Employees & Payslips — Complete User Guide — Two Accounts Web

Comprehensive guide for managing employee records, processing payslips, tracking payroll balances, and reporting in Two Accounts Web

Table of Contents

1. What Are Employees and Payslips?
2. Prerequisites — Enabling via Customize Menu
3. System Hierarchy
4. Field-by-Field Guide for Creating an Employee
5. Field-by-Field Guide for Creating a Payslip
   • Payslip Header Fields
   • Earnings Lines
   • Deduction Lines
   • Contribution Lines
   • Payslip Additional Options
   • Payslip Status — Not Applicable
6. Settings Configuration
   • Control Account for Employees
   • The Default Employee Clearing Account on the Balance Sheet
   • Payslip Earnings Items
   • Payslip Deduction Items
   • Payslip Contribution Items
   • Payslip Footers
   • Reporting Categories
7. Setting an Opening Balance for the Employee Clearing Account
8. How Payslips Post to the General Ledger
9. Transactional Workflow
10. Reports
    • Employees Listing
    • Payslips Listing
    • Employee Summary Report
    • Payslip Summary Report
    • Payslip Totals Per Item and Employee Report
    • Balance Sheet
    • Profit and Loss Statement
11. How Balances Are Calculated
12. Sample Data and Report Output
    • Status Scenarios
13. Common Issues and Solutions
14. Accounting Regulation Compliance

1. What Are Employees and Payslips?

The Employees and Payslips module manages all aspects of payroll accounting. It tracks:

• Employee records — personal details, currency preferences, and control account assignments
• Payslips — salary and wage calculations with earnings, deductions, and employer contributions
• Payroll balances — amounts owed to or overpaid to each employee
• Payments — settling payroll liabilities through the Payment module

Employees and Payslips are Liabilities-class Balance Sheet accounts. The Employee Clearing Account appears under Liabilities on the Balance Sheet with a Credit normal balance — a positive balance means the business owes money to employees (unpaid payroll). A debit (negative) balance means the employee has been overpaid.

2. Prerequisites — Enabling via Customize Menu

Both the Employees and Payslips tabs are enabled by default. If they are not visible in your navigation:

1. Go to Customize Menu (click the Customize button from navigation bar)
2. Find the Employees toggle and ensure it is turned on
3. The Payslips toggle will appear once Employees is enabled
4. Enable Payslips as needed
5. Click Save

Enabling the Employees tab also makes available:

• Settings → Control Accounts → Employees — create custom BS line items
• Settings → Payslip Earnings Items — define earning types with their expense accounts
• Settings → Payslip Deduction Items — define deduction types
• Settings → Payslip Contribution Items — define employer contribution types
• Settings → Payslip Footers — signature blocks and additional notes
• Reports → Employee Summary
• Reports → Payslip Summary
• Reports → Payslip Totals Per Item and Employee

3. System Hierarchy

The Employees and Payslips system follows a hierarchy:

Level 1 — Balance Sheet Group (Liabilities or Equity)
    │
    └── Level 2 — Balance Sheet line item (built-in or custom control account)
            │           e.g. "Employee Clearing Account" (the BS line item)
            │
            ├── Level 3 — Individual Employee
            │             e.g. "John Smith", "Jane Doe"
            │
            ├── Level 3 — Payslip (per payroll run)
            │             e.g. "Payslip for John Smith — January 2026"
            │
            └── Level 3 — Payment to Employee (via Payment module)
                          e.g. "Payment to John Smith"

How It All Connects

4. Field-by-Field Guide for Creating an Employee

Navigate to: Employees tab → click New Employee button

5. Field-by-Field Guide for Creating a Payslip

Navigate to: Payslips tab → click New Payslip button

5.1 Payslip Header Fields

5.2 Earnings Lines

Each earnings line represents a component of the employee's gross pay (e.g. Basic Salary, Overtime, Bonus). You can add multiple lines.

5.3 Deduction Lines

Each deduction line represents a deduction from the employee's gross pay (e.g. Income Tax, Health Insurance, Pension Contribution).

5.4 Contribution Lines

Each contribution line represents an employer-side contribution (e.g. Employer Social Security, Provident Fund matching).

5.5 Payslip Additional Options

5.6 Payslip Status — Not Applicable

Unlike invoices, payments, and other business documents, payslips do not have a status field. There is no such concept as "Draft", "Posted", or "Cancelled" for payslips.

What this means in practice:

• Every payslip is posted to the General Ledger immediately upon saving — there is no draft mode
• There is no way to cancel, void, or reverse a payslip after it is saved
• The Payslips listing table has no Status column because the concept does not exist for payslips
• If a payslip was created in error, use a reversing Journal Entry to correct the General Ledger impact

6. Settings Configuration

6.1 Control Account for Employees

Location: Settings → Control Accounts → Employees

Control accounts determine how employee balances appear on the Balance Sheet. Each control account becomes a separate line under Liabilities. If you want "Salaries Payable" and "Wages Payable" as separate lines, create two control accounts and assign each employee to the appropriate one.

6.2 The Default Employee Clearing Account on the Balance Sheet

Location: Settings → Chart of Accounts → find "Employee Clearing Account" under Liabilities

Every business has a built-in default Employee Clearing Account on the Balance Sheet. This is used automatically when:

• No custom control accounts have been created
• An Employee has no Control Account assigned

6.3 Payslip Earnings Items

Location: Settings → Payslip Earnings Items

Earnings Items define the types of earnings that can be added to a payslip — salary, overtime, bonus, commissions, etc. Each item is linked to an Expense Account in the Chart of Accounts, which determines where the cost is recorded in the Profit and Loss Statement.

6.4 Payslip Deduction Items

Location: Settings → Payslip Deduction Items

Deduction Items define deductions from employee pay — tax, insurance, pension contributions, loan repayments, etc. The deduction amount is subtracted from gross pay and posted to the specified account.

6.5 Payslip Contribution Items

Location: Settings → Payslip Contribution Items

Contribution Items define employer-side contributions — social security, provident fund, health insurance premiums, etc. Each contribution creates two GL entries: one expense (the cost to the business) and one liability (the amount payable).

6.6 Payslip Footers

Location: Settings → Payslip Footers

Footer blocks can be added to the bottom of payslips for signature lines, declarations, disclaimers, or payment instructions.

6.7 Reporting Categories

Location: Settings → Reporting Categories → Payslip Items

Reporting Categories are optional classification labels that help organise payslip items for reporting purposes. They function as grouping tags — each earnings item, deduction item, or contribution item can be assigned a Reporting Category, which then flows through to the General Ledger.

There are three separate Reporting Category lists, one for each payslip item type:

• Earnings Item Reporting Categories — for grouping earnings items (e.g. "Regular Salary", "Bonuses", "Allowances")
• Deduction Item Reporting Categories — for grouping deduction items (e.g. "Statutory Deductions", "Voluntary Deductions")
• Contribution Item Reporting Categories — for grouping contribution items (e.g. "Government Contributions", "Private Scheme")

How Reporting Categories Flow to the General Ledger

When a payslip is saved, each earnings, deduction, and contribution line posts to the General Ledger. The Reporting Category assigned to the payslip item is carried forward to each General Ledger entry:

• Earnings lines — the Reporting Category from the Payslip Earnings Item is attached to the expense debit entry
• Deduction lines — the Reporting Category from the Payslip Deduction Item is attached to the deduction credit entry
• Contribution lines (expense leg) — the Reporting Category from the Payslip Contribution Item is attached to the expense debit entry
• Net pay (balancing entry) — no Reporting Category is assigned

Reports That Use Reporting Categories

• Employee Summary — groups payslip lines by Reporting Category
• Payslip Summary — filters and groups by Reporting Category
• Payslip Totals Per Item and Employee — uses Reporting Categories for period-over-period comparisons

7. Setting an Opening Balance for the Employee Clearing Account

Location: Settings → Opening Balances → New Opening Balance Entry

To set the initial balance for an employee (e.g. when migrating from another payroll system):

What Happens When You Save

The system creates two General Ledger entries to maintain double-entry accounting:

Entry 1 (Employee Clearing Account):
  Dr/Cr: As you specified
  Amount: The amount you entered
  Employee: The specific employee

Entry 2 (Retained Earnings — balancing entry):
  Dr/Cr: Opposite of Entry 1
  Amount: Same amount, opposite sign

Example: Opening balance of 50,000 BDT Credit for "John Smith" (amount owed to employee):

Entry 1: Employee Clearing Account (John Smith)     50,000.00 Cr
Entry 2: Retained Earnings                           50,000.00 Dr
                                                      ───────── ─────────
                                                      Dr = Cr ✓

8. How Payslips Post to the General Ledger

The GL Posting Logic

When a Payslip is saved, the system creates the following General Ledger entries:

1. Earnings entries — each earnings line creates one entry:

Dr [Earnings Item Expense Account]       Amount

2. Deduction entries — each deduction line creates one entry:

Cr [Deduction Item Account]              Amount (reduces gross pay)

3. Employer Contribution entries — each contribution line creates two entries:

Dr [Contribution Item Expense Account]   Amount  (employer cost)
Cr [Contribution Item Liability Account]  Amount  (amount payable)

4. Balancing entry — the net pay (earnings minus deductions) goes to the Employee Clearing Account:

Cr [Employee Clearing Account]           Net Pay  (liability to employee)

Example Payslip GL Flow

Payslip: John Smith — January 2026

Earnings:
  Basic Salary:         30,000.00
  Overtime:              5,000.00
  Gross Pay:            35,000.00

Deductions:
  Income Tax:           (5,000.00)
  Health Insurance:     (1,500.00)
  Total Deductions:     (6,500.00)

Net Pay:                28,500.00

Employer Contributions:
  Social Security:       6,000.00
  Provident Fund:        3,000.00
  Total Contributions:   9,000.00

GL Posting:

  Dr Salary Expense                    30,000.00
  Dr Overtime Expense                   5,000.00
    Cr Income Tax Payable                           5,000.00
    Cr Health Insurance Payable                      1,500.00
    Cr Employee Clearing Account — John Smith       28,500.00  ← Net Pay
  Dr Social Security Expense            6,000.00
    Cr Social Security Payable                       6,000.00
  Dr Provident Fund Expense             3,000.00
    Cr Provident Fund Payable                        3,000.00
                                         ─────────   ──────────
  Total Debits: 44,000.00   Total Credits: 44,000.00 ✓

Employee Clearing Account Balance Flow

Opening Balance (OB entry):                     Cr 50,000.00
Payslip: Cr Employee Clearing Account           Cr 28,500.00
  Subtotal:                                     Cr 78,500.00  (owed to employee)
Payment to Employee: Dr Employee Clearing        Dr 28,500.00
  Closing Balance:                               Cr 50,000.00  (still owed)

9. Transactional Workflow

9.1 End-to-End Payroll Cycle

1. Create Employee records — one for each employee (one-time setup)
2. Set Opening Balances — if migrating, set initial amounts owed (one-time)
3. Create Payslip — add earnings, deductions, contributions; save to post GL entries
4. Pay Employees — go to Payments tab, create a payment with the Employee Clearing Account to settle the net pay
5. Verify Balances — check the Employees listing to see current balances (positive = unpaid)

9.2 Paying an Employee via Payment

When you pay an employee, the Payment module can automatically pull up all unpaid balances:

Payment:
  Pay To:         John Smith
  Account:        Employee Clearing Account
  Amount:         28,500.00 (the net pay from payslip)

GL Posting:
  Dr Employee Clearing Account — John Smith   28,500.00
    Cr Cash at Bank                            28,500.00

This reduces the employee's outstanding balance. If there are multiple unpaid payslips, the system can aggregate them into one payment.

9.3 Paying Multiple Employees

The Employees tab has a "Amount to Pay" button at the bottom. Clicking this shows all employees with positive balances (amounts owed) and allows creating batch payments.

9.4 Foreign Currency Employees

If an employee has a Currency set, the following happens automatically:

• The payslip's transaction currency defaults to the employee's currency
• The exchange rate is auto-populated
• All GL entries are created in the employee's currency with base currency equivalents
• The Employee Clearing Account balance is tracked in the employee's currency

10. Reports

10.1 Employees Listing

Location: Employees tab

How the balance is calculated:

Balance = Sum of all GL transaction amounts for the employee's clearing account
  Positive (Credit) = Amount owed to employee (Unpaid)
  Zero             = Fully settled (Paid)
  Negative (Debit) = Employee overpaid (Paid in Advance)

10.2 Payslips Listing

Location: Payslips tab

10.3 Employee Summary Report

Location: Reports → Employees → Employee Summary

This report shows a breakdown of payslip amounts for a selected employee over a specified period. It groups:

• Earnings — grouped by earnings item (e.g. Basic Salary, Overtime)
• Deductions — grouped by deduction item (e.g. Income Tax, Insurance)
• Net Pay — calculated total for the period
• Contributions — grouped by contribution item (employer cost only)

10.4 Payslip Summary Report

Location: Reports → Payslips → Payslip Summary

This report shows a summary of all payslips within a date range, grouped by employee and currency:

10.5 Payslip Totals Per Item and Employee Report

Location: Reports → Payslips → Payslip Totals Per Item and Employee

This report compares payslip amounts across multiple periods (e.g. month-over-month or year-over-year). It groups by:

• Earnings — by item, then by employee, shown per period
• Deductions — by item, then by employee, shown per period
• Contributions — by item (employer expense side only), then by employee, shown per period

Each cell is clickable to drill into the individual transactions.

10.6 Balance Sheet

On the Balance Sheet, the Employee Clearing Account appears under the Liabilities section. The amount shown is the total of all employee balances (net pay owed to all employees):

Balance Sheet Line = Sum of base currency amount for all General Ledger transactions where:
  The account is the Employee Clearing Account (or a custom employee control account)
  The date is on or before the report period end date

10.7 Profit and Loss Statement

Employee earnings and employer contributions appear as expenses on the Profit and Loss Statement. The specific expense accounts used depend on the Payslip Earnings Items and Contribution Items configured in Settings.

• Earnings → Expense account defined on the Payslip Earnings Item
• Employer Contributions → Expense account defined on the Payslip Contribution Item
• Deductions → May be contra-income (reduce expense) or liability accounts (not on the P&L)

The Employee Clearing Account itself is a Balance Sheet account (Liability) — it does NOT appear on the P&L.

11. How Balances Are Calculated

11.1 Employee Balance Calculation

The balance shown in the Employees listing is calculated as:

Balance = Sum of account currency amount for every General Ledger transaction where:
  - The account is an Employee Clearing Account
  - The transaction references this specific employee
  - Result is multiplied by −1 for display

Positive balance (Unpaid): Total net pay from payslips exceeds total payments made. The business owes the employee.

Zero balance (Paid): All payslips have been paid.

Negative balance (Paid in Advance): Payments exceed payslip amounts (overpayment).

11.2 Payslip GL Account Resolution

When a payslip is saved, the system resolves which General Ledger account to use for each transaction:

• Earnings: Uses the expense account set on the Payslip Earnings Item
• Deductions: Uses the account set on the Payslip Deduction Item (can be liability or P&L)
• Contributions: Uses both the expense account and liability account set on the Payslip Contribution Item
• Net Pay (balancing entry): Uses the Employee Clearing Account — if the employee has a custom Control Account, that account is used; otherwise the default Employee Clearing Account is used

11.3 Employee Control Account Resolution

When a payslip or transaction references an employee, the system determines which Balance Sheet line to post to as follows:

• If the employee has a Control Account assigned, the transaction posts to that custom control account on the Balance Sheet
• If the employee has no Control Account, the transaction posts to the default "Employee Clearing Account" Balance Sheet line
• If no employee is selected when one is required, the transaction falls to Suspense (this should not happen in normal use)

11.4 Foreign Currency Handling

When an employee has a foreign currency set:

• The payslip's transaction currency uses the employee's currency
• Exchange rate is auto-populated from the currency's current rate
• The Employee Clearing Account supports foreign currency amounts
• Each GL entry stores both the transaction amount (in employee's currency) and the base amount (in base currency)

11.5 Opening Balance Entity Resolution

When creating an Opening Balance Entry for the Employee Clearing Account:

• The Employee field appears only when the selected Account is an Employee Clearing Account type
• The employee's custom Control Account is automatically resolved — so if the employee has a custom control account, the opening balance posts to that account instead of the default
• If the employee has no custom control account, the opening balance posts to the default "Employee Clearing Account" line

12. Sample Data and Report Output

Setup

Earnings Items

Deduction Items

Contribution Items

Opening Balances

Payslips for January 2026

Payment to Employees

Employees Listing Output

Balance Calculation:

John Smith:  50,000 (OB) + 28,500 (Payslip Net Pay) − 28,500 (Payment) = 50,000.00
Jane Doe:     1,000 (OB) +  2,100 (Payslip Net Pay) =  3,100.00 USD

Payslip Summary Report Output (Q1 2026)

Balance Sheet Output (Liability Section)

12.1 Status Scenarios — Sample Data

Each employee in the listing shows a colour-coded Status badge based on their current balance. Below are three complete scenarios demonstrating each status value.

Scenario 1 — Paid (Zero Balance)

When an employee's payslips have been fully settled, the balance is zero and the status shows Paid with a green badge.

Employees listing output:

GL verification — Employee Clearing Account after all entries:

Dr Cr
55,000 (Payment)
        20,000 (Opening Balance)
        35,000 (Payslip)
─── ───
55,000 55,000
Net = 0.00 ✓
DR = CR ✓

Scenario 2 — Unpaid (Positive Balance)

When the business owes money to the employee (payslips exceed payments), the balance is positive and the status shows Unpaid with a red badge.

Employees listing output:

GL verification — Employee Clearing Account:

Dr Cr
25,000 (Payment)
        10,000 (Opening Balance)
        42,000 (Payslip)
─── ───
25,000 52,000
Net = 27,000 Cr (Unpaid) ✓
DR = CR ✓

Scenario 3 — Paid in Advance (Negative Balance)

When payments exceed payslip amounts (overpayment), the balance is negative and the status shows Paid in Advance with a blue badge.

Employees listing output (before adjustment):

GL verification — Employee Clearing Account (before adjustment):

Dr Cr
15,000 (Advance Payment)
        5,000 (Opening Balance)
        8,000 (Payslip)
─── ───
15,000 13,000
Net = 2,000 Dr (Paid in Advance — employee owes business) ✓
DR = CR ✓

13. Common Issues and Solutions

13.1 The Employees Tab Does Not Appear

Cause: The Employees tab is disabled in Customize Menu.

Solution: Go to Customize Menu and enable the Employees toggle. The Payslips tab will appear once Employees is enabled.

13.2 No Options Appear in the Employee Dropdown

Cause: No Employee records have been created, or all existing employees are marked as Inactive.

Solution: Create at least one Employee via the Employees tab.

13.3 The Employee Clearing Account Does Not Appear on the Balance Sheet

Cause: No Employee records exist in the system.

Solution: Create at least one Employee. The Balance Sheet line will appear automatically.

13.4 Payslip Shows Net Pay of Zero

Cause: Total deductions equal or exceed total earnings.

Solution: Check that earnings are greater than deductions. If deductions exceed earnings, net pay becomes negative (employee owes the business).

13.5 Employee Balance Shows As Negative When It Should Be Positive

Explanation: The Employee Clearing Account is a Credit-normal (Liability) account. A Credit entry (positive balance) means the business owes the employee. The Employees listing correctly uses sign reversal — a positive balance owed to the employee displays as a positive number. A negative balance (overpayment) displays with parentheses.

13.6 Custom Control Account Not Working for Opening Balance

Cause: If the employee has a custom Control Account, the opening balance should automatically resolve to that account. If it does not, the employee's Control Account may not have been set when the opening balance was created.

Solution: Ensure the employee has the correct Control Account assigned before creating the opening balance entry.

13.7 A Transaction has Fallen into the Suspense Account

Cause: A payslip or payment was created without selecting an Employee when an Employee Clearing Account was used.

Solution: Edit the transaction and ensure the Employee field is filled in.

13.8 Foreign Currency Employee Shows Wrong Exchange Rate

Cause: The exchange rate on the payslip was not auto-populated or was manually overridden.

Solution: Ensure the employee has a Currency set. The exchange rate will auto-populate when the employee is selected on the payslip.

14. Accounting Regulation Compliance

14.1 IAS 19 — Employee Benefits

Requirement (§10-11): Short-term employee benefits are recognised as an expense when the employee renders service. A liability is recognised for the amount expected to be paid.

How this system complies:

• When a payslip is created, earnings are recognised as an expense (Dr) immediately
• The net pay is credited to the Employee Clearing Account — a liability representing amounts owed to employees
• When payment is made, the liability is reduced (Dr the clearing account)
• This matches the accrual basis required by IAS 19

14.2 IAS 1 — Presentation of Financial Statements §54

Requirement (§54): "An entity shall present... trade and other payables" as a separate line item. Employee benefit liabilities are included in "other payables."

How this system complies:

• The Employee Clearing Account appears as a separate line on the Balance Sheet under Liabilities
• Custom control accounts allow segregation — different employee groups can appear on separate BS lines
• AP Aging and similar reports do not include employee balances (they are tracked separately)

14.3 DR = CR Enforcement

Every payslip creates a balanced set of GL entries:

Example: John Smith January 2026 Payslip

Dr Basic Salary Expense                    30,000.00
Dr Overtime Expense                         5,000.00
Cr Income Tax Payable                                 5,000.00
Cr Health Insurance Payable                            1,500.00
Cr Employee Clearing Account — John Smith             28,500.00
Dr Social Security Expense                  6,000.00
Cr Social Security Payable                             6,000.00
                                           ─────────   ──────────
Total Debits: 44,000.00   Total Credits: 44,000.00 ✓

14.4 IFRS for SMEs — Section 28: Employee Benefits

Requirement: "The cost of all employee benefits to which an employee has rendered service during the reporting period shall be recognised as an expense."

How this system complies:

• Earnings expenses are recognised in the period the payslip is dated, not when paid
• The Employee Clearing Account ensures the liability side is properly recorded
• Contribution expenses and liabilities are both recorded simultaneously, matching accrual accounting

14.5 NBR VAT Act 2012

Relevance: Salary and wage payments are not subject to VAT (they are outside the scope of taxable supplies). Payroll-related tax (income tax) is handled through the deduction system, which creates a liability account for tax payable. VAT on employee benefits in kind may apply separately.

14.6 Bangladesh Labour Act 2006 (Section 48)

Requirement: Wages must be paid within the prescribed period.

How this system supports compliance: The Employee Clearing Account provides a clear audit trail of unpaid wages. At any point, the balance shows total wages earned but not yet paid — enabling management to ensure timely payment.

End of Employees & Payslips Guide