Payroll
How a payslip is calculated
The exact order and formulas the payroll run uses for basic salary, proration, overtime, allowances, insurance, absence, missing time, tax, loans, penalties and net pay.
5 min readLast updated
In this article
Every payslip carries the section How this was calculated: one line per step, with the rate, the base and the working that produced each amount. It keeps the settings used at processing time, so it still explains the payslip after a rate changes. The steps below follow the order the system applies.
To see the working
Open People › Payroll › Payslips, then open a payslip with Actions › View.
Read How this was calculated above the totals. Choose Detailed before Print or Download to include the working on paper.
Payslips processed before the system began recording the working show the amounts only, with a notice that explains why.
Earnings
Step | How the system calculates it |
|---|---|
Basic salary | The contracted basic salary in force at the end of the period. It is prorated only for someone who joined or left during the period: basic × days employed in the period ÷ calendar days of the period. A full-period employee gets the full contract salary. |
Overtime | Overtime hours recorded in attendance × hourly rate × overtime multiplier. The hourly rate is basic ÷ (working days per month × 8 hours). The multiplier is the employee's own, or Overtime rate multiplier in HR Settings (1.5 by default). Paid only while overtime is included in salary for that employee. |
Rest-day work | Hours worked on a weekly rest day or a holiday, at the same hourly rate and the rest-day multiplier (2 by default). |
Allowances | Every active allowance whose effective dates cover the period. A percentage allowance is a percentage of the basic salary above, never of the gross. |
Gross salary | Basic + overtime + rest-day work + allowances. |
Deductions, in order
Apart from social insurance, each deduction is capped at what is left of the gross, and net pay never falls below zero.
# | Deduction | How the system calculates it |
|---|---|---|
1 | Social insurance (employee) | Basic salary, capped at the salary cap, × the employee rate. The employer share is calculated the same way and shown under Employer Contributions; it is not deducted from the employee. The method is None by default, which deducts nothing. |
2 | Benefits | The monthly employee cost of each active benefit enrollment that is set to be deducted from payroll. |
3 | Absence | Only when Auto-deduct absences is on. Each missed scheduled day costs basic ÷ working days per month (30 by default). Weekend days and holidays are never scheduled, a half day counts as half missed, days after today are not counted, and approved paid leave counts as present. |
4 | Unpaid leave | Approved leave of an unpaid type, at the same daily rate, on its own line. |
5 | Missing time | Unexcused late arrival and early departure minutes for the period, plus approved hourly permission minutes beyond the leave type's monthly allowance or on an unpaid type. The total is charged in blocks: hourly rate = basic ÷ working days per month ÷ the payroll working hours per day (8 by default), the first block at the first multiplier, the next at the second, and the last multiplier for everything after. |
6 | Branch regulatory deductions | set up in payroll localization for the employee's branch. |
7 | Income tax | (see below). |
8 | Loan installments and recurring deductions | A scheduled installment is taken only when due in the period. If the remaining pay cannot cover it, a partial amount is taken and the payslip says so. |
9 | Penalties | that are approved and not yet deducted, issued on or before the period end: a fixed amount, a percentage of basic, or days of salary at basic ÷ 30. |
Income tax
Taxable income = gross − social insurance, benefits, absence, unpaid leave, missing time and regulatory deductions − non-taxable allowances. Loans, recurring deductions and penalties do not reduce taxable income. When automatic tax calculation is on, the progressive brackets apply; brackets stated per year are applied to the month's income × 12 and the result is divided by 12. With no brackets defined, the tax is zero. Statutory figures come from in HR Settings decides whether the rates and brackets come from the payroll settings or from the branch's country profile.
Net salary = gross − all deductions − tax, floored at zero.
A worked example
Basic salary 6,000 for a full month, 30 working days per month, 8 working hours per day, block size 2 hours, multipliers 1, 1.5, 2:
10 overtime hours at 1.5: 6,000 ÷ 240 = 25 per hour, so 10 × 25 × 1.5 = 375.
2 missed days: 6,000 ÷ 30 × 2 = 400.
150 missing minutes: 25 per hour; the first 120 minutes × 1 = 50, the next 30 minutes × 1.5 = 18.75; total 68.75.
Common questions
Why was an employee with no attendance paid in full? With no attendance and no leave at all in the period, the system does not treat every day as absent. The working says that no attendance was recorded.