Oracle Payroll AS-IS Document

AS IS SYSTEM STUDY
PAYROLL
INTERLOOP LIMITED
A. F. FERGUSON & CO.

CHARTERED ACCOUNTANTS
A member firm of
TABLE OF CONTENTS
Page
1 PAYROLLOVERVIEW .............................................................................................3
1.1 Existing Payroll Systems............................................................................ 3
1.2 Payment Procedure & Frequency ........................................................ 3
2 ALLOWANCES .....................................................................................................5
2.1 Salary Break up ........................................................................................ 5
2.2 Other Allowances .................................................................................... 7
2.3 Loans & Advances ................................................................................ 25
2.4 Contractor’s Employees ....................................................................... 26
3 EMPLOYER RELATED PAYMENTS.............................................................................28
3.1 Statutory Payments ............................................................................... 28
3.2 Other Employer Payments ................................................................... 29
4 BONUS & POST RETIREMENT BENEFITS ....................................................................31
4.1 Bonuses ................................................................................................... 31
4.2 Post Retirement Benefits ....................................................................... 34
5 DEDUCTIONS .....................................................................................................38
5.1 Employees Deductions ......................................................................... 38
6 FINAL SETTLEMENT ..............................................................................................43
6.1 Payment Procedure .............................................................................. 43
6.2 Deduction ............................................................................................... 43
7 LEAVES AND ABSENCES ......................................................................................45
7.1 Workers .................................................................................................... 45
7.2 Executives and Management ............................................................. 46
8 ATTENDANCE PROCEDURE ...................................................................................48
8.1 Time Deduction...................................................................................... 48
9 ACCOUNTING ENTRIES ........................................................................................51
AS IS STUDY
Payroll
1 PayrollOverview
1.1 Existing Payroll Systems
Currently Interloop has three types of monthly Payrolls

 Fixed Rate Employees
 Piece Rate Employees
 Contractor Employees
Procedure:
 HR completes Payroll data entry in system at the end of the each month. (Leaves
Posting, bonuses, allowances, etc)
 HR intimate to the MIS for processing of Payroll.
 For fixed rate employees, MIS process the payroll on 1st day of each month, after
updating attendance data of employees.
 For piece rate employees, MIS process the payroll on 1st day of each month from
production record of employees.
 On processing of payroll, a credit balance (Payable) is booked in Accounts Payable
module against a dummy supplier.
 MIS generates salary slips and Bank Letters and forward to HR.
 HR verifies the salary slips and forward to Finance for payment.
1.2 Payment Procedure & Frequency
1.2.1 Payment Frequency
Fixed Rate Employees are paid on 1st of every month while salaries of Piece Rate Employees
are transferred on 2nd of every month.
1.2.2 Payment Procedure
After processing payroll, MIS department generates invoices in Accounts Payable Module
and extracts salary sheets from system. Intimation is sent to Finance Department along with
salary sheets.
Sr. Officer Accounts in Finance Department verifies the invoices in Accounts Payable Module
by checking it with salary sheets and generates system generated Bank Transfer Letters.
Currently Interloop Limited has the following bank accounts for the purpose of salary
payment:
A. F. FERGUSON &CO.a member firm of PAGE 3 OF 54

AS IS STUDY
Payroll
1. Habib Bank
2. Bank Alfalah
3. Bank of Punjab
4. Silk Bank
5. Standard Chartered
For Silk Bank and Standard Chartered, transfer letter is filled on the formats provided by the
respective banks and salaries are transferred online in these banks. Other Bank transfer
letters are then disbursed and salaries are transferred.
For those employees who are paid salary in cash, their salaries are transferred to cashier.

AS IS STUDY
Payroll
2 Allowances
2.1 Salary Break up
2.1.1 Gross Salary
2.1.1.1 Workers – AllDivision
Gross Salary=(Basic Salary +House Rent Allowance + Conveyance Allowance + Special Allowance-1)
2.1.1.2 Executives–All Divisions
Gross Salary = (Basic Salary + Other Allowance)
2.1.2 Basic Salary
2.1.2.1 Workers – Spinning Division
Basic Salary = (50% X Gross Salary)
2.1.2.2 Workers – All Divisions except Spinning
2.1.2.3 Executives – All Divisions
2.1.3 House Rent Allowance
House Rent Allowance = (70% X Basic Salary)
House Rent Allowance = (45% X Basic Salary)

AS IS STUDY
Payroll
2.1.4 Conveyance Allowance
Conveyance Allowance = (30% X Basic Salary)
Conveyance Allowance = (20% X Basic Salary)
2.1.5 Special Allowance – 1
It is basically the difference between Adjusted and Break-up Gross Salary which is normally
Rs. ±1.
2.1.6 Other Allowance
2.1.6.1 Executives – All Divisions
Other Allowance = (40% X Gross Salary)
2.1.7 Adjusted and Unadjusted Salary
Unadjusted gross salary is the remuneration negotiated with the employee and entered in
system.
Adjusted salary is the amount of unadjusted gross salary adjusted to reflect the actual
earned amount for a particular month.
Unadjusted gross salary

Adjusted gross salary = 26
X Working Days
While Working Days are defined as
Working Days = 26 − Leaves without pay days − Skip days

AS IS STUDY
Payroll
2.2 Other Allowances
2.2.1 Medical Allowance
2.2.1.1 Workers – All Divisions
Workers are not entitled for medical allowance.
2.2.1.2 Executives – All Division

2 percent of gross salary is given to every executive as medical allowance with salary.
Medical Allowance = Adjusted gross salary X 2 %
*Employees receiving 15 years service award it is increased to 4 percent
2.2.2 Overtime
Formula
Unadjustedbasicsalary
Normal rate (per hour) = 26 x 8
Overtime rate (per hour) =Normal rate (per hour) x 2
Overtime amount = Overtime rate (per hour) x Overtime Hour
Rate
Double overtime rate =200% of Normal Rate - applicable to all workers from grade 0 to 3Aof
Spinning Division.
Rules
Employees working over and above duty hours or working on rest day will be calculated as
overtime and unadjusted basic salary is considered for this purpose. On working days, if
employee’s early arrival or late departure will be within 25 minutes margin limit then
overtime will not be calculated else all time before start of duty or after end of duty will be
considered as overtime.

AS IS STUDY
Payroll
Examples:
Employee Duty Hours In Time Out Time Overtime [Min.] Time Deduction [Min.]
09:00 to 17:00 08:45 17:25 0+0=0 0
09:00 to 17:00 08:34 16:30 26+0=26 30
09:00 to 17:00 08:34 17:26 26+26=52 0
09:00 to 17:00 08:35 19:00 0+120=120 0
On rest day all present time is considered as overtime and it is covered in “Incentive against
Overtime” section.
Fixed Rate Workers
Formula

Overtime rate per hour =Normal rate (per hour)x 2
Overtime amount =Overtime rate (per hour) x Overtime hours
Rate
Double overtime rate = 200% of Normal Rate - applicable to both Fixed Rate and Piece Rate
workers from grade 0 to 3A of following divisions:
 Hosiery Division I
 Hosiery Division II
 Hosiery Division Common
 Energy Division
 Yarn Dyeing Division

AS IS STUDY
Payroll
 Domestic Sales Division

 Corporate Division
Overtime Limit
Maximum 4 hours overtime is allowed per day. Overtime limit of any employee should not
exceed 12 hours in a week. Week is considered from Monday to Sunday and maximum
overtime limit per month is 48 hours per worker. On gazetted holiday working over 8 hours
is considered while checking overtime limit violations.
Rules
overtime and unadjusted gross salary is considered for this purpose. On working days, if
employee’s early arrival or late departure will be within 15 minutes margin limit then
overtime will not be calculated else all time before start of duty or after end of duty will be
considered as overtime.
Piece Rate Workers

Production (Piece Rate) system calculates the per worker production on daily basis.
Overtime rate is calculated according to the extra productivity of worker in Overtime Hours.
Formula
Total day production (dozens)

Dozens produced per hour = Total stay hours
Normal production (dozens) =Dozens produced per hour x 8
Overtime production (dozens per day) = Totaldayproduction −

Normal production (dozens)
Total day earnings

Normal rate (per dozen) = Total day production (dozen)
Overtime rate (per dozen) = Normal rate (perdozen) x 2
Overtime amount (per day) =

Overtime production (dozens per day) x Overtime rate (per dozen)

AS IS STUDY
Payroll
Example
Machine Hours Dozens Rate per Total

produced dozen Rs.
A 2 3 10 30
B 14 4 20 80
C 2 5 10 50
D 2 2 5 10
Total 20 14 170
14
Dozens produced per hour = 20= 0.7 dozens per hour
Normal production (dozens) =0.7 x 8 = 5.6dozens
Overtime production (dozens per day) = 14 − 5.6 = 8.4 dozens
170
Normal rate (per dozen) = 14
= Rs. 12.14 per dozen
Overtime rate (per dozen) = 12.14 x 2 = Rs. 24.28 per dozen
Overtime amount (per day) = 8.4 dozensxRs. 24.28 perdozen= Rs. 203.952
Rate
Double overtime rate = 200% of Normal Rate - applicable to Piece Rate workers from grade
0 to 3A applicable to all workers from grade 0 to 3A of following
divisions:
 Energy Division

AS IS STUDY
Payroll
Overtime Limit
Maximum 4 hours overtime is allowed per day. Overtime limit of any employee should not
exceed 12 hours in a week. Week is considered from Monday to Sunday and maximum
overtime limit per month is 48 hours per worker. On gazetted holiday working over 8 hours
is considered while checking overtime limit violations.
Rules
overtime. On working days, if employee’s early arrival or late departure will be within 15
minutes margin limit then overtime will not be calculated else all time before start of duty
or after end of duty will be considered as overtime.
If employee stay time in a day is more than working hours then some portion of employee
production is consider as working in extra stay (overtime). This portion is calculated on same
ratio as extra stay has ratio with working time.
2.2.2.3 Executives – Spinning Division
Formula

Overtime amount =Overtime rate x Overtime hours
Rate
Double overtime rate = 200% of Normal Rate - applicable to all Executives from grade 4
to 6 of Spinning Division.
Rules
If employees stay over and above duty hours on working days then it is calculated as
overtime and unadjusted gross salary is considered for this purpose.

AS IS STUDY
Payroll
Only grade 4 executive are eligible for it. Executives of grade 5 and 6 get paid for working
overtime only on Gazetted holidays and it is calculated by using the same formula.
On working days, if employee’s early arrival or late departure is within 25 minutes margin
limit then overtime will not be calculated else all time before start of duty or after end of
duty is considered as overtime.
Example:
Employee Duty In Out Overtime Time Deduction

Hours Time Time [Min.] [Min.]
09:00 to 17:00 08:45 17:25 0+0=0 0
09:00 to 17:00 08:34 16:30 26+0=26 30
09:00 to 17:00 08:34 17:26 26+26=52 0
09:00 to 17:00 08:35 19:00 0+120=120 0
All the work hours on rest day are considered as overtime and it is discussed in “Incentive
against Overtime” section. It is not paid against extra stay for OSD duty.
2.2.2.4 Executives – All Divisions except Spinning
Formula
Unadjusted basic salary

Overtime amount = Overtime rate (per hour) x Overtime rate
Rate
Double overtime rate = 200% of Normal Rate - applicable to all Executives from grade 4 to
6 of following divisions:

AS IS STUDY
Payroll
 Energy Division
Rules
Employees working hours over and above duty time are calculated as overtime and
unadjusted basic salary is considered for this purpose. On working days, if employee’s early
arrival or late departure is within 15 minutes margin limit then overtime will not be
calculated else all time before start of duty or after end of duty will be considered as
overtime.
Examples:
Employee Duty In Out Overtime Time Deduction

Hours Time Time [Min.] [Min.]
09:00 to 17:00 08:45 17:15 0+0=0 0
09:00 to 17:00 08:44 16:30 16+0=16 30
09:00 to 17:00 08:44 17:16 16+16=32 0
09:00 to 17:00 08:45 19:00 0+120=120 0
On rest day all the working hours are considered as overtime and it is not paid against extra
stay for OSD duty.
2.2.3 Incentive against Overtime
Formula

AS IS STUDY
Payroll
For all holidays other than Eid

For Eid holidays

For Christmas holiday (applicable for Christian workers only)

Rate
Double overtime rate = 200% of Normal Rate - applicable to all fixed rate workers from
grade 0 to 3A of Spinning Division for gazetted days other than
festival.
Triple overtime rate = 300% of Normal Rate - applicable to all fixed rate workers from
grade 0 to 3A of Spinning Division for festival’s holidays.
Rules

AS IS STUDY
Payroll
Workers who come for work on gazetted holiday are given incentive and are paid at double
or triple overtime rate. Total present hours are treated as overtime for this purpose. On
gazette holidays (other than festivals) all employees are paid at double overtime rate. For
working on Eid holidays all workers are paid at triple overtime rate while only Christian
workers are paid on triple overtime rate against their work on Christmas.
Fixed Rate Workers
Formula
For all holidays other than festivals

For Eid holidays



AS IS STUDY
Payroll
Rate
Double overtime rate = 200% of Normal Rate - applicable to all fixed rate workers from
grade 0 to 3A of divisions other than Spinning for gazetted days
other than festival.
Triple overtime rate = 300% of Normal Rate - applicable to all fixed rate workers from
grade 0 to 3A of divisions other than Spinning for festival’s
holidays.
Rules
Fixed rate workers coming for work on gazetted holiday or rest day are given incentive and
are paid at double or triple overtime rate. Total present hours are treated as overtime for
this purpose. On gazetted holidays (other than festivals) all employees are paid at double
overtime rate. For working on Eid holidays all workers are paid at triple overtime rate while
only Christian workers are paid on triple overtime rate against their work on Christmas.
Piece Rate Workers
Formula
For all holidays other than Eid

Normal production (dozens) =Dozens produced per hour x 8
Overtime production (dozens per day) =Totaldayproduction −

Normal production(dozens)
Total day earnings

Overtime rate (per dozen) = Normal rate (perdozen) x 2

AS IS STUDY
Payroll
Overtime amount (per day)

=Overtime production (dozens per day) x Overtime rate (per dozen)
For Eid holidays

Dozens produced per hour =
Total stay hours
Normal production (dozens) = Dozens produced per hour x 8
Overtime production (dozens per day) = Total day production −

Total day earnings

Normal rate (per dozen) =
Total day production (dozen)
Overtime rate (per dozen) = Normal rate (per dozen) x 3
Overtime amount (per day) =

Overtime production(dozens per day) x Overtime rate(per dozen)

Normal production (dozens) = Dozens produced per hour x 8
Overtime production (dozens per day) = Total day production −

Total day earnings

Overtime rate (per dozen) = Normal rate (per dozen) x 3
Overtime amount (per day)

= Overtime production(dozens per day) x Overtime rate (per dozen)

AS IS STUDY
Payroll
Rate
Double overtime rate = 200% of Normal Rate - applicable to all piece rate workers from
grade 0 to 3A of divisions other than Spinning for gazetted days
other than festival.
Triple overtime rate = 300% of Normal Rate - applicable to all piece rate workers from
grade 0 to 3A of divisions other than Spinning for festival’s
holidays.
Rules
Piece rate workers coming for work on gazetted holiday are given incentive and are paid at
double or triple overtime rate. Total present hours are treated as overtime for this purpose.
On gazette holidays (other than festivals) all employees are paid at double overtime rate.
For working on Eid holidays all workers are paid at triple overtime rate while only Christian
workers are paid on triple overtime rate against their work on Christmas.
2.2.3.3 Executives – Spinning Division
Formula
Normal rate (per hour) = Unadjusted gross salary

26 x 8
Overtime amount = Overtime rate x Overtime hours
Rate
Double overtime rate = 200% of Normal Rate - applicable to all executives from grade 4 to
6 of Spinning Division.
Rules
Working on festival or other public holiday is calculated and paid separately from overtime.
Same like rest day working all presence time is considered during calculation. Executives
from grade 4 to 6 are eligible for this incentive.

AS IS STUDY
Payroll
2.2.3.4 Executives – All Divisions except Spinning
Formula
Normal rate (per hour) = Unadjusted basic salary

26 x 8
Rate
Double overtime rate = 200% of Normal Rate - applicable to all executives from grade 4 to
6 of following divisions:
 Energy Division
Rules
Working on festival or other public holiday is calculated and paid separately from overtime.
Same like rest day working all presence time is considered during calculation. Executives
from grade 4 to 6 are eligible for this incentive.
2.2.4 OSD Payment Allowance
A nominated person stays overnight to overlook the administrative issues. Schedule of

duties is designed at the start of every period. Employees on OSD duty are given next day
off. If OSD is on gazetted holiday then 1 additional personal leave is also awarded.
Only Executives are assigned with OSD duty.
OSD Payment Allowance =Rs 1500 per OSD duty

AS IS STUDY
Payroll
2.2.5 Knitting Work Allowance
This allowance is given to workers who run machines more than a limit. Workers of the
following divisions are eligible for knitting work allowance:
Incentive is paid with salary for period from 26 to 25 of next month. For example with salary
of April, incentive will be paid from 26 March to 25 April.
Customized Production Application calculates the amount of allowance to be paid to
workers according to their work on different machines. Amount to be paid is decided from
cost center, machine group and number of machine managed. Complete table of this
information is given in appendix A at end of this document. Amount mentioned in table is
for 23 days.
For example if employee run 7 machine for 20 days in a month and in table against relevant
const center, machine group and 7 machine amount mentioned is Rs 1500 then his incentive
amount will be:
1500
( 23
)x 20 = 1304
If same employee also runs 8 machines for 2 days then incentive for 2 days is calculated
using same method and his total incentive is calculated by adding both calculated figures.
2.2.6 Attendance Allowance (Press man work allowance)
This allowance is given to workers on Press Man job and is paid on monthly basis. Only
those workers are eligible for this allowance that have performed 24 days of service in a
month and only those days are considered valid for this purpose in which employee has
worked for minimum 7 hours.
Press Man Work Allowance is a fixed amount of Rs. 400. While for the month of June, July
and August this allowance is raised to Rs. 600.
Procedure
Employee presence time (in minutes) for whole month is extracted customized attendance
module and is converted in hours. Only those days are counted which have more than 7
working hours. Employees having total 24 (or above) valid days are paid Press Man Work
Allowance.

AS IS STUDY
Payroll
2.2.7 Production Incentive
Workers on the job of Press Man get this allowance if their daily production exceeds 112
dozens. Rs. 25 daily is paid for Production Incentive to workers whose production exceeds
112 dozens per day.
Procedure:
Daily production report is extracted from customized production application which shows
the number of dozens processed by workers on Press Man job. Payroll system adds Rs. 25
for production incentive for workers whose production exceeds 112 dozen per day.
2.2.8 Handling Machine Allowance
Handling machine allowance is paid to employees who handle specific machines. Only fixed
rate employees are entitled for this allowance. The amount of this allowance is not fixed
rather it depends upon the nature of job of worker and thus it is entered manually in payroll
system by HR.
2.2.9 Metal Detection Allowance
This allowance is given to employees performing metal detection job. Amount is defined
with designation. Designation wise per month allowance is given in next table:
Designation Amount per month (Rs)
Supervisor MD 1500
JR Supervisor MD 1500
JR Operator MD 1000
This allowance is adjusted according to the working days by the following formula:
Unadjusted MD allowance
Adjusted MD allowance payable = ( 26
)x Working days

AS IS STUDY
Payroll
2.2.10 Disbursement Allowance
HR manually enters the allowance amount in Payroll System for each employee.
2.2.11 LFA Allowance
As per the policy employees are entitled for LFA which consists of 6 Annual Leaves.
Employee receives 60% of gross for each LFA they avail. HR manually enters in LFA in system
for each employee.
2.2.12 Long Service Benefit
Long service benefit is given to employees completing a specific period in service. HR

manually enters the benefits in system for which employee becomes entitled.
2.2.13 Staff Welfare
HR manually inputs the allowance amount in Payroll System for the employees who are
entitled for Staff Welfare Allowance.
2.2.14 Reward
Employees might be given a benefit against their service in form of Reward allowance, for
such allowance HR manually enters the benefit amount for each employee in Payroll
System.
2.2.15 Driver Salary
Upon entitlement of this benefit HR manually enters this in Payroll System.
2.2.16 Car Allowance
HR manually enters the car allowance value in Payroll System at employee level.

AS IS STUDY
Payroll
2.2.17 Mobile Phone Allowance
For those employees who are entitled for mobile phone allowance, HR manually enters the
allowance amount in Payroll System.
2.2.18 Residence Allowance
Residence allowance is manually entered in system by HR for each employee is entitled for
it.
2.2.19 Cash Handling Allowance
Cash handling allowance is given to all cashiers. HR manually enters the allowance amount
in Payroll System at employee level.
2.2.20 Income Tax Return (refund)
In case of excess income tax being deducted from employee’s salary, HR manually enters
the refund amount in Payroll System.
2.2.21 Fuel Expense
HR manually enters the fuel expense value in Payroll System at employee level.
2.2.22 Vehicle Sale Proceed
HR manually enters the employee’s share from the sale proceeds of vehicle.
2.2.23 DOBOTEX QC Staff Payments
Company has 2 employees of executive cadre who are paid by Interloop Limited but their
salaries are claimed from DOBOTEX.

AS IS STUDY
Payroll
The difference is of accounting entries, in this case receivable against DOBOTEX is generated
instead of salary expense.
Following are the accounting entries which come into affect as a result of Payroll process of
DOBOTEX QC Staff
Payroll Process:
DESCRIPTION DEBIT CREDIT
Receivable (DOBOTEX) Account xxx
Salary Payable Account xxx
Salary Payment:
Salary Payable Account xxx
Bank Account xxx
When salary of QC Staff is recovered from DOBOTEX following accounting entries take place:
Bank Account xxx
Receivable (DOBOTEX) A/c xxx
2.2.24 Home ownership scheme
For those employees who are entitled for home ownership scheme, HR manually enters the
allowance value in Payroll System.

AS IS STUDY
Payroll
2.2.25 Welfare Grant
HR manually inputs the grant amount in system for workers who are entitled for Welfare
Grant.
2.3 Loans & Advances
2.3.1 Advance against Salary
Employees can take 50% of their working days salary as advance with the approval of HOD
and the amount taken as advance is adjusted against the salary of the next month. Advance
is not allowed for more than two times in a financial year. The amount of advance is entered
in Loan Application.
Advance = (Gross26Salary x Days Worked)x 50%
2.3.2 Loan against Provident Fund
Executives can take 75% of their provident fund balance as loan. Loan may be refundable or
non refundable.Refundable loan is repayable in maximum 36 installments. The amount of
loan is entered in Loan Application.
2.3.3 Salary Loan (Short Term)
Employees who have served for more than 1 year are entitled for short term loan.
For workers, the amount of short term loan is limited to 4 gross salaries or Rs.50,000
whichever is less.
For Executives,the amount of short term loan is limited to 4 gross salaries or Rs.200,000
whichever is less.
The term of loan is not more than 1 year.
This type of loan is not allowed, more than once in two consecutive years. Time period is
considered from the sanctioning date of loan.
The amount of loan is entered in Loan Application.
2.3.4 Long Term Loan
Employees who have served for more than 5 year are entitled for long term loan.
For workers, the amount of short term loan is limited to 12 months salary or Rs.100,000
whichever is less.

AS IS STUDY
Payroll
For Executives,the amount of short term loan is limited to 12 months salary or Rs.200,000
whichever is less.
The term of loan is not more than 3 years.
This type of loan is not allowed, more than once in five consecutive years.
The amount of loan is entered in Loan Application.
2.4 Contractor’s Employees
2.4.1 Contractual Salary
Contractual employees are paid according to the contract terms. Monthly salary is adjusted
according to working days using the following formula:
Unadjusted contractual salary

Adjusted contractual salary = X Working Days
26
2.4.2 Contractual Overtime
Formula
For working in addition to normal working hours and holidays (other than festivals)
Adjusted gross salary

Overtime rate (per hour)= Normal rate (per hour) x 2
Overtime amount = Overtime rate (per hour) x Overtime hours
For Eid holidays


AS IS STUDY
Payroll

Normal rate (per hour) =
26 x 8
Rules
Overtime incentive is given to contractual employees for working in addition to normal
working hours. Moreover if contractual employees come for work on gazetted holiday or
rest day then they are also given incentive and are paid at double or triple overtime rate.
Total present hours are treated as overtime for this purpose. On gazetted holidays (other
than festivals) all employees are paid at double overtime rate. For working on Eid holidays
all workers are paid at triple overtime rate while only Christian workers are paid on triple
overtime rate against their work on Christmas.
2.4.3 Contractual Staff Welfare
HR manually inputs the grant amount in system for contractual workers who are entitled for
Welfare Grant.
2.4.4 Contractual Reward
Employees might be given a benefit against their service in form of Reward allowance, for
such allowance HR manually enters the benefit amount for each employee in Payroll
System.

AS IS STUDY
Payroll
3 Employer Related Payments
3.1 Statutory Payments
3.1.1 EOBI Company Contribution
EOBI employer contribution is 5% of the earned salary with a maximum limit of 5% of

workers’ minimum wage i.e. Rs 8000. It means that maximum employer contribution can be
Rs 400 (5% of 8000).
Earned salary does not include items other than salary such as overtime, incentives and
arrears.
For example, if employee earned salary is Rs 5000 then employer contribution will be
5000 x 5% = Rs 250
If employee earned salary is Rs 8000 then employer contribution will be Rs 400 as 5 percent
of 8000 is greater than maximum limit (Rs 400).
3.1.2 Social Security Company Contribution
Workers having gross salary less then Rs. 12,500 are eligible for Social Security benefit.
Employer contribution for Fixed Rate Workers
For fixed rate employees contribution is 6 percent of earned salary with a cap of Rs 750.
Earned salary does not include heads other than salary such as overtime, incentives and
arrears.
For example if earned salary is Rs 8000 then contribution will be Rs 480. If earned salary will
be Rs 10000 or more then contribution will be Rs 600.
Employer contribution for Piece Rate Workers
For piece rate workers employer contribution is calculated from wages payment days and
defined minimum wage. Maximum contribution can be up to Rs. 750.

AS IS STUDY
Payroll
Formula:
Minimum wage for workers

Employer contribution = X Payment Days X 6%
26
For example if minimum wage for workers is Rs 7000 and employee’s payment days are 24
in wage then employer contribution will be
7000
26
x 24 x 6% = Rs. 388
3.1.3 Education Cess
Workers of all divisions are eligible for Education Cess benefit. Company makes a
contribution of Rs. 25 for 3 months for every worker.
3.2 Other Employer Payments
3.2.1 Loan Waived
Loan can be waived off by company for any employee. In this case amount to be waived off
is manually entered in Customized Loan Application.
3.2.2 Hajj Expense
This allowance is given to employees to assist them in performing Hajj. HR manually enters
the allowance amount in Payroll System for each entitled employee.
3.3.1 Contractual Social Security Company Contribution
Contractual workers having gross salary less then Rs. 12,500 are eligible for Social Security
benefit.

AS IS STUDY
Payroll
Company contribution for Fixed Rate Contractual Workers
For fixed rate contractual workers contribution is 6 percent of earned salary with a cap of Rs
750.
Earned salary does not include heads other than salary such as overtime, incentives and
arrears.
For example if earned salary is Rs 8000 then contribution will be Rs 480. If earned salary will
be Rs 10000 or more then contribution will be Rs 600.
Employer contribution for Piece Rate Contractual Workers
For piece rate contractual workers employer contribution is calculated from wages payment
days and defined minimum wage. Maximum contribution can be up to Rs. 750.
Formula:
Minimum wage for workers

Employer contribution = X Payment Days X 6%
26
For example if minimum wage for workers is Rs 7000 and employee’s payment days are 24
in wage then employer contribution will be
7000
26
x 24 x 6% = Rs 388
3.3.2 Contractual EOBI Company Contribution
EOBI employer contribution is 5% of the earned salary with a maximum limit of 5% of

workers’ minimum wage i.e. Rs 8000. It means that maximum employer contribution can be
Rs 350 (5% of 8000).
Earned salary does not include items other than salary such as overtime, incentives and
arrears.
For example, if employee earned salary is Rs 5000 then employer contribution will be
5000 x 5% = Rs 250
If employee earned salary is Rs 8000 then employer contribution will be Rs 350 as 5 percent
of 8000 is greater than maximum limit (Rs 350).

AS IS STUDY
Payroll
4 Bonus & Post Retirement Benefits
4.1 Bonuses
4.1.1 10-C Bonus
After completion of financial year, 10-C bonus is paid to workers subject to the following
conditions
 Employees who have served for minimum 90 days during financial year are eligible
for bonus, regardless they are active employee or not at time of payment.
 Employees who are terminated due to misconduct are not considered.
4.1.1.1 Worker - Spinning Division
10-C Bonus Amount =One gross salary at the end of financial year is paid as bonus.
4.1.1.2 Worker - Other than Spinning Division
 Fixed Rate Employees

 Piece Rate Employees
4.1.1.2.1 Fixed Rate Employees
10-C Bonus Amount =One gross salary at the end of financial year is paid as bonus.
4.1.1.2.2 Piece Rate Employees
10-C Bonus Amount = Average Monthly Gross Salary
Average Monthly Gross Salary =

Production Amount + Pay Leaves Payment + Extra Payment to fulfull minimum wage
Salary Months

AS IS STUDY
Payroll
4.1.2 Performance Bonus
Performance bonus is paid to executive and management staff.
4.1.2.1 Grade 4 to 6
Performance bonus payable to existing employees is calculated as

Performance Bonus = Gross Salary x 60%
For employees who have joined during the financial year payable amount is calculated on
pro rata basis
GrossPay
1.65
Performance Bonus = (
365
) x Service Days during Financial Year
4.1.2.2 Grade 7 & Above

Every year OD prepares terms and conditions of Performance Bonus and forward to MIS.
Payment sheets are prepared accordingly.
For Grade 7 and above performance bonus payable amount is manually entered in payroll
system.
4.1.3 Joining Bonus
Joining bonus is paid to executives at the time of joiningif it is a part of contract of service.
HR manually enters the bonus amount in payroll system.
4.1.4 Long Service Benefit
Long service benefit is paid to employees of grade 1 to 7A after 10 years of service and for
grade 8 & above after 5 years of service.
For grade 1 to 3A, monthly kit fee of one child upto Rs.500
For Grade 4 & above, monthly kit fee of one child upto Rs.2500
After 15 years of service monthly kit fee of 2 child is paid as long service benefit.
Long Service benefit is manually entered in payroll system.

AS IS STUDY
Payroll
4.1.5 WPPF
After completion of financial year, WPPF is paid to workers subject to the following
conditions
 Employees who have served for minimum 180 days during financial year are eligible
for bonus, regardless they are active employee or not at time of payment.
On the basis of Average Monthly Paid Salary, workers are divided into different groups for
entitlement of WPPF.
*** Group wise amount to be paid as WPPF Interestand WPPF is calculated by Finance on
the basis of Profit before tax.
Group Salary Band WPPF WPPF Interest
1 Up to 7500 *** ***
2 7501 to 15000 *** ***
3 15001 & above *** ***
Average Paid Salary for the workers of spinning division is calculated as
Average Paid Salary =

Adjusted Gross Salary– Overtime Amount– Incentive against Overtime
Salary months
4.1.5.2 Worker - Other than Spinning Division
Average Paid Salary for fixed rate workers of hosiery division is calculated as
Adjusted Gross Salary–OvertimeAmount–Incentive Against Overtime
Salary months

AS IS STUDY
Payroll
Average Paid Salary for piece rate workers of hosiery division is calculated as
Production Amount + Pay Leave Payment + Payment to fulfill Minimum wage
Salary months
4.2 Post Retirement Benefits
4.2.1 Provident Fund – Employer Contribution
Provident fund contribution for executives is calculated at the rate of 7.5% irrespective of
employee deduction rate.
PF contribution amount is calculated as
PF EmployerContribution = Baisc Salary x 7.5%
Employer contribution is paid to trust at the end of financial year.
4.2.2 Provident Fund – Employee Contribution
Provident fund is created only for executives and the executives have the right to choose a
rate of 7.5% or 12.5%.
PF deduction amount is calculated as
PF Deduction = Baisc Salary x Rate
4.2.3 Gratuity
There are two gratuity schemes

 After 1st Jan, 2003
 Before 1st Jan, 2003
Gratuity is paid with final settlement

Employees who are terminated due to misconduct are not considered for gratuity.

AS IS STUDY
Payroll
Gratuity scheme after 1st Jan, 2003

The period for entitlement of gratuity starts form 1st Jan, 2003 or joining date whichever is
later.
4.2.3.1 Worker – Spinning Division
Workers who have served for more than 1 year are entitled for gratuity, which is calculated
as
Normal Gratuity = Last Un-adjusted Gross Salary x Years of Service
Years of service are rounded to nearest whole number.
4.2.3.2 Worker – Other than Spinning Division
Workers who have served for more than 6 months are entitled for gratuity, which is
calculated as
Normal Gratuity = Last Un-adjusted Gross Salary x Years of Service
Workers who have served for more than 6 months are entitled for gratuity, which is
calculated as
Normal Gratuity = Highest Earned monthly Salary during last 12 months x Years of Service

AS IS STUDY
Payroll
4.2.3.3 Executive and Management Staff
Provident fund is not mandatory and the executives have option to participate or not.
Incase if they opt for provident fund they have to surrender 50% of their gratuity
Executives who have served for more than 3 years are entitled for gratuity, which is
calculated as
Normal Gratuity = Un-adjusted Basic Salary x Years of Service

Employees who have served for more than 5 years are entitled to an additional gratuity.
If Service period is more than 5 years but less than 10 years then additional gratuity is
calculated as
Additional Gratuity = Normal Gratuity x 25%
If service period is 10 years or more then additional gratuity is calculated as

Additional Gratuity = Normal Gratuity x 50%
Employees for whom years of service are rounded form 4.9 years or less to 5 years then
those employees are not considered for additional gratuity.
Employees for whom years of service are rounded form 9.9 years or less to 10 years then
those employees are not considered for additional gratuity of more than 10 years whoever
they are entitled for additional gratuity of 5 years due to less than 10 years.
Gratuity scheme before 1st Jan, 2003
Years of service till 1st Jan, 2003 are considered for calculation of gratuity
Normal Gratuity = (Basic Salary x Years of Service) x 25%
Service period of 5 / 10 years for entitlement additional gratuity starts from 1 st Jan, 2003.

AS IS STUDY
Payroll
4.3.1 Contractual Bonus 10-C
After completion of financial year, 10C bonus is paid to workers subject to the following
conditions
 Employees who have served for minimum 90 days to company during financial year
are eligible for bonus, regardless they are active employee or not at time of
payment.
10-C Bonus Amount = One Gross Salary is paid as bonus

AS IS STUDY
Payroll
5 Deductions
5.1 Employees Deductions
5.1.1 Mess Charges
For all employees, Mess charges are calculated in the Mess System and at the end of the
month mess charges are updated in payroll system.
5.1.2 Income Tax Deduction
Income tax calculation is done by the finance department for all the employees in
accordance with the Income Tax Ordinance, 2001 and manually enters the amount in payroll
system
Following are the components of the taxable salary income:
 Basic Salary
 Medical Allowance
 Overtime
 Other Allowance
 Bonus
Finance Department computes the estimated tax liability on the basis of projected salary for
the year and enters the deductable amount in payroll system.
After increment in January Finance department reassess tax liability of the person on the
basis of incremental salary and update the deductable amount in payroll system.
At the time of payment of bonus, Finance department compute estimated tax liability
payable on bonus and deduct the amount of tax before making the bonus payment.
Rate of tax for estimated tax liability for bonus is computed by adding bonus into projected
salary.
In the last month of financial year, Finance department compute the actual tax liability on
the basis of actual salary and update the payroll system.
A tax credit for investment in shares, donation to approved institution, Interest on house
loan is available to the employee.

AS IS STUDY
Payroll
5.1.3 Deduction of Advance against Salary
Employees can take 50% of their working days salary as advance with the approval of HOD
and the amount taken as advance is adjusted against the salary of the next month. Advance
amount is entered in loan application and loan application updates the payroll system for
deduction. The actual deducted amount is then updated in Loan Application.
5.1.4 Deduction of Salary Loan (Short Term)
Employees who have served for more than 1 year are entitled for short term loan.
For all employees, Installment amount is calculated in Loan Application and updated in
payroll system for deduction. The actual deducted amount is then updated in Loan
Application.
5.1.5 Deduction of Loan against Provident Fund
Installment amount of refundable loan against provident fund is calculated in Loan

Application and updated in payroll system for deduction. The actual deducted amount is
then updated in Loan Application.
Installment amount of loan is paid to trust with employee contribution of provident fund on
monthly basis.
5.1.6 Excess Mobile Usage
Excess mobile usage is manually entered in payroll system.
5.1.7 EOBI Employee Deduction
EOBI deducted from employee salary is calculated from the following formula but the
maximum employee participation is Rs.80.
EOBI Deduction = Adjusted Gross Salary x 1%
5.1.7.2 Worker –Other than Spinning Division

AS IS STUDY
Payroll
5.1.7.2.1 Fixed rate employees
5.1.7.2.2 Piece rate employee
EOBI Deduction = Earned Salary x 1%
And
Earned Salary =
Production Amount + Leave Payment + Payment to fulfill minimum wage
5.1.7.3 Executives
5.1.8 Deduction against Vehicle Loan
For executives, Installment amount of vehicle loan is calculated in Loan Application and
updated in payroll system for deduction. The actual deducted amount is then updated in
Loan Application.
5.1.9 Uniform Charges
Uniform charges are manually entered in payroll system.
5.1.10 Excess Electricity Usage

AS IS STUDY
Payroll
Excess electricity usage is manually entered in payroll system.
5.1.11 Excess Paid Salary Recovery
Excess paid salary recovery is manually entered in payroll system.
5.1.12 Entertainment Deduction
Entertainment deduction is manually entered in payroll system.
5.1.13 Excess Paid OT Recovery
Excess paid OT recovery is manually entered in payroll system.
5.1.14 Excess Medical Bill Deduction
Excess medical bill deduction is manually entered in payroll system.
5.1.15 Excess Paid Medical Allowance
Excess paid medical allowance is manually entered in payroll system.
5.1.16 Excess Sui Gas Usage
Excess Sui gas usage is manually entered in payroll system.
5.1.17 Excess Paid Long Term Service Benefit
Excess paid long service benefit is manually entered in payroll system.

AS IS STUDY
Payroll
5.1.18 Deduction against Long term Loan
Employees who have served for more than 5 years are entitled for long term loan.
For all employees, Installment amount is calculated in Loan Application and updated in
payroll system for deduction. The actual deducted amount is then updated in Loan
Application.
5.1.19 International Courier Charges
Courier charges are manually entered in payroll system.
5.1.20 Excess Disbursement Allowance
Excess disbursement allowance is manually entered in payroll system.
5.1.21 Fine Card Loss
Fine for card loss is manually entered in payroll system.
5.1.22 Transport Deduction
Transport deduction is manually entered in payroll system.
5.2.1 Contractual EOBI Deduction

AS IS STUDY
Payroll
6 Final Settlement
6.1 Payment Procedure
HR prepares the Final settlement bill and forwards the details to Finance for computation of
tax liability. Finance department compute the tax liability of the person and intimate to HR
for entry in Final Settlement Bill.
On completion of Final Settlement Bill, Invoice is generated in AP module against a dummy
final settlement supplier.
HR prepares the Final settlement bill of executives and workers of spinning division in
payroll system. Final settlement Bill of workers of other divisions (Except Spinning) is system
generated.
Payment is made through normal banking channel.
Provident fund payment is made separately from final settlement. Trust computes the
provident fund payable after adjustments of loan against provident fund if any and income
tax deductible on employer contribution.
If the employee resigns before the completion of a period of 3 years then amount
contributed by the employer is not paid to employee instead the of employer contribution is
paid to Interloop Limited.
6.2 Deduction
6.2.1 Notice Period Deduction
Notice period deduction is made from executives, which is manually entered in payroll
system.
6.2.2 Notice Period Earning
Notice period earning is given to those employees that are discharged by the company on
less than one month notice period.
6.2.3 Leave Encashment
According to the Policy at Interloop Limited only annual leave can be cashed at the time of
separation from the company. Leave encashment is paid with Final Settlement according to
the following formula:
Leave encashment = ( 26
)x Remaining annual leave balance

AS IS STUDY
Payroll
6.2.4 Excess Availed Leaves
6.2.4.1 Workers
On separation, Excess availed leaves of an employee is calculated in system as

Excess Availed =
Allowed Leaves for the year
Actual Leaves −
12
x No. of months till separation
Excess Availed Leaves Deduction =Un−Adj Gross

26
Salary
x Excess Availed Leaves
6.2.4.2 Executives
Excess availed leaves are manually entered in payroll system.
Excess Availed Leaves Deduction =Un−Adj Gross

26
Salary
x Excess Availed Leaves
6.2.4.3 Contractual Leave Encashment
Only annual leave can be cashed at the time of separation from the company. Leave
encashment is paid with Final Settlement according to the following formula:
Unadjusted contractual salary

Leave encashment = ( 26
)x Remaining annual leave balance

AS IS STUDY
Payroll
7 Leaves and Absences

7.1 Workers
S.N Type Approval Duration Eligibility/Conditions

o.
1 Medical leave Head of 8  All confirmed and probationary
department Days workersare entitled to medical leaves.
 On contract employees are also eligible
for 8 medical leaves for one year. On
extension of contract leaves are also
revised.
 Medical leaves cannot be carried
forwarded and lapse at the end of the
year.
2 Casual leave Head of 10  All confirmed employees are entitled to

Department Days causal leaves at the start of the year.
 For probationary employees system
gives leave balance at time of
confirmation for period from date of
joining or start of year whichever is
greater to end of year.
 Workers on contract are also eligible
for 10 casual leaves for 12 months. On
extension of contract leaves are also
revised.
 Casual leaves cannot be carried
year.
3 Annual leave Head of 14  All workers are entitled to annual

department Days leaves after one year of continuous
service.
 Annual leaves can be carried forwarded
to maximum of 28 days.
4 Maternity Head of 12  Maternity leave consists of 12 weeks.

leave department Weeks  No defined limit or check in system and
is open for data entry person.
5 Leave without Head of -  No defined limit or check in system and
pay department is open for data entry person.

AS IS STUDY
Payroll
6 Social Security Head of -  It is a sub type of without pay leaves

leave department and at time of leaves entry user flags
mark without pay leave as social
security leave.
 Only workers who are registered for
Social Security benefit can avail this
leave.
 It can be medical or maternity leave
only and company recovers the salary
of leave days from Social Security.
 No defined limit or check in system and
7 Compensatory Head of -  For working on Rest Day one
leave department compensatory leave is incremented.
8 Special Case Head of -  These include leaves for reasons such
leave department as wedding vacations, Haj leaves,
closure of production unit due to power
breakdown etc.
 Only authorized person can enter these
leaves. No other check is present in
system.
7.2 Executives and Management
S.N Type Approval Duration Eligibility/Conditions

o.
1 Personal leave Head of 18  All confirmed employees are entitled to
(Medical & department Days 8 Medical and 10 Causal leaves at the
Casual) start of year.
 On contract employees are given
personal leave balance as per their
contract terms.
 Personal leaves cannot be carried
year.
2 Annual leave Head of 14  All confirmed employees are entitled to
department Days annual leaves after one year /
12months of continuous service
 Annual leaves can be carried forwarded
to maximum of 28 days
3 Maternity Head of 12  Maternity leave consists of 12 weeks.
leave department Weeks  No defined limit or check in system and

AS IS STUDY
Payroll
4 Leave without Head of -  No defined limit or check in system and

pay department is open for data entry person
5 Compensatory Head of -  For working on rest day one
leave department compensatory leave is awarded.
 Only Executives of grade 5 and 6 of
Spinning Division are eligible for this
benefit.
 Management employees also get one
compensatory leave for working on rest
day.
6 Special Case Head of -  These include leaves for reasons such as

leave department wedding vacations, Haj leaves, closure
of production unit due to power
breakdown etc.
 Only authorized person can enter these
leaves. No other check is present in
system.

AS IS STUDY
Payroll
8 Attendance Procedure
Every employee at Interloop Limited has a shift and their attendance can only be marked as
present if they come for work during their duty time.
All employees from grade 1 to 6 have a margin of 15 minutes for their time-in. In case of
being late from the margin of 15 minutes, Late Minutes Deduction is made.
8.1 Time Deduction
8.1.1 Workers – Spinning Divisions
Time deductions for whole month are added up at the end of every month. In case
accumulative time deduction is less than two hours margin limit then no deduction is made,
otherwise all time deduction is converted into casual leaves and deducted from the balance.
If leave balance is not available then it will be deducted as leave without pay. Formula for
converting time deduction to leaves days will be
𝑇𝑜𝑡𝑎𝑙 𝑡𝑖𝑚𝑒 𝑑𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛 (𝑚𝑖𝑛𝑢𝑡𝑒𝑠)

Leaves days = 480
Minimum unit for absent days is 0.25 and all any remaining dayis ignored.
Examples:
Total time deduction Leaves

(minutes) (day)
1 to 119 0
120 to 239 0.25
240 to 359 0.5
400 to 479 0.75
480 to 599 1.0
In any case time deduction of one month can not be carried forwarded to next month. If
employee goes outside factory/attendance area during duty hours, all skipped time is
calculated as time deduction and overtime hours can not be adjusted against time
deduction.

AS IS STUDY
Payroll
Note: Time deduction from leave balance is not made for any specific day rather it is
deducted from whole month as a whole.
8.1.2 Workers – All Divisions except Spinning
Time deductions for whole month are added up at the end of every month. In case
accumulative time deduction is less than two hours margin limit then no deduction is made,
otherwise all time deduction is converted into casual leaves and deducted from the balance.
If leave balance is not available then it will be deducted as without pay leaves. Formula for
converting time deduction to leaves days will be
Totaltimededuction (minutes)
Leave days = 480
Minimum unit for absent days is 0.25 and all any remaining dayis ignored.
Examples:
Total time deduction Leaves

(minutes) (day)
1 to 119 0
120 to 239 0.25
240 to 359 0.5
400 to 479 0.75
480 to 599 1.0
In any case time deduction of one month can not be carried forwarded to next month. If
employee goes outside factory/attendance area during duty hours, all skipped time is
calculated as time deduction and overtime hours can not be adjusted against time
deduction.

AS IS STUDY
Payroll
8.1.3 Executives – All Divisions
At time of month closing for employees of executive cadre time deductions for whole
month is summed up. If this accumulative time deduction is less than four hours margin
limit then it is ignored, otherwise all time deduction is be converted into days and deducted
from personal leaves, incase if leave balance is not available it will be converted into
without pay leaves.
Following is the formula for converting time deduction (minutes) to leaves days:
Total time deduction (minutes)
Leave days = 480
Minimum unit for absent days is 0.25 and all any remaining day is ignored.
Examples:
Total time Leaves

deduction (minutes) (day)
1 to 239 0
240 to 359 0.5
400 to 479 0.75
480 to 599 1.0
In any case time deduction of one month can not be carried forwarded to next month.
Executives of all divisions have to complete a minimum of 4 hours duty time or else their
absence is marked.If employee goes outside factory/attendance area during duty hours, all
skipped time is calculated as time deduction and overtime hours can not be adjusted against
time deduction.
8.1.4 Management – All Divisions
For Management employees there is no condition for minimum presence time in a day and
no time deduction is calculated.

AS IS STUDY
Payroll
9 Accounting Entries
Following are the accounting entries which come in affect as a result of Payroll processing:
Salary Components:
Salary and Wages A/c xxx
Overtime A/c xxx
Salary Payable A/c xxx
Other Benefits:
Non Mandatory Fringe Benefits A/c xxx
Bonus
Mandatory Fringe Benefits (Expense A/c) xxx
WPPF
Mandatory Fringe Benefits A/c xxx
WPPF Payable A/c xxx

AS IS STUDY
Payroll
Deduction (Mess, Excess Mobile etc)
Expense A/c xxx
Loan/ Advance (Repayment)
Loan/Advance Receivable A/c xxx
Gratuity
Mandatory Fringe Benefits A/c xxx
Gratuity Payable A/c xxx
Provident Fund (Employer Contribution)
Non Mandatory Fringe Benefits (Expense A/c) xxx
PF Payable A/c xxx
Provident Fund (Employee Contribution)
PF Payable A/c xxx

AS IS STUDY
Payroll
Provident Fund (Payment by Interloop to Trust):
PF Payable A/c xxx
Bank A/c xxx
EOBI / Social Security (Employer Charges):
Mandatory Fringe Benefits A/c Xxx
EOBI / Social Security Payable A/c xxx
EOBI (Employee Contribution)
EOBI / Social Security (Payment):
Bank A/c xxx

AS IS STUDY
Payroll
Deduction of Income Tax (Employee):
Income Tax Payable A/c xxx
Payment of Salary:
Bank A/c xxx

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AS IS SYSTEM STUDY

A. F. FERGUSON & CO.

1.1 Existing Payroll Systems

Currently Interloop has three types of monthly Payrolls

1.2 Payment Procedure & Frequency

1.2.1 Payment Frequency

1.2.2 Payment Procedure

A. F. FERGUSON &CO.a member firm of PAGE 3 OF 54

A. F. FERGUSON &CO.a member firm of PAGE 4 OF 54

2.1 Salary Break up

2.1.1 Gross Salary

2.1.1.1 Workers – AllDivision

2.1.1.2 Executives–All Divisions

Gross Salary = (Basic Salary + Other Allowance)

2.1.2 Basic Salary

2.1.2.1 Workers – Spinning Division

Basic Salary = (50% X Gross Salary)

2.1.2.2 Workers – All Divisions except Spinning

Basic Salary = (60% X Gross Salary)

2.1.2.3 Executives – All Divisions

Basic Salary = (60% X Gross Salary)

2.1.3 House Rent Allowance

2.1.3.1 Workers – Spinning Division

House Rent Allowance = (70% X Basic Salary)

2.1.3.2 Workers – All Divisions except Spinning

House Rent Allowance = (45% X Basic Salary)

A. F. FERGUSON &CO.a member firm of PAGE 5 OF 54

2.1.4 Conveyance Allowance

2.1.4.1 Workers – Spinning Division

Conveyance Allowance = (30% X Basic Salary)

2.1.4.2 Workers – All Divisions except Spinning

Conveyance Allowance = (20% X Basic Salary)

2.1.5 Special Allowance – 1

2.1.6 Other Allowance

2.1.6.1 Executives – All Divisions

Other Allowance = (40% X Gross Salary)

2.1.7 Adjusted and Unadjusted Salary

Unadjusted gross salary

While Working Days are defined as

Working Days = 26 − Leaves without pay days − Skip days

A. F. FERGUSON &CO.a member firm of PAGE 6 OF 54

2.2 Other Allowances

2.2.1 Medical Allowance

2.2.1.1 Workers – All Divisions

Workers are not entitled for medical allowance.

2.2.1.2 Executives – All Division

Medical Allowance = Adjusted gross salary X 2 %

*Employees receiving 15 years service award it is increased to 4 percent

2.2.2.1 Workers – Spinning Division

Overtime rate (per hour) =Normal rate (per hour) x 2

Overtime amount = Overtime rate (per hour) x Overtime Hour

A. F. FERGUSON &CO.a member firm of PAGE 7 OF 54

09:00 to 17:00 08:45 17:25 0+0=0 0

09:00 to 17:00 08:34 16:30 26+0=26 30

09:00 to 17:00 08:34 17:26 26+26=52 0

09:00 to 17:00 08:35 19:00 0+120=120 0

2.2.2.2 Workers – All Divisions except Spinning

Fixed Rate Workers

Unadjusted gross salary

Overtime rate per hour =Normal rate (per hour)x 2

Overtime amount =Overtime rate (per hour) x Overtime hours

A. F. FERGUSON &CO.a member firm of PAGE 8 OF 54

 Domestic Sales Division