How a payslip is worked out

Payroll in Penahak is monthly. The pay run works out each employee's salary, allowances, deductions, provident fund or SSF, CIT and tax from the settings, then the payslip is approved and posted to Accounting. This page says what goes into a payslip and where each part is set.

HR & payroll Concepts
9 min read
Updated October 20, 2026

For Payroll officer Accountant HR officer Administrator

On this page

The idea
What goes into a payslip
Pay months and the year
The life of a payslip
Confirm the settings with your accountant
How each part is worked out, in plain words

The idea

Payroll works month by month. For one pay month (a period), the pay run takes every working employee you select and works out a payslip from three things: the employee's own record, the company's payroll settings, and the month's extra items (overtime, absence, loan installments, one-off income or deductions).

The payslip is a draft until it is approved. Approved payslips are then posted to Accounting as one journal. Nothing is typed twice: the settings are entered once, the pay run reads them every month.

What goes into a payslip

Part of the payslip	Where it is set	How it is worked out
Basic salary and grade	Payroll setup › Designation salary (or per employee when the employee's salary is "based on employee setting")	The monthly figure, cut to the days from the joining date when the employee joined part way through the month. Grade is the number of grades the employee holds times the designation's grade amount
Allowances	Payroll setup › Allowance, by designation or by employee	A percentage of basic, a percentage of basic plus grade, a fixed amount, an amount times a monthly rate, or an amount times days present
Deductions	Payroll setup › Deduction, by designation or by employee	A percentage of basic, a percentage of basic plus grade, a fixed amount, or an amount per day
Provident fund (PF) or social security fund (SSF)	Payroll configuration (company wide) and the employee's Payroll details	A percentage of salary from the company and a percentage from the employee. A company uses PF or SSF, not both
Gratuity and CIT	Payroll configuration and the employee's Payroll details	Gratuity is a percentage of salary. CIT is a percentage or a fixed amount set on the employee
Tax	Payroll setup › Tax rule and the other tax tabs, Payroll configuration	The tax for the whole year is projected, reliefs are taken off, and the tax still to pay is spread over the months left in the year (Tax rules: slabs, discounts, rebates and relief)
Overtime, leave salary, other income	Other income and deduction, overtime requests	Added in the month they are approved or entered (Extra income and deduction: one-off items, PF loan, medical discount, previous income, Overtime: request, approval and payment)
Unpaid leave and absence	Leave requests, Absent day entry, attendance	Salary is cut for each day away (Absence, unpaid leave and attendance in payroll)
Loan installments and interest	Advance loan issue	Taken from the payslip until the loan is paid (How loan installments and interest are taken from pay)

Worked example: one employee's month, from attendance to the payslip

The pay month has 30 days. The employee's designation has a Basic salary of 30,000 on Designation salary, and the employee has no grade. The company has two payroll items: Meal allowance (a fixed 3,000, with Apply Leave Impact on Payroll Head ticked) and Staff welfare fund (a deduction of a fixed 600, taken after tax). Attendance based payroll system and Include Absence Salary are ticked on Payroll configuration. The employee has no PF, SSF, gratuity, CIT or loan.

What happened this month:

The employee had one day of approved paid leave. A paid day is not taken off salary.
One working day had no punch, no leave and no visit, so it was Absent. The payroll officer ticked Absent for that day on Absentee Payroll Deduction.

Step	Working	Amount
Basic salary for the whole month	Set on Designation salary	30,000
Absent days	The one absent day. The paid leave day does not count	1
One day's pay	30,000 ÷ 30 days	1,000
Absent-day salary on the basic	1,000 × 1 day	1,000
Meal allowance	A fixed amount	3,000
The absent day's share of the meal allowance	3,000 ÷ 30 days × 1 day	100
Absent line on the payslip	1,000 + 100	1,100
Staff welfare fund	A fixed amount	600
Social security tax and income tax	Worked out from your Tax rule and the year's projection	Not worked out here

The payslip, with Include Absence Salary ticked: Total income 33,000 (30,000 basic and 3,000 meal allowance) and Total deduction 1,700 (1,100 absent and 600 staff welfare fund) plus the two tax lines. Net salary is 31,300 less the tax. If Include Absence Salary were not ticked, the lines would already be reduced (basic 29,000, meal allowance 2,900, no Absent line), and the net before tax would be the same 31,300.

Pay months and the year

Pay months come from the period list of the fiscal year, in order: the first period is month 1 of the year. The tax part of the pay run needs to know how many months are left, counting this one, so it always treats the year as 12 pay months. A pay run is made for one period at a time; an employee cannot get two payslips for the same period.

The life of a payslip

Generate
Who
Payroll officer
Where
Payroll › Payroll generate
What changes
Each selected employee gets a payslip in Draft.
Recommend for approval
Who
Payroll officer
Where
Recommendation for approval
What changes
The payslip is Approval Process: it is ready for the approver.
Approve or disapprove
Who
Approver
Where
Approve or Disapprove
What changes
Approved payslips are locked and cannot be deleted. Disapproved ones go back to be corrected.
Post to Accounting
Who
Payroll officer or accountant
Where
Payroll JV tab
What changes
One journal voucher is made for the approved payslips you choose (What payroll posts to Accounting).

See Run the month's payroll for the screens and Recommend, approve or disapprove payslips for the approval step.

Confirm the settings with your accountant

Penahak applies the percentages, limits and tax slabs that your company enters in the settings. It holds no tax table or legal rate of its own, and it does not check what you enter against the law. The amounts it works out are only as right as those settings. Before the first pay run, ask your company's accountant to check the Payroll configuration, the Payroll items and their tax rules, and the Tax rule for the fiscal year, and to check the first month's payslips against a hand calculation.

How each part is worked out, in plain words

Use this list with your accountant. Each line says what Penahak does; your accountant confirms that it suits your company and that the settings behind it are right.

Months. The tax year is the fiscal year of the pay month. The year always counts as 12 pay months, and the pay months are numbered from the first period of the year.
Salary for part of a month. An employee who joins during the month is paid for the days from the joining date: the monthly basic divided by the days in the month, times the days.
Grade. Grade pay is the number of grades the employee holds times the grade amount of the designation. Basic plus grade never goes above the designation's maximum salary.
Absence. Each absent day costs the monthly basic and grade divided by the days in the month. Absent days are the days entered on Absent day entry to be deducted, approved unpaid leave (when Deduct unpaid leave salary is ticked) and, with Attendance based payroll system, the attendance deductions you select. Every calendar day of an unpaid leave counts, weekends and holidays included.
Allowances and deductions. If an employee has allowances of their own, only those are used for that employee; otherwise the designation's are used. The same goes for deductions. A percentage allowance is worked on the full monthly salary, and the share for days not paid comes off with the absence when the item is set to follow leave.
Provident fund, SSF and gratuity. The company's and the employee's percentages from Payroll configuration, worked on basic and grade (after absence, when Apply Leave Impact to PF/SSF is ticked). A company uses PF or SSF. The company's share is added to the employee's taxable income.
CIT. A percentage of the month's taxable pay or a fixed amount, as set on the employee's Payroll details.
The year's income. The pay run adds the months already paid this year, this month, and this month's amount again for each month still to come. Overtime and leave salary paid this month are counted the same way; a one-off income is counted once. Income from a previous employer in the same year is added.
Reliefs. Retirement savings (PF, SSF and CIT) up to the limits in the configuration; insurance premiums up to the yearly limits; the discounts your Tax discount rule gives (for women or for persons with impairment).
Tax. The year's tax is found from the slabs you entered for the fiscal year and the employee's group (Single or Married). The first slab is the social security tax; an employee on SSF pays none of it. The tax already charged this year is taken off and the rest is divided by the months left, so a raise or a bonus changes the monthly tax from that month on.
TDS on allowances. Allowances marked TDS-able are taxed at the TDS percentage in the configuration, outside the yearly calculation.
Medical tax discount. The relief entered for an employee comes off the month's income tax, up to the yearly limit in the configuration and never more than the month's tax.
Loans. Each month takes the installment (or the amount you set for that month), and interest at the loan's yearly rate for the days since the last payment, in whole rupees.
Rounding. Amounts are kept to the paisa; tax is not rounded to whole rupees.

Your accountant should also check that the payroll journal posted to Accounting agrees with the payslips each month (What payroll posts to Accounting).