Deductions from Payslips

@Tut Thank you for your updates. I just tried to inquire on most relevant topics unfortunately topic is closed therefore I have to re-state my query separately again.

We follow monthly pay system however there are certain cases where pay is deducted due to late arrivals etc and organization deduct net pay. Whereas, it is not wise to issue payslip reducing the gross pay and it is agreed and pay slip is used for certain other benefits. Therefore, we would like to reflect it Payslip deduction item linking it salaries expense rather liability account.

Accounting entry would be same as it results from negative entry whereas purpose of showing gross salary will stand!

I will appreciate, if you guide for the solution.

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As I said in the other thread, your question was already answered. Did you read the entire thread? And have you read the various payroll Guides covering the flexibility added to the program since that obsolete topic was last used?

Yes, I did.

We can post negative entries for deduction in pay but it will reduce gross pay as well. Our concern is not to change gross but deductions such as reduction in salary due to late etc should be show in counter side.

If you define payslip items correctly, they will all show on the payslip. So your employee will see the regular pay and the reduction. Gross pay is the net of all those payslip items.

All payslip are created and linked to appropriate accounts.

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We want to link this deduction account with ‘Salary Expenses’ not Salary Payable.

One Option is to create an item on earning side and enter details with negative number. Other option is above but we are unable to link to Salary Expenses. Hope you can guide further.

Apologies I need a solution for it.

Your reductions to employee pay due to reasons like late arrival are not expenses. They cost your business nothing. (In fact, they save you money.) They represent reduced liabilities to pay your employees. So posting them to a Salary payable liability account is appropriate. You could also post them to a Salary recovery contra liability account if you want for more visibility. But there is no accounting necessity for that.

I understand your point, its ultimately reduction in expense / saving. Whereas, it is not wise to reduce Earning Items otherwise every month earning will fluctuates and like tax, bank and other dept need to verify constant salary over period.

Actually, payslip generate salary expense v salary payable with certain amount like USD 100; accounting will be equal for both.

Now, if USD 10 is deducted for certain reason than actual expense should be recorded in books of accounts is USD 90 (expenses v payable). If it is the case then we can reduce from earning items but our concern is not managed while reducing earning items.

Our objective to state earning item as per agreed terms and conditions; deduction should be managed differently. Contra liability will not suffice the purpose as in net we need to reduce salary expense.

I hope you understand the concern correctly.

@Rajwani, I do not know how many more ways I can say this. Your reduction of the amount you pay an employee is not, in Manager, a payslip deduction item. It is a payslip earnings item, which must be entered as negative. It can be posted to a different account than Salary payable if you want. But that account will be a liability account; having negative entries, it will function as a contra liability account. It will also have the effect of reducing the balance in your salary expense account.

Deductions are for things like taxes withheld, labor union dues you pay to the union on behalf of the employee, or health insurance costs you pay to an insurance fund.

I would love to see that implemented. Personally I cannot see why the developer would stand behind one particular method for treatment of payroll deduction and label every other method “the wrong way.” But that seems to be the situation here.

Many have made the same or similar requests for a variety of reasons like display of full gross pay, legal compliance andstreamlining of payroll process. Here are some examples.

And lo and behold, there’s actually an idea for that that I missed the whole time.

I am going to vote for it and you can vote for that idea if think it should be implemented.

Perhaps, but I don’t know how many ways I can say that Manager is WRONG. It is clearly obvious that you either haven’t understood or just clearly ignored the poster’s very clear points, being:

  1. it is not wise to issue payslip reducing the gross pay
  2. Our concern is not to change gross
  3. Our objective to state earning item as per agreed terms and conditions

So as to illustrate, if the agreed terms are gross 2,000, then the payslip’s gross earnings need to show 2,000. It is unacceptable to show gross earnings of 1,900 because of a negative earnings item of 100, because then the payslip fails to match the agreed terms.

The 100 (for what ever reason) is a deduction (recovery) and is unattached to the gross earnings.

The point to highlight here, it is not what’s on an individual payslip but how the payslips are reported in respect to the employment terms. This report shows full transparency:

Whereas this report indicates that the employee may have been underpaid:

Quite frankly, there is nothing in accounting principles that justifies or supports Manager in restricting the payslip deduction items to being allocated to BS Liability accounts only. In fact, there have been a number of Users who have clearly illustrated by example why the restriction is flawed.

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I have neither misunderstood nor ignored @Rajwani’s points, all of which were addressing payslips, not the Payslip Summary report you have used to illustrate your comments. I also confined my remarks to payslips, not reports. So let me illustrate what I have meant about payslips providing full visibility if payslip items are defined correctly.

With two payslip earning items defined, Regular wages and Pay reductions, a payslip can be produced that shows the full amount earned per the terms of an employment agreement, as well as the reduction for whatever reason. In this example, there are also a deduction for income tax and a contribution to retirement:

Your objection seems to be to Manager’s use of the phrase Gross pay, which you apparently want to restrict to the contractual amount normally earned. The program, however, uses that phrase to refer to the sum of all positive and negative earnings items. You may not personally like the phrase, but its use is perfectly legitimate. Looking up gross in the dictionary, you can find this definition:

TOTAL, whole, entire, complete, full, overall, comprehensive, aggregate; before deductions, before tax

In other words, gross pay is not the amount that could or should have been earned, but the total or aggregate amount actually earned. The antonym is given as “net,” also consistent with Manager’s use; net pay is the pay after deductions. So Manager is not wrong, as you insist.

Could you argue that the Pay reduction in my example should be called a deduction? You could, but you would be arguing semantics. Manager’s developer chose to reserve that term only for payslip items that would be owed to someone else on the employee’s behalf. There is nothing wrong with that usage either.

No, the report does not indicate that. It indicates what the employee actually earned, which is what it is supposed to do. It is a summary. If you want the details on a report, the Payslip Totals per Item and Employee gives them to you:

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In my opinion this is an example of a more general problem:
How to efficiently handle entities / contacts who interact with a business in more than one way. In this case

  • Employee and customer

But many other combinations occur in different business and situation.
So I suspect a good overall solution is to have a “Contact” address book / database table, with a check box for each of the various roles.
Manager could then support the various cross posting which are useful such as accounts payable for an employee.