# Deduction Categories
Deduction Categories define how amounts are subtracted from an employee's pay — cash advances, deductions on expenses, and loss-of-pay (LOP). Each category maps to ledger accounts used when a pay run or deduction transaction is approved.
Overview
Go to Payroll → Settings → Deduction Categories.
Deduction Categories appear on Pay Run deduction lines, Cash Advance Voucher, and Deduction on Expense. Use the quick filter tabs and Advanced Filters to find categories by name, credit account, or LOP flag.
List columns
| **Column** | **Shows** |
|------------|-----------|
| Id | Category reference number. |
| Name | Deduction category name. |
| Description | Optional note. |
| Credit account | Account credited when the deduction is posted. |
Quick filter tabs
| **Tab** | **Shows** |
|---------|-----------|
| Active | Active categories (default). |
| Suspended | Suspended categories. |
Advanced Filters
Id, Name, Description, Credit Account, Is Amount affected on lop days, Status, and Created Date.
Quick Start
1. Navigate
Go to Payroll → Settings → Deduction Categories and click New.
2. Fill the form
Enter Name, select a Credit Account, and optionally enable Is Amount affected on lop days. The debit account defaults to Wages Payable.
3. Save
Click Save. The category is available on pay runs and deduction transactions.
Fields
| **Field** | **Description** |
|-----------|-----------------|
| Name * | Display name on pay runs and reports. |
| Description | Optional note. |
| Credit Account * | Account credited when the deduction is posted (e.g. employee advance receivable). |
| Is Amount affected on lop days | When enabled, LOP-related salary reductions can affect this deduction category. Default: off. |
On save, the system records the credit account origin (creditOrigin). Debit posts to Wages Payable by default.
Default Categories
| **Name** | **Debit Account** | **Credit Account** | **LOP Affected** | **Used for** |
|----------|-------------------|--------------------|------------------|--------------|
| Cash advance | Wages Payable | Employee advance receivable | No | Cash advance recovery on pay runs |
| Deduction on expense | Wages Payable | Employee advance receivable | No | Linking to Deduction on Expense vouchers |
| Loss of Pay | Wages Payable | Salary expense | No | LOP salary deduction lines on pay runs |
Loss of Pay is used when salary is reduced for unpaid leave under deduction-mode calculation. Any custom categories you create (see Custom Deduction Categories) are treated as "other deductions" in balance and statement reports — they reduce net payable but are kept separate from the Cash advance and Deduction on expense workflows.
Custom Deduction Categories
Beyond the seeded categories, you can create your own deduction categories for statutory, contractual, or voluntary deductions that apply in your region. Each custom category maps to a Credit Account — the liability or payable account where the withheld amount accrues — while the debit always posts to Wages Payable, reducing the employee's net pay. When a pay run is approved, the deduction lines credit the payable account so the accrued amount is ready for remittance.
India
Indian payroll typically includes several mandatory statutory deductions alongside voluntary ones:
| **Category** | **Type** | **Notes** |
|--------------|----------|-----------|
| Provident Fund (PF) | Mandatory | Employees' Provident Fund — a mandatory retirement social security scheme. The employee contribution (typically 12% of Basic + DA) is withheld and credited to a PF payable account for remittance to EPFO. |
| Employees' State Insurance (ESIC) | Mandatory | Health and social security cover for employees earning below the wage threshold. The employee share is withheld and credited to an ESI payable account. |
| Professional Tax (PT) | Mandatory (state) | State-levied tax deducted monthly and remitted to the state government. |
| TDS on Salary | Mandatory | Income tax deducted at source, credited to a TDS payable account. |
| Labour Welfare Fund (LWF) | Mandatory (state) | Small periodic contribution in states where it applies. |
| Salary Advance / Loan Recovery | Voluntary / contractual | Repayment of company loans or salary advances. |
Example scenario — India. A manufacturing company must withhold PF and ESIC from every eligible employee each month. Create a Provident Fund (PF) category with a "PF Payable" credit account and an Employees' State Insurance (ESIC) category with an "ESI Payable" credit account. On pay run approval, both appear as deduction lines: Wages Payable is debited and the respective payable accounts are credited, so the accrued statutory liability is ready for monthly remittance to EPFO and ESIC.
Middle East
In most GCC countries there is no personal income tax, so deductions are usually limited to social security for nationals plus voluntary or contractual items:
| **Category** | **Type** | **Notes** |
|--------------|----------|-----------|
| Social Security (GOSI / GPSSA / PIFSS) | Mandatory for GCC nationals | Withheld only for GCC national employees; expatriate staff are generally exempt. Examples: GOSI (Saudi Arabia), GPSSA (UAE), PIFSS (Kuwait). Credited to a social security payable account. |
| Salary Advance / Loan Recovery | Voluntary / contractual | Recovery of staff loans or advances. |
| Fines / Penalties | Contractual | Disciplinary deductions within the limits set by local labour law. |
| Unpaid Leave / Absence | Contractual | Deduction for days not covered by paid leave (often handled through Loss of Pay). |
Example scenario — Middle East. A company in Saudi Arabia employs both Saudi nationals and expatriates. Social security (GOSI) applies only to the Saudi nationals, so create a GOSI (Social Security) category linked to a "GOSI Payable" account and apply it on the pay runs of national employees only. Expatriate employees have no statutory salary deduction, so their pay runs carry only voluntary deductions such as loan recovery. Because there is no personal income tax, no TDS-equivalent category is needed.
How It Works
- Pay Run — Deduction lines on a pay run debit Wages Payable and credit the category's account. Cash advance deductions recover outstanding advances.
- Cash Advance Voucher — When an advance is issued, it posts against the Cash advance category. Receipt vouchers reduce the balance.
- Deduction on Expense — Standalone deductions use the Deduction on expense category and appear on the Employee Statement.
- LOP — Under deduction-style salary calculation, LOP amounts post through the Loss of Pay category, reversing the salary expense.
Actions
List header: New
| **Action** | **Description** |
|------------|-----------------|
| View | Opens the category in read-only view |
| Edit | Opens the edit form |
| Delete | Removes the category when not referenced |
| Suspend / Activate | Disables or re-enables the category |
Form buttons: Save / Update, Reset, Cancel
FAQ
Why can't I change the debit account on the form?
Debit account is fixed to Wages Payable. Deductions reduce the net amount owed to the employee.
What is the difference between Cash advance and Deduction on expense?
Cash advance is for advances issued and recovered through pay runs. Deduction on expense is for ad-hoc deductions recorded on Deduction on Expense vouchers.
Which deductions count as "Other Deductions" on the Employee Wise Salary report?
Loss of Pay and any custom deduction categories you create — everything other than the Cash advance and Deduction on expense categories.
What is Loss of Pay category?
A seeded deduction category for LOP amounts when salary calculation uses deduction mode — it appears as separate pay-run deduction lines.
Can I create custom deduction categories?
Yes. Create categories for statutory or voluntary deductions such as Provident Fund (PF), ESIC, Professional Tax, or GOSI (see Custom Deduction Categories). The Cash advance and Deduction on expense categories are reserved for their built-in workflows.
Why does cash advance recovery use the Cash advance category?
It links pay-run deduction lines to Cash Advance Voucher references for balance tracking.
Do deduction categories post on pay-run approve?
Yes together with payment lines — net effect reduces Wages Payable by total deductions.