
Explanation of each checkbox with examples:
- Apply tax exemption to this component
- Use this when the allowance qualifies for tax relief.
- Example: If an employee receives a “Travel Allowance,” a part of it may be exempt from tax based on rules.
- Make it eligible for arrears calculations
- Enable this if arrears should be calculated when salary revisions occur.
- Example: If the employee’s salary is revised from January but the change is done in March, the system will automatically calculate the difference for January and February.
- Permit employee-level custom values and overrides
- Allows individual employees to have a different amount than the default.
- Example: Standard meal allowance is ₹1,000, but a field employee gets ₹1,500 because of frequent travel,you can also manually adjust the amount during payroll execution.
- This component is not affected by any Loss of Pay days
- Component is paid in full, even when an employee has LOP.
- Example: A fixed monthly phone reimbursement of ₹500 remains unchanged despite unpaid leaves.
- Calculate it on a pro-rata basis
- Component amount adjusts based on attendance.
- Example: If allowance is ₹3,000 monthly and the employee works only half the month, they receive ₹1,500.
- Include in EPF Contribution
- Adds this component to EPF-calculable wages.
- Example:If PF is calculated on Basic + Special Allowance, and the Special Allowance is ₹3,000, then this ₹3,000 becomes part of PF-calculable wages once you enable this option.
- Include in ESI Contribution
- Adds this component to ESI gross salary.
- Example: If an employee’s salary is ₹20,000 and you add an allowance of ₹1,000 with this option enabled, then the ESI gross becomes ₹21,000.
- Display in the payslip
- Shows this allowance as a separate line item on the employee’s payslip.
- Example: “Meal Allowance – ₹1,500” visible in payslip.
- Mark as active
- Ensures the component is enabled and included in payroll calculations.
- After completing the configuration, click Save to add the recurring allowance to the payroll group.