Pay & Claims

Section 01Know the difference before you start#

Four things in this group sound alike and are not. Confusing them is the commonest setup mistake.

A travel advance lives under Expenses and is settled by claims. A salary advance lives under Loans and is repaid from pay. They share the word "advance" and nothing else.

Section 02One-time setupExpenses#

WhereSettings›HRM›Expenses

Seven screens. The first two are the ones you cannot skip.

OpenClaims & Submission→Categories & Policy Limits→Trips & Advances→Per Diem & Mileage→GST & ITC→Budgets & Payouts→Approvals→

Claims & Submission#

• Set the claim number prefix (EXP-00001) and the currency. These apply to new claims only, so changing them later leaves your history alone.
• Choose which payout methods finance may use.
• Set how many days people have to submit an expense after they incur it.
• Decide whether likely duplicates are flagged.

Categories & Policy Limits#

The claim form picks its categories from here, so nothing can be claimed until this is done.

• Add your categories, and for each say how it is settled and whether its GST is recoverable.
• Say whether a bill is required, and above what amount.
• Add policy limits — per claim, per month or per year — and choose whether each warns or blocks.

Trips & Advances#

• Decide whether you use trips and travel advances at all. If you use neither, turn it off — people then claim travel spend like any other expense, the Trips, Travel advances and Ageing tabs disappear, and nothing is deleted.
• Decide whether a trip needs approving before it is booked, and name your trip types.
• Decide whether somebody may hold a second advance while one is still unaccounted for.
• Set when an advance counts as overdue, and the ageing buckets the report groups by.

Per Diem & Mileage#

• Add daily-allowance rates by destination, expense type and role, each with the date it starts from. Leave the role blank for a rate everybody gets; where somebody holds two roles, the higher rate is paid.
• Set what a departure or return day is worth.
• Add mileage rates by vehicle class.
• Decide how allowance money that is not spent is treated for tax.

Rates are matched against the date of the expense, so a rate you add in October never restates an August claim.

GST & Input Tax Credit#

Skip if you do not reclaim GST on expenses.

• Set the §17(5) answer for each category, with the date it applies from.
• Say whether GST is claimable on a bill in an employee's own name, and whether reverse charge is flagged.
• Set how much date and rounding difference a GSTR-2B match may carry before it stops counting as the same transaction.

The tax answer is worked out and stored when a claim is filed, so a correction here never rewrites a return you have already filed.

Budgets & Payouts#

• Give a department a budget if you track spend against one, and choose whether going over warns or blocks.
• Choose your bank's payment-file layout, and the account claims are credited from.

Approvals#

Three separate decisions, and they need not be the same person:

• Who approves a claim — add a second level for larger amounts.
• Who approves a trip — agreeing the intent, before any money is committed.
• Who approves an advance. Approving is not paying it out; paying out is a separate permission.

Section 03One-time setupReimbursements#

WhereSettings›HRM›Reimbursements

OpenBenefit Year & Claim Rules→Benefit Components→Entitlements & Limits→Year-End Settlement→Approvals→

Benefit Year & Claim Rules#

Do this first — entitlements are annual, and the year you set decides which pot every claim is measured against.

• Choose the month the benefit year starts. April in India, and separate from your leave year.
• Set the claim number prefix. Its own series, because it reconciles against a different account from expenses.
• Decide whether somebody may claim above their entitlement, and how much notice they get before the year ends.

Benefit Components#

• Add each component your packages include.
• Say how it is paid — reimbursed against a bill, as a non-cash voucher, or as cash. This decides how it is taxed, not just how it looks on screen.
• Say whether a bill is required, and what proof it takes.

Entitlements & Limits#

• Give each component an annual entitlement, by role where they differ. Leave the role blank for the figure everybody gets, and add a row only for roles that differ.
• Where somebody holds more than one role, the most generous entitlement wins.
• Add the tax-free limit where the law sets one.

• Give each one the date it takes effect from. Adding one today never rewrites a year already under way.

Year-End Settlement#

• Choose each component's policy for a balance nobody claimed: lapse, carry forward, or pay out and tax.
• Set the policy now; run the settlement once, at the year end.

Approvals#

A reimbursement is somebody's own salary coming back, so it often routes to payroll rather than to finance.

• Pick who approves, by role or by named person.
• Add a second level if benefit claims need payroll sign-off.
• Set how long a claim waits before it escalates.

Section 04One-time setupLoans & Salary Advances#

WhereSettings›HRM›Loans & Salary Advances

OpenRequests & Reminders→Loan Types→Statutory Reference→Approvals→

Requests & Reminders#

• Set the loan number prefix.
• Decide whether a new request is refused while somebody still owes on one. Off by default — holding two loans at once is ordinary.
• Set how many days ahead people are reminded about an instalment. Overdue instalments are always chased.

Loan Types#

The request form picks its types from here, and a loan carries the terms it was taken under for its whole life.

• Add each type. A salary advance is simply a type with no interest and a short term.
• Set the maximum amount, the longest term, and how soon repayment starts.
• Choose the interest method if you charge any. Flat interest costs roughly twice what the same rate costs on a reducing balance, and both figures are shown to the borrower before they ask.

Statutory Reference — read only#

Shows the concessional-loan threshold the law sets, so you can see what an interest-free loan may cost the borrower in tax. You cannot edit it — it is law, not a company preference. It is a cliff, not a band: one rupee over and the benefit is worked out on the whole balance. Facto flags a loan that crosses it; it does not compute the perquisite. Confirm the treatment with your accountant.

Approvals#

• Pick who approves. A manager can approve a loan without being able to see salaries.
• Add a second level for larger amounts.
• Set how long a request waits before it escalates.

Approving does not release the money. Paying out is a separate permission — and paying out is also what fixes the repayment schedule.

Section 05One-time setupPetty Cash#

WhereSettings›HRM›Petty Cash

OpenFloats & Vouchers→Approvals→

Floats & Vouchers#

• Set the amount above which a voucher needs approving. Leave it blank for none — the float balance is already a hard cap, since a ₹10,000 tin cannot pay ₹40,000.
• Choose how often the cash is expected to be counted against the book. A tin nobody counts is a spreadsheet.
• Set the voucher number prefix before the first voucher exists. Separate from your expense claim numbering.
• Leave tax details off unless your petty cash regularly comes with real tax invoices.

Every float can override these on its own screen, so this is the answer for the ones nobody thinks about.

Approvals#

Only needed if you gave any float an approval threshold.

• Pick who reviews — usually the reporting manager, since this is a check on spending rather than on cash handling.
• Choose a fallback for people with no manager, or the request has nowhere to go.

Section 06One-time setupSalary & Payroll#

The longest part, and the one where skipping a step shows up latest. Work straight down.

OpenPay Cycle & Unpaid Leave→Statutory Choices→Income Tax & Declarations→Payslips & Review→Deductions & Ceilings→

Pay Cycle & Unpaid Leave#

WhereSettings›HRM›Salary & Payroll›Pay Cycle & Unpaid Leave

• Set the day attendance is counted to. Anything after it lands in next month's pay.
• Set the pay day — the date the bank file and the payslip are dated against.
• Choose what a day of unpaid leave costs. This is a company policy; the law does not prescribe one, and one thirtieth of the month is what most companies use.

Somebody joining or leaving part way through a month is always worked out on that month's actual calendar days instead. Both rules are correct and they answer different questions.

Each month keeps the dates and the divisor it was run with, so changing these later never rewrites a month you have closed.

Statutory Choices#

WhereSettings›HRM›Salary & Payroll›Statutory Choices

Go through these once with your accountant. The rates and slabs themselves are maintained for you and are not here — only the handful of questions genuinely yours to decide.

• Whether provident fund is worked out on the first ₹15,000 of wages or on the whole of them. The extra goes entirely to the fund — the pension share is capped either way — and it needs a joint declaration you keep on file.
• The gratuity rule. Five years is the safer reading.
• Whether the gratuity provision counts towards the wages the 50% deduction cap is measured on.

Income Tax & Declarations#

WhereSettings›HRM›Salary & Payroll›Income Tax & Declarations

Set this in April, before declarations open.

• Whether investment declarations are reviewed before they reduce anybody's tax. Reviewing stops an optimistic figure suppressing tax for nine months; it also puts every declaration through one person each April.
• How far into the year people may still change tax regime. Locking it early does not save anybody tax — it only means they wait for a refund.

Anybody on the old regime who is 60 or over needs their date of birth on file. It is not on this screen — it is on the person's Details tab in User Management — but it is worth doing in April with the rest of this. The old regime has three slab tables and the higher exemption limits are ₹3,00,000 from 60 and ₹5,00,000 from 80, against ₹2,50,000 below. Age is taken as on 31 March of the tax year, so somebody who turns 60 in February is a senior citizen for the whole of it, including the April payslip. Without a date of birth the person is worked out on the under-60 table and the regime comparison screen says so for them by name. It makes no difference under the new regime, which is age-neutral.

• Whether payslips are also emailed. Everyone can always read their own in the app.
• Whether year-to-date figures appear on the payslip. They double its width.
• The variance threshold — how big a month-on-month change is worth stopping to look at before a run is approved. Joiners and leavers move by 100% and are labelled as such, so they will not drown the rest.

Two halves, and only the second one is yours to answer.

The top of the page is the law, read-only. There is a limit on what can come out of somebody's wages in a single month, and Facto applies it for you on every run:

Statutory deductions — provident fund, state insurance, professional tax, the labour welfare fund and income tax — come out before this limit and are not counted against it. "Wages" here means Basic, dearness allowance and whatever the 50% test adds back: the figure that appears on every payslip as Wage Base (§2(y)), not gross and not take-home.

The second half is the list of your own deduction heads, and it asks what each one is. The answer decides which limit applies to it and what happens to the part a limit refuses. A badge at the top counts how many are still unanswered.

A head nobody has classified is treated as an ordinary authorised deduction: counted against the total limit, and never treated as a fine. That is the mildest reading available and it is deliberate — the app will not invent a penalty out of a blank field.

This page is configuration. An individual fine or damage recovery is not recorded here — those are dated events with a clock on them, and they live under Fines & recoveries. See Fines and damage recoveries in Part 2.

Salary components#

WhereHRM›Salary›People & pay›Components

OpenComponents→

A component is one line on a payslip. There are two kinds, handled very differently.

The statutory ones are created for you. When your company was set up, Facto added the nine heads its payroll engine posts against, plus a wage-base line. You do not need to create them, and you must not re-create them under different names. The engine matches on the code, exactly:

The earnings are yours to create. Basic, HRA, a special allowance, a conveyance allowance — these are your company's own design and no two companies agree on them, so Facto does not invent them. Add each one you use.

Salary structure#

WhereHRM›Salary›People & pay›Structures

OpenStructures→

A cost to company on its own is a number, not a payslip. A structure is what splits it across your components.

Build at least one. It has to balance — the parts must add up to the whole — and one line is the balancing line that absorbs the remainder. It cannot contain a circular reference, where two components each depend on the other.

This is on the employee's own page, not in the Salary module, which is why it is the step most often missed. For each person who will be paid:

• Payroll treatment — whether they are on payroll at all. A consultant is correctly outside all of this.
• Professional tax state — professional tax follows the establishment somebody is borne on, not the office they badge into. Without it there is no slab to apply and no state to remit to.
• UAN and provident-fund member ID — where they apply. If a number has been applied for but has not arrived, record it as pending rather than leaving it blank. "Nobody has typed it in" and "it does not apply" are different answers, and the return needs to know which.
• Bank account and PAN — if you did not do it when you added them, do it now.

Cost to company#

WhereHRM›Salary›People & pay›Compensation

OpenCompensation→

Record each person's CTC, with the date it takes effect from. The date must be on or before the month you want to pay — a revision dated mid-month does not apply to that month's run.

Each entry also carries a kind of change — on joining, annual increment, promotion, market correction, or other — beside the free-text reason. The reason is what an auditor reads; the kind is what a report can count.

Assign a salary structure to each person, effective from a date. Somebody with a CTC and no structure cannot be paid.

Open the pay period#

WhereHRM›Salary›Run payroll›Pay periods

OpenPay periods→

Open the month you want to pay. Until a period is open, most of the Salary module has nothing to show you.

Section 07One-time setupCheck your work#

WhereHRM›Salary›Run payroll›This month

Facto has a built-in pre-flight check that reads your whole setup and tells you what is still missing, person by person. Read it before your first run — and before every run after that, which is why it also appears in Part 2.

It sorts what it finds into three levels:

• Blocks pay — the run cannot pay this person. No cost to company, no salary structure, no bank account. Fix these first.
• Blocks filing — the run can pay them, but you will not be able to file the return. No PAN, no professional-tax state, a provident-fund number still awaited.
• Needs attention — worth a look. A bank account in a slightly different name, a benefit claim waiting for a run that this month will not pay, a statutory head your library does not carry.

Every finding names the person, says what is wrong in a plain sentence, and tells you what to do about it. When this screen is empty, your setup is complete.

OpenThis month→

The same list, as something to work down before your first run:

• The nine statutory heads exist, spelled exactly as the table above
• Your own earnings components added — Basic, HRA, allowances
• At least one salary structure that balances
• Payroll treatment, professional-tax state and PF numbers on each person
• A cost to company recorded for each person, dated on or before the month
• A structure assigned to each person, from the same date
• The pay period open
• The pre-flight check shows nothing under Blocks pay
• One month run in parallel with your existing payroll, and compared