Professional Documents
Culture Documents
Final Settlement
Problem Statement
The functionality of final settlement is not currently available in ERP. The main requirement here is to
exclude retiring employees from the normal payroll process. The processing should be done separately
for all retiring employees during the month.
Current Process
Currently, the ERP system process the salaries of all employees based on the number of days worked in
the current month. That means the salaries of all the resigned employees are also processed within the
same payroll cycle. However, instead of running a normal payroll cycle, the payroll team wants to
process resigned staff salaries separately with a full and final settlement working.
To process the final settlement in ERP, the payroll team follows below steps as a workaround for final
settlement:
1- the payroll team does not update the actual resignation date in ERP. Instead, they mark the last
date of the previous month as the resignation date of all employees resigning in the current
month. This way they are able to exclude all resigning employees from current month’s payroll.
2- Next, they do the manual working to calculate all resigned employees’ salaries, benefits & PF to
run it separately in ERP.
Proposed Solution
The solution here is to give payroll team the ability to run payroll of resigned employees separately
through a final settlement process. The customized two-step process will be:
Step#1: Exclude all the employees from current payroll cycle if the below conditions are met:
Step#2: Payroll will be run separately for resigned employees but using exactly the same process
as a normal payroll cycle.
A “Yes/No” check mark will be created on employee profile to show if the final settlement of the
employee is completed or not.
Process the payroll for resigned employees using the default payroll functionality
Once the payroll process is completed for the resigned employees, switch the Final Settlement
toggle to ‘Yes’
There must be a pop up in case of late intimation of resignation (e.g., Employee resigned in
January and employee is being marked as resigned in March, by virtue of which Feb payroll was
incorrectly run)
Once the Final Settlement is processed from the system, then a report to made against each
individual consisting of 1. Tax certificate 2. Final Pay statement (Sample attached)
Arears should be calculated and included in current months payroll in below mentioned scenarios:
1) Incase of employee joining date of previous month (after the payroll run date) Dynamics doesn’t
calculate the arear salary of previous month with the current month’s salary. The number of
days worked in the previous month should be paid as arears in current month salary.
2) Incase of change in salary amount that is effective from prior months then the arears with the
incremental amount should be calculated from effective-increase for prior periods and included
in the current month’s payroll.
a. Arears should include: Salary amount, PF amount, Tax amount.
Current Process
Currently the arears are calculated manually by the payroll team. The ERP can only process payroll on
current month basis (ie, 30 or 31 days of current month). It does not account for previous month’s
unpaid work days.
For such new joiners, the payroll team processes current month’s salary normally in ERP and
then manually calculated previous month’s salary based on the number of days worked in
previous month.
For salary increment effective from previous month, the payroll team updates the employee
profile with new salary and benefits and processes the current month’s payroll normally. Then
they manually calculate the incremental amount for previous month’s salary add it in current
month’s payroll manually. This process requires lot of manual effort and is prone to error.
Proposed Solution
Scenario# 1 – New joiners from previous month
To calculate previous month’s unpaid salary and process it in current month’s payroll, the ERP
will:
Check the “Last payroll run date”. If the last payroll run date does not exist then the ERP
will auto calculate previous month’s salary & benefits based on the number of days
worked in previous month and process it with current month’s payroll cycle.
In case of change in employee salary and the change is effective from previous month, then ERP
should calculate the incremental amount and process it with current month’s payroll. To enable
this functionality in ERP we will:
Final Settlement 20 6 26
Arrears calculation and making part of payroll 11 3 13
Total 31 9 42