Expense claims can be reimbursed two ways: paid directly from the bank, or settled through payroll so the employee receives one combined payout with their salary. The payroll route is a subledger move, not a recalculation — the claim's expense was already booked when the claim posted, so payroll never re-accrues it as an earning. What moves is the liability: from "we owe this employee a reimbursement" to "it is part of what payroll pays them". No amount is counted twice, and both modules stay reconcilable because everything is keyed on the same person record.
The claim side
An expense claim carries a reimbursement mode; claims meant for the salary payout are set to Payroll. The claim lives its normal life in the expenses module — entry, policy checks, approval, posting. Posting the claim books the expense (expense accounts debited, employee payable credited) and raises the employee-payable open item; that posting is the prerequisite for the payroll settlement, because you can only move a liability that exists in the ledger.
The settlement move
On a posted, payroll-mode claim, the Settle via Payroll action performs the move: one journal debits the employee payable and credits the Payroll Payable control for the claim's open amount, the employee-payable open item is settled, and the claim is stamped with the payroll run it rode with and marked settled and paid — from the expense module's point of view, the reimbursement is done. The action asks for confirmation and refuses the cases that would corrupt the trail: a claim not yet posted, or one whose employee payable is already settled.
| Stage | Ledger effect |
|---|---|
| Claim posted (expenses module) | Dr expense accounts / Cr Employee Payable, open item raised |
| Settle via Payroll | Dr Employee Payable / Cr Payroll Payable, open item settled, claim tagged with the run |
| Salary payout | The payroll payable is discharged with the salary payment |
Why it is not an earning
A tempting design would add the reimbursement as a pay component — and it would double-count: the expense hit the P&L when the claim posted, so adding it to gross pay would book it again. The settlement move keeps the P&L untouched and shifts only the balance-sheet liability. It also keeps tax clean: a reimbursement settled this way never inflates gross earnings or the TDS basis.
The corollary: a payroll-settled reimbursement is not a payslip line, because it never enters the run's calculation. The employee sees the claim reimbursed in the expenses module and the money in the combined payout; the payslip documents the salary calculation only.
Eligibility, precisely
A claim is ready for payroll settlement when all of these hold — worth encoding in your period-close checklist for claims:
- Reimbursement mode is Payroll (a direct-reimbursement claim should be paid from the bank instead).
- The claim is posted — approval alone is not enough; the liability must be in the ledger.
- It is not already settled or paid, and not already included in a payroll run.
- The claimant is on the paying company's payroll, so the liability lands in the right company's payroll payable.
For the full claim lifecycle — entry, policies, approval, posting and direct reimbursement — see the expenses documentation.
Common questions
Does the reimbursement show on the payslip?
No, and deliberately: it never enters the payroll calculation, so it cannot appear as a calculated line. The claim itself — visible to the employee in the expenses module — is the record of the reimbursement, stamped with the run it was settled alongside.
When in the payroll cycle should claims be settled?
After the claims are posted and before the salary payment goes out, so the combined payout covers them. The settlement is a ledger move independent of the run's own calculate/post sequence — it does not require the run to be in any particular status, and it never changes the run's figures.
Is the reimbursement taxed?
The payroll settlement neither adds to gross earnings nor touches the TDS basis — tax treatment is decided in the expenses module by the claim's own nature and your policies there, not by the payout route.
What if the claim was settled via payroll by mistake?
The move is a posted journal, so the correction is a reversal in the ledger — reverse the settlement journal to restore the employee payable, then reimburse directly. The claim's stamps (settled, paid, included-in-run) identify exactly what to unwind.