What is Payroll processing?
Payroll is a list of employees that are paid by the company. Payroll is the total amount the employers pay to the employees. A payroll function involves the development of an organization pay policy that includes flexible benefits, leave encashment policy.
Payroll management also includes payslip components like basic, variable pay, HRA, and LTA. and also gathering other payroll inputs like the organization’s food vendor supply, etc.
Payroll and HR management also involve releasing the employees’ salary, depositing the dues like TDS, PF, etc with appropriate authorities, and filing returns.
Put together Payroll processing includes the calculation of the Net Pay after the tax adjustments and other deductions
Useful Links
Payroll processing and HR management
Payroll processing in India
Pre-Payroll Activities
Defining payroll policy
The first step is wherein the policies to the bank during the payroll processes need to be established. These policies need to be approved by the management to turn these policies into standards. Policies like the Pay policy, Attendance policy, leave and benefits policy, and more.
Gathering inputs
At this stage, the inputs are gathered from various departments to ensure the accurate calculation of the payroll.
| Source of Data | Data Example |
|---|---|
| Employees | Income tax declaration, facilities availed, and more |
| HR team | Salary structure, eligibility for benefits |
| Finance team | Deduction for recoveries |
| Leave and attendance systems | Data from attendance systems, current work shift, etc. |
| General service providers | Transport service provider, canteen vendor, etc. |
This data collection can seem tedious at first but registering with IndiaFilings will make it more hassle-free.
Input validation
It is necessary to verify the validity of the data once it is gathered as a minute mistake can ruin the entire payroll process.
It is necessary to ensure that the list contains all the active employees and no records of inactive employees. Checking the data whether it adheres to the company policy. Ensure the present in the right format.
Payroll Calculation
This step is when the validated input data is fed into the payroll system for actual payroll processing. The result is the Net pay after adjusting the necessary taxes and other deductions.
Once the payroll process is over it is always better to reconcile the values and verify the accuracy to avoid further errors.
Post- Payroll
Statutory compliance
The payroll administrator needs to religiously adhere to statutory compliance. There are various statutory deductions like EPF, TDS, ESI is deducted during the payroll processing.
These deductions are then paid to the respective authorities or government bodies.
Payroll accounting
Every organization is required to maintain an accurate book of accounts and the salary that is paid for one of the significant entries in the books of accounts.
Payout
After complying with the steps above the salaries can be finally paid in cash or cheque or via bank transfers. For hassle-free transfers, it is better to have salary accounts of the employees.
Report
Preparing a report is the last stage and it is necessary to prepare an accurate report containing information such as the department or location-wise employee cost
Startup or an established business, you’ll find professional utilities services fast, affordable and hassle-free Startup or an established business, you’ll find professional utilities services fast, affordable and hassle-free
Various methods of payroll management
Excel-based payroll management
At the initial stage of operations and when a company has a handful of employees they opt for excel based payroll management.
In excel based payroll management the calculation is done on excel sheets using the standard payroll calculation template. The already set mathematical formulas help the payroll officer to do the computation. But this method has many errors like
Outsourcing Payroll
When the payroll is outsourced an external agency is taking care of the payroll function. The payroll service provider based on the pay cycle every month provides various other data such as the attendance, leaves, and reimbursement details.
The external service provider then computes the payroll and takes care of the statutory compliance. Since payroll is a crucial function IndiaFilings can help you comply with all the needs.
HR & Payroll Software FAQ's
Payroll activities include attendance data for a particular month to capture the pays and the accurate attendance of the employees, details of new employees and employees left, the salary structure of new joiners and their bank account details, if there is any advance or incentive to be paid and if there are any special changes that are to be made to the salary structure.
Payroll comes under both the HR and the finance departments.
The Human resource office prepares the payroll since they hold the records of the attendance and the overtime that is rendered by the employees, the accounts department prepares the payment and is subjected to approval from the head of the Agency or the representative.