Setting up payroll

Before you can issue the first payslip, you need to setup payslip items. Payslip items are types of earnings, deductions and employer contributions. Once you create your payslip items, you will be able to use them on your payslips.

Earnings items

Earnings items are typically wages, salary, bonus, commission and various allowances. It’s types of earnings your employee will see on their payslip.

When you setup an earnings item, you will need to select an expense account. Usually, the appropriate expense account for any earnings item is the Wages and salaries account but you can link the earnings item to another expense account, if required.

Deduction items

Deduction items are typically payroll taxes but there are also other deductions such as insurance, union fees or wage garnishment.

To add a new deduction item to be used on a payslip:

  1. Go to Settings tab.
  2. Click Payslip Items.
  3. Click New Deduction Item button.
  4. Enter the description of the deduction item.
  5. Click Create button to save the deduction item.

When you setup deduction items, you also need to select a liability account. This is because deductions from an employee’s gross pay (e.g. payroll tax, union fees) are payable to someone else (e.g. tax authority, union).

You can allocate all deduction items to the general Payroll liabilities account but it’s preferable to setup custom liability accounts under the Chart of Accounts for each deduction item to track the liability for each item separately on the balance sheet.

Employer Contribution Items

Employee contribution items are special items that are characterized as both earnings and deductions…

For example, if you are required to contribute a certain percentage of an employee’s gross pay into a pension or superannuation fund, it is regarded as a contribution. It represents employee earnings but is deducted from their gross pay at the same time and is subsequently paid to their pension fund.

Another example is if you have a type of matching program where you add to an employee’s charity contribution. Through a matching gift program, your policy may be to double or even triple an employee’s contribution toward a charity.

When you setup an employer contribution item, you need to select an expense account (e.g. Superannuation or Charity contribution). And at the same time you also need to select a liability account (e.g. Superannuation payable or Charity contribution payable).

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Leave entitlements and YTD totals would be useful additions to the payslips?

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YTD totals are coming very soon. Leave entitlements later on.

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I’ve tried to setup exactly as in this instruction. Why is my expenses accounts a negative ?

Have you got the Debits/Credits reversed ? Where did the contra entry go - Employee Clearing ? Is that balance also reversed?

If you click on the 5000 balance and then click on edit for a transaction, can you post a screenshot of the transaction ?

My other expenses accounts appears correctly (Debits). However, all expenses in this group appears negative, which seems reversed. I’m not certain what I had done to make it reversed. Appreciate all the help I can.

Screenshot of the transaction as follows:

The Payslip seems to be okay - so unsure what the cause is.

Another possible cause could be how the structure within the COA P&L is functioning
Relocate the 6003 Salaries account to another expense area of the P&L and see what occurs
Maybe post a screenshot of the COA P&L

I’m also very unsure what is the cause. My last guess is that it is a coding thing? Hope somebody can help shine some light…

Did you try relocating 6003 Salaries to another expense area, and was it still negative
Also the screenshot is not very clear

Relocate to another expense area?

I’m not sure if i understand correctly, but i’ve tried to change the account code to 4600 series so that it ‘Wages and Salaries’ appears after cost of sales (is this what you mean as relocate?).

However, the amount still appear as negative.

I’m not sure what else…

Sorry, I should have said - change the Group for 6003 to Expenses, but changing the code should have the same effect - as long as it wasn’t showing in the “Less - Wages & Salaries” group.

Ok - if the balanced stayed negative then the COA P&L functioning doesn’t seem to be the problem.

Have you deleted and re-created the payslip ?
Is your Employee Clearing on the Summary tab also showing negative ?
For some unexplainable reason it appears that the payslip wants to be Income

You could create a test company and just do standard payslip transaction - don’t touch COA P&L
Just do salary, don’t worry about deductions

Ok i think i’ve figured out whats the problem.

When I change the account to ‘Expenses’ the balance shows as positive.
but
When I change the account to ‘Expenses–>Wages & Salaries’, it reverts back to negative. I think this is because i did not select ‘expenses’ when i created the accounts group ‘Wages & Salaries’. and there is no way i can select it after its been created.

So what i did is to delete this accounts group, re-create another and making sure i tick ‘expenses’, and problem solved.

Thanks Brucanna!

Would it be good if there is position tab, worker code etc in the payslip .

how do i enter YTD payroll ?

Are you asking because you are transferring historical data from other accounting system? You need to give more context what you are doing.

How do I select which business bank account is coming from to pay wages?

To pay wages you would Spend Money and under “Paid From” select the relevant account

Where is that exactly? Thanks for the reply :slight_smile:

What do I select to get to that part though? Sorry for the questions, I’m hopeless at this sort of thing, so your help is appreciated. Is it in payslip? When I create a new payslip?