What are the types of payments and deductions found in salary slips?<\/h2>\n\n\n\n
In Sri Lanka, companies use different structures when calculating the salaries of employees. Some use a simple salary structure with the total amount of earnings counting as the basic salary. While others use a tiered structure with elements such as a basic salary, benefits, allowances, overtime, and other incentives being part of a standard salary of an employee.<\/p>\n\n\n\n
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- Basic salary<\/strong> \u2013 This is the main part of an employee\u2019s salary. Usually, this amount is a set amount that does not change over time unless there is a promotion or salary increase.<\/li>\n\n\n\n
- Allowances<\/strong> \u2013 A form of payments paid at the discretion of the company or to contribute towards the expenses of an employee. It is typically negotiated into the employment contract. Some common types of allowances include vehicle allowances, housing allowances, or travel allowances.<\/li>\n\n\n\n
- Overtime pay<\/strong> \u2013 In Sri Lanka, overtime pay is governed by the law which sets the overtime pay rate at 1.5 times the amount of hourly wage.For example, if you have an employee who earns 300 LKR hourly, for every hour they work overtime, you will have to pay them 450 LKR. Some companies have set limits on how many hours an employee could work overtime for a month.<\/li>\n\n\n\n
- Salary advances<\/strong> \u2013 This allows employees to request a portion of their next month\u2019s salary from the employer. It is up to the company to provide such advances with many companies having strict policies around these types of payments.<\/li>\n\n\n\n
- Commissions and reimbursements<\/strong> \u2013 Commissions are incentives given to employees to reward and motivate them. This could be in the form of payment when a certain threshold is met, or it can be a percentage for every customer an employee brings in. For example, in job roles such as sales, commissions could make up a large portion of the salary.Reimbursements are paid by companies when employees have to bear expenses when carrying out company duties. For example, if an employee has to bear travel costs to attend a meeting, companies would provide reimbursements for them.<\/li>\n\n\n\n
- Other deductibles and taxes <\/strong>\u2013 There are several deductibles every employee will be subject to in Sri Lanka. These include EPF, ETF deduction, and taxes such as Advanced Personal Income Tax or PAYE<\/a> taxes where applicable.<\/li>\n\n\n\n
- Deduction for no-pay leave <\/strong>\u2013 Employees can request to take non-paid leave when they do not have remaining leave or due to unique circumstances. Normally, the company will deduct the daily salary for the total number of days of no-pay leave taken by the employee.<\/li>\n<\/ul>\n\n\n\n
What does a payslip look like?<\/h2>\n\n\n\n
An employee salary slip consists of several pieces of information. This includes:<\/p>\n\n\n\n
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- The name of the company<\/li>\n\n\n\n
- The full name of the employee<\/li>\n\n\n\n
- Employee number (This is also the EPF number)<\/li>\n\n\n\n
- Employee designation<\/li>\n\n\n\n
- NIC number of the employee (optional)<\/li>\n\n\n\n
- A complete breakdown of the salary including basic salary, any allowances, any deduction, and taxes (no pay, salary advances, EPF deductions, PAYE\/APIT<\/a>)<\/li>\n\n\n\n
- The net salary<\/li>\n\n\n\n
- EPF and ETF contributions made by the employee and the employer<\/li>\n\n\n\n
- Signature of the employee certifying the payment<\/li>\n<\/ul>\n\n\n\n
The below format can be used as a standard payslip for your company.<\/p>\n\n\n\n
Sample Payslip and Summary of EPF ETF <\/figcaption><\/figure>\n\n\n\n How to calculate the salary of an employee and no-pay deductions?<\/h2>\n\n\n\n
To calculate the monthly salary, you need to firstly add in all types of payments an employee is due for a month. After calculating the total amount that is due, you can then subtract any deductions such as PAYE, EPF, ETF, salary advances, and no-pay leaves. When calculating no-pay leaves, you need to keep in mind that every employee has an allocated number of leaves including sick or casual leaves, annual leaves, paid holidays, or even maternity leave. An employee may request for no-pay leave when it is a special circumstance or they no longer have leaves left for the month. For example, if an employee wants to visit a relative who is sick, and they\u2019ve already taken all the possible casual leaves, he or she can apply for a no-pay leave from the company. When no-pay leave is requested by an employee it is up to the company to either approve or reject it. The amount that you can deduct as no-pay leave depends on how you calculate the salary in your company. In Sri Lanka, most companies tend to calculate the amount of salary based on the number of working days in a month, often set at 30. Let\u2019s look at the below example to understand it better. <\/p>\n\n\n\n
Example (1)<\/h6>\n\n\n\n
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- Sarath is an employee of company A with a total salary of LKR 30,000, and he has taken four days of no-pay leave.<\/li>\n\n\n\n
- His company uses a 30 day salary period, and as such his daily wage would be LKR 1,000. (LKR 30,000\/30).<\/li>\n\n\n\n
- When paying the salary, the company would deduct the payment for the two days he has not worked (LKR 1,000 X 4 = 4000) and pay a total amount of LKR 26,000.<\/li>\n<\/ul>\n\n\n[et_pb_section global_module=\"25332 \"][\/et_pb_section]\n\n\n\n
How to prepare payroll reports?<\/h2>\n\n\n\n
The payroll report is a document that has the payroll information of all the employees in a company. Government rules and regulations require these payroll reports to be maintained properly by the company and be available for audits or requests by government agencies. When making payroll reports, the salaries of employees should be reported the same way as they were described in the individual payslips. If you have divided the salary into basic and allowances in the payslips, they need to be displayed the same way in the payroll reports. If you have represented these numbers or payment types differently and they are discovered by the relevant authorities, you may risk attracting penalties, fines, or even other legal action being taken against you.<\/p>\n\n\n\n
Sample Pay Sheet Format \u2013 Sri Lanka<\/figcaption><\/figure>\n\n\n\n
- Allowances<\/strong> \u2013 A form of payments paid at the discretion of the company or to contribute towards the expenses of an employee. It is typically negotiated into the employment contract. Some common types of allowances include vehicle allowances, housing allowances, or travel allowances.<\/li>\n\n\n\n
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