Use this checklist when creating allowance items in Tools > Payroll Item > Allowance. Proper allowance setup ensures payroll additions are calculated accurately and reported correctly according to company policies and statutory requirements.
Checklist for Allowance Item Setup:
Code
A unique identifier used to identify the allowance type.
Description
The full name or description of the allowance.
Start Period & End Period
Defines the validity period of the allowance.
Statutory (Pay EPF, SOCSO & EIS, Tax, HRDF)
Determine whether the allowance is included in statutory contribution calculations.
Pay EPF – Include the allowance amount in EPF contribution calculations.
Pay SOCSO & EIS – Include the allowance amount in SOCSO and EIS contribution calculations.
Pay Tax – Include the allowance amount in PCB (Monthly Tax Deduction) calculations.
Pay HRDF – Include the allowance amount in HRDF levy calculations.
Tax Exempted Rule
Defines whether the allowance qualifies for any tax exemption. Examples of tax-exempt allowances include Petrol Allowance (subject to statutory limits), Parking Allowance, and more.
ℹ️ Note: For the Tax Exempted Rule to take effect, Pay Tax must be enabled. Otherwise, the system will not evaluate the tax exemption rule.
EA Form Selection Field
Determines where the allowance should appear in the employee's EA Form for annual tax reporting purposes.
ℹ️ Note: For an allowance to appear in the EA Form, Pay Tax must be enabled. If Pay Tax is not selected, the allowance will not be included in EA Form reporting.