Pay components and tax rules

Pay components are the lines on a payslip and the accounts each one posts to. Tax rules are the income tax bands, reliefs, credits and contributions (pension, social security, health, housing funds and so on) for your country, and for a state or province where it has its own.

Payroll uses the country in Organization settings. Nigeria has built-in rules. For any other country, AI can draft the rules from official sources, and an Administrator checks and approves them before any pay run uses them.

Before you start

• You need the Company Settings permission.
• Set your country in Setup → Organization first.
• Only an Administrator can approve rules.

Steps

Accounts

1. Open Payroll → Settings. Check Net salaries payable, Usually pay salaries from and Staff loans and advances, then click Save. The Country shown here comes from Organization settings. Click Change to change it there.
2. Open Payroll → Pay components. Each built-in component already points at a default account, for example Salaries and Wages or PAYE Payable. Click a component to change its account.

Your own components

3. Click New component, choose Earning or Deduction, then a fixed amount or a % of basic.
4. Set its account. For an earning, also choose whether it is taxable, counts for pension, is pro-rated for part months, or is entered one-off on each run.

Tax rules for your country

5. Open Payroll → Tax rules. The page shows your country and its rules: National first, then one group for each state or province. Each set of rules has a label:
   • Built in: supplied with Business Sensor; can't be edited.
   • Approved: used by pay runs for its dates.
   • Draft – needs approval: ignored by pay runs until it is approved.
   • AI: drafted by AI.
6. If your country has no rules yet, use Draft rules with AI:
   1. Leave State / province blank for the national rules.
   2. Check the Tax year.
   3. Click Draft with AI. AI searches official sources (the tax authority, the social security or pension agency) and drafts the rules. This usually takes one to three minutes. Keep the page open.
   4. The draft opens with its Sources and any notes and warnings: things AI could not represent exactly, or that you must check.
7. For a state or province with its own income tax (for example a Canadian province or a US state), repeat step 6 with the State / province filled in. Use the same code your staff have as their Tax state / province, for example ON. These rules are added on top of the national rules for those staff only.
8. Check the draft. Compare every band, rate, ceiling and credit with the linked sources. Use Try it to work out a sample salary step by step. To fix a figure, open Edit (advanced), change it and click Save.
9. Approve it. An Administrator opens the draft and clicks Approve. Business Sensor then creates the pay components and liability accounts it needs, such as CPP_EE and CPP Payable. From then on, pay runs for those dates use it.

Changing rules later

10. To change approved or built-in rules, click Copy and edit your copy. Your own rules are used instead of the built-in ones for the dates they cover.
11. When a non-Administrator edits rules that AI drafted, they go back to Draft and need approving again.
12. Rules you created and no pay run has used yet can be deleted with the bin icon.

Employees

13. On each employee, set Tax state / province where their income tax is paid. Tick any optional schemes they belong to. The list comes from your country's rules, for example National Housing Fund in Nigeria.

Tips

• The rules in force on the last day of the month are used. New-year figures take over automatically when you add and approve rules with the new start date.

• AI drafts are a starting point, not advice. Always check them against the sources, or with your tax adviser, before approving them.

• A pay run lists a Statutory schedules tab for each tax and contribution it contains (for example Federal income tax, Pension plan). Use it with the CSV export to fill in your remittance returns.

• What these rules can't do (yet):

  • Annual earnings ceilings are applied per pay period. There is no year-to-date tracking, so an employee whose pay varies a lot may reach a ceiling differently from the official method.
  • Cumulative tax methods (as in the UK) are not supported.
  • Filing status and personal allowance claims are not supported.
  • Local or city taxes are not supported.

  The AI notes say when a country's rules need one of these. Adjust affected payslips with one-off amounts on the run.

Common problems

• "No approved tax rules for … cover …". No approved national rules are in force for that month. Draft them with AI, or copy rules and set their dates, then have an Administrator approve them.
• The Approve button is missing. Only an Administrator can approve rules. Ask one to open the draft.
• "Draft with AI" isn't shown. AI is not switched on for this business. Copy rules and enter the figures yourself, then have them approved.
• The AI draft failed or timed out. Try again in a few minutes. If it keeps failing for a state or province, try its full name (for example Ontario).
• A pay run warns that an employee's state has no rules. That state or province has no approved rules, so only the national rules were applied. Draft and approve its rules, or check the employee's Tax state / province code.
• "… is in the tax rules but has no pay component". The rules were saved but the components were not created yet. Approve the rules, or add the component under Pay components with the same code.
• Built-in rules can't be edited. Copy them first.
• A component's account shows "not set" on the run. Set it under Pay components, then recalculate.
• The country is wrong. Change it in Setup → Organization. Payroll follows it automatically.