Sometimes employees take unpaid leave. As we cannot reduce their monthly pay amount, we show the leave deductions in deduction loss of pay. These are now showing in payroll liabilities in summary page.
Why not? Even if they have a recurring payslip set up, you can edit the payslip before issuing it. A payslip should show as earnings only what was actually earned.
This is an incorrect procedure. Deductions are amounts you deduct on behalf of some outside entity, such as a union, tax authority, etc. See this Guide: https://www.manager.io/guides/how-to/set-up-payslip-items. All deduction items must be posted to a liability account because the business owes the money to an outside entity.
In summary, unpaid leave corresponds to a reduction in earnings, not a deduction from earnings.
Not necessarily, but Manger is structured with that limitation. Employers who:
a) provide accommodation to employees and deduct rent.
b) provide company cars to employees and deduct private usage allowance.
Currently these types of deductions have to be first posted to the BS and then transferred back to the P&L via Journal.
The oddity is the fact that you can create these types of “deductions” under Payroll Income Items but you can’t under Payroll Deduction Items which is their logical location.
Here in the middle east there is no unions or taxes. So as per ministry rule, the basic salary and other allowances must be mentioned as agreed in the contract. What we can do is use deductions to show the loss of pay or cash advances or any other liabilities owed to the company on a monthly basis.
Both of you have provided similar examples, where the “outside entity” I mentioned would be an internal account. The transferring by journal entry @Brucanna mentioned is equivalent to a payment transaction that would go to a true outside entity. Same number of entries.
To me, this makes sense, because in your examples the employee has earned something as part of total compensation: accommodation or use of a car. The fact that recovery takes place through the deduction only seems odd if recovery equals the full cost of what is provided. In many cases, that will not be true. Lodging is provided that is worth 500 per month, but the deduction is only 300. Or the full cost of the car is 1000, but personal usage accounts for only 250. As the program is currently structured, the full cost to the company of the “compensation” is recorded, along with the recovery amount. Likewise, if the deduction is for more than the true cost, such as 600 per month for the 500 accommodation, income would be recognized.
That is completely confusing. Since when has an outside entity (tax authority, superannuation, union) been the equivalent to an internal P&L account.
And therein lies the problem, if the Payroll Deduction Item could be posted directly to the P&L account then the Journal wouldn’t be required, therefore only one entry required not the two as forced by Manager.
The employees total compensation has absolutely nothing to do with - the employee earns 1000 per month regardless of any deductions. He has the choice of renting onsite or offsite - the rent payment (private landlord or boss) is a completely separate unrelated transaction to their earnings. Same with the car, use their own or a company car, the payment is unrelated to their to their earnings.
These deductions are not something which have been added into a package up front and then subsequently adjusted out - they are stand alone independent transactions. Why does Manager not recognise the existence of such deduction types and allow them to be posted directly.
For an extensive discussion on this subject read this topic
@JG-YPT
Enter a negative amount against gross pay.
So add another employee earning line, and select let say Basic Salary and enter a negative amount there with a narration.
It will work perfect.
@Abeiku - totally agree with your example and it fits in perfectly as an adjustment to earnings, but when the internal deduction (rent) is not related to earnings, then allowing the deduction under Payroll Deductions Items is a more logical workflow, rather then at present - as negative income.
@Brucanna You can create the deductions for Rent and car usage as Employee earning payslip items but enter negative amounts there. That is if the rent and car usage amounts are already added to some earning item.
Will this work?
Currently adding them as Payslip Earnings Items as negative items is the only direct P&L account posting method available even though they (rent / car) have absolutely nothing to do with any earnings item.
I was trying to draw an analogy, pointing out how the deduction might be posted to an internal account rather than the built-in flow of posting to a liability account payable to the outside authority. In other words, I was agreeing with your earlier suggestion/explanation, but trying to show how the concept could be extended.
True. My purpose for raising this was to point out that when a more traditional deduction is made, such as tax withholding, you already have to make the second transaction to discharge the liability to the tax authority. So the approach (which was your original idea, not mine) is no more work. I agree, though, there could be an approach that would make it less work.
This is not necessarily true. Taking your discussion a little further, amenities and fringe benefits (company-provided accommodation or car) are frequently considered part of total compensation, especially by tax authorities. Otherwise, a business and its employee could conspire to dodge taxes by taking all compensation in kind: company-paid lodging, free car, meals allowance, etc. In all jurisdictions I know anything about, all those are considered taxable income and may have to be reported directly to the tax authorities by the business. In such a case, they would normally be considered deductible expenses by the business, and you would need to record any recovery to avoid understating income. Your idea of handling these as deductions provides for proper accounting on the part of both business and employee.
Thanks. This method works fine for us.
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!
@Rajwani , you are responding to a 4-year old topic. Since then, many payroll procedures in Manager have changed, making this topic mostly obsolete. I have closed it.