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All-in-one HR platform · v2.0
14-day free trial · No credit cardhello@HrMagix.com
All-in-one HR platform · v2.0
14-day free trial · No credit cardhello@HrMagix.com
A unit, such as a department, branch or project, to which payroll cost is charged in the accounts. Tagging each employee to a cost centre, and splitting where people work across more than one, lets the payroll journal post salary cost where finance needs to see it.
Cost centres are assigned when an employee joins and updated whenever they move team, branch or project. Payroll then produces a journal each month that groups gross pay, employer PF, employer ESI and other costs by cost centre, which finance posts in the books.
For example, an engineer who spends 60% of time on Project A and 40% on Project B can be split so that ₹48,000 of an ₹80,000 monthly cost goes to A and ₹32,000 to B. The split should be changed with an effective date when the allocation changes, not edited for past months.
The common mistake is updating the cost centre late, after payroll has run, so a transfer in mid-month posts the whole month to the old team. Agreeing a cut-off for transfers and checking the cost centre report against the headcount list before closing payroll avoids rework in accounts.
Each employee is assigned to one cost centre in their record, or split across several by percentage where they work for more than one unit.
So salary, employer PF, ESI and other costs post to the right department or project in the books, rather than to one general salary account.
A department is an organisational unit; a cost centre is an accounting unit. They often match but need not, for example where one department runs several projects.
The cost is usually split by days in each cost centre, or the whole month is charged to the new one, as the finance policy decides.
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