Frappe HRMS – Chapter 7: Payroll

Part of the Frappe HRMS documentation series. | Upstream: github.com/frappe/hrms

The Payroll module handles the complete salary computation cycle: from salary structure design through batch payroll entry, salary slip generation, disbursement, and accounting integration. Mandatory government contributions (SSS, PhilHealth, Pag-IBIG) and BIR withholding are configured here as Salary Components.

1. Payroll Period

Purpose

Defines the financial year for payroll (start date to end date). All payroll runs, income tax computations, and benefit applications reference the active Payroll Period.

Steps

Go to Payroll → Setup → Payroll Period → New.
Enter Period Name (e.g., Payroll Year 2025), Start Date, and End Date.
Select Company.
Under Payroll Period Dates, define each payroll cycle within the year (e.g., semi-monthly: 1st–15th, 16th–end of month).
Save.

2. Salary Component

Purpose

Defines an individual earning or deduction that appears on a salary slip. Components use formulas to calculate amounts based on other components, employee data, or fixed values.

Component Types

Type	Examples
Earning	Basic Salary, COLA, Transportation Allowance, Hazard Pay, Night Differential, Holiday Pay, Overtime Pay, 13th Month Pay
Deduction	SSS Employee Share, PhilHealth Employee Share, Pag-IBIG Employee Share, BIR Withholding Tax, Salary Advance Recovery, Loan Deduction

Key Fields

Component Type: Earning or Deduction
Depends on Payment Days: Yes/No — if Yes, amount scales proportionally to actual days worked
Variable Based on Taxable Salary: For income tax computation
Is Tax Applicable: Whether this component is subject to income tax
Accounts: Expense and payable accounts per Company

Steps

Go to Payroll → Setup → Salary Component → New.
Enter Component Name and select Type.
Set formula or fixed amount under the Amount section.
Configure tax applicability and payment day dependency.
Map to accounting accounts.
Save.

Common Formulas

Component	Formula Example
COLA	`500` (fixed, non-taxable)
Transportation Allowance	`1500` (fixed)
Night Differential	`base * 0.10 * (night_hours / total_hours)`
SSS Employee Share	Lookup table / custom formula
PhilHealth Employee Share	`base * 0.025` (2.5% for 2025)
Pag-IBIG Employee Share	`min(base * 0.02, 100)`
BIR Withholding Tax	Computed via Income Tax Slab

3. Salary Structure

Purpose

A template that defines which Salary Components an employee receives and how they are calculated. A Salary Structure is assigned to an employee via a Salary Structure Assignment. When payroll is run, the structure's components and formulas produce the salary slip line items.

Steps

Go to Payroll → Setup → Salary Structure → New.
Enter Structure Name (e.g., Regular Employee – 2025, Project-Based – 2025).
Set Payment Frequency (Monthly, Semi-Monthly, Weekly, etc.).
Under Earnings table, add all earning components.
Under Deductions table, add all deduction components.
For formula-based components, formulas can reference:
- base — employee's base salary
- Other component amounts by variable name
- Employee fields (e.g., employee_doc.employment_type)
Save.

Note

Do not add SSS, PhilHealth, or Pag-IBIG directly as fixed amounts in the structure — use formulas or the Income Tax Slab mechanism so the deductions update automatically when rates change.

4. Salary Structure Assignment

Purpose

Links a Salary Structure to a specific employee with a base salary and effective date. An employee can have multiple assignments over time (e.g., when promoted or when the structure changes).

Steps

Go to Payroll → Setup → Salary Structure Assignment → New.
Select Employee and Salary Structure.
Set From Date (effective date).
Enter Base Salary (the employee's basic monthly pay).
Select Payroll Frequency if different from the structure default.
Save and submit.

Bulk Assignment

Use Bulk Salary Structure Assignment to assign the same structure to multiple employees at once.

5. Additional Salary

Purpose

One-off additions or deductions that are not part of the standard Salary Structure — processed in a specific payroll period. Examples: 13th month pay, incentive bonus, salary advance recovery, meal subsidy.

Steps

Go to Payroll → Additional Salary → New.
Select Employee, Salary Component, Amount, and Payroll Date (the month it should appear in).
Save and submit.
System includes this in the next Payroll Entry for that employee.

6. Payroll Entry

Purpose

Processes payroll for a batch of employees for a defined period. Creates individual Salary Slips, computes all earnings and deductions, and generates the consolidated accounting entry.

Prerequisites

All Salary Structure Assignments up to date
Attendance records finalized for the period
Additional Salaries submitted for the period
Leave Without Pay (LWOP) records finalized

Steps

Creating the Payroll Entry

Go to Payroll → Payroll Entry → New.
Select Company, Payroll Frequency, Start Date, and End Date.
Optionally filter by Department, Branch, or Designation.
Click Get Employees — system lists all eligible employees.
Review the list. Remove any employees who should be excluded.
Click Create Salary Slips — system generates a Salary Slip for each employee.

Reviewing and Submitting

Review individual Salary Slips for accuracy (check LWOP deductions, OT additions, government contributions).
Once satisfied, click Submit Salary Slips from the Payroll Entry.
Click Make Payment to generate the accounting entries (Journal Entry posting to salary payable accounts).

Accounting Impact

On submission:

Debit: Salary Expense accounts (per Salary Component account mapping)
Credit: Salary Payable (employees)

On payment:

Debit: Salary Payable
Credit: Cash / Bank

7. Salary Slip

Purpose

The individual payslip for one employee for one pay period. Shows all earnings, deductions, government contributions, net pay, and leave days. Can be emailed to the employee directly from the record.

Key Sections

Attendance Summary: Working days, present days, leave days, LWOP days
Earnings: Each earning component with computed amount
Deductions: Each deduction (SSS, PhilHealth, Pag-IBIG, tax, etc.)
Loan Details: Any salary-linked loan deductions
Net Pay: Total Earnings – Total Deductions

Actions

Email Salary Slip: Sends a PDF copy to the employee's email.
Print: Generates a printable payslip.

Payroll Correction

If errors are found after submission, use Payroll Correction to amend specific salary slip values without reprocessing the full payroll entry.

8. Salary Withholding

Purpose

Temporarily holds an employee's salary payment — for example, pending completion of clearance, disciplinary investigation, or awaiting documentation. The withheld amount is released later via a Salary Withholding Cycle.

Steps

Go to Payroll → Salary Withholding → New.
Select Employee, From Date, and reason.
Submit. Future salary slips will flag this employee's payment as withheld.
When ready to release, create a Salary Withholding Cycle to process the release.

9. Gratuity

Purpose

End-of-service gratuity computation for employees upon retirement or long-service separation. In the Philippines, this covers retirement benefits under RA 7641.

Prerequisites

Gratuity Rule configured with country-specific slabs
Employee separation record or confirmed eligibility

Steps

Go to Payroll → Gratuity → New.
Select the Employee.
System computes gratuity based on:
- Years of service
- Last drawn salary
- Gratuity Rule slab (e.g., 22.5 days per year of service for RA 7641)
Review computed amount.
Submit. Process payment via Payment Entry.

Gratuity Rule (Philippine RA 7641)

Employees who have rendered at least 5 years of service are entitled to retirement pay.
Computation: 22.5 days × monthly rate × years of service.
Applies to employees aged 60 (optional) or 65 (compulsory).

10. Arrear

Purpose

Computes back-pay owed to an employee when a salary revision takes effect retroactively. The system calculates the difference between old and new salary for each back-dated period and creates an Additional Salary for the current payroll run.

Steps

Go to Payroll → Arrear → New.
Select Employee and the date range for back-pay.
System computes the difference between old Salary Structure Assignment and current.
Submit. An Additional Salary record is created for the arrear amount.

Reports

Salary Register — full earnings and deductions register for all employees in a period
Bank Remittance — bank transfer file for ATM salary crediting (formatted per bank requirements)
Salary Payments Based on Payment Mode — breakdown by cash / bank transfer / check
Salary Payments via ECS — Electronic Clearing Service file for bank submissions
Accrued Earnings Report — accrual-basis earnings summary

Related Chapters

Frappe HRMS — main index
Frappe HRMS - Ch08 Tax and Benefits — income tax computation, benefit applications
Frappe HRMS - Ch09 Philippine Localization — SSS, PhilHealth, Pag-IBIG configuration, 13th month pay, BIR withholding