PAYROLL
● Payroll is the unit of employees who get paid by the company.
● Payroll also refers to the total amount of money an employer pays to the
employees after adjusting necessary taxes and other deductions.
Net pay = gross income - gross deductions
STAGES IN PROCESSING PAYROLL
1. Pre-payroll
2. Actual payroll activities
3. Post-payroll
Stage 1 ~ PRE PAYROLL PROCESS
1. Defining payroll policy:
● The net amount to be paid is affected by multiple factors.
● The company must set clear rules about pay, leave, and attendance that
management must approve to ensure smooth processing.
2. Gathering inputs:
● Payroll process involves working with different departments to collect necessary
information, such as attendance records and salary changes.
● Using payroll software can make this easier.
3. Input validation:
● Check the collected data to make sure it follows company rules.
● Ensure all active employees are included and that no inactive employees receive
payment.
STAGE 2 ~ ACTUAL PAYROLL PROCESS
Payroll calculation:
● At this stage, the validated input data is entered into the payroll system for the
actual payroll process.
● The net pay is calculated after adjusting necessary deductions.
● It is a good practice to record the outputs and verify for accuracy to avoid any
disruption.
STAGE 3 ~ POST-PAYROLL PROCESS
1. Statutory compliance:
● Process all required deductions like PF and TDS when running payroll and pay
them to the government.
● Payment schedules can vary, and returns need to be filed afterward.
2. Payroll accounting:
● Keep records of all payroll transactions, as salaries are a major expense.
● Ensure all salary and reimbursement information is entered correctly into the
accounting system.
3. Payout:
● Distribute salaries through cash, cheque, or bank transfer.
● Make sure there are enough funds in the company’s bank account for payments.
● Provide a salary statement with details like employee ID and amount paid.
● If using payroll software, employees can view their payslips online.
4. Reporting:
● After payroll is complete for the month, management may request reports on
employee costs.
● As a payroll officer, it’s your job to gather and share this information.
STATUTORY COMPLIANCE IN INDIAN PAYROLL:
● Statutory compliance involves following employment laws set by the central and
state governments.
● Key requirements for Indian businesses include:
1. Paying minimum wages
2. Providing overtime wages
3. Deducting contributions to schemes like PF and ESIC ( Employees' State
Insurance Corporation )
● Failure to comply can result in significant fines and penalties.
CHALLENGES IN HANDLING PAYROLL
MANAGEMENT PROCESS:
The payroll process has two main challenges:
1. Requirement to stay Statutory compliant:
● It’s important to follow laws about payroll.
● Not doing so can result in fines and might hurt the business.
● Using better payroll systems can help meet these requirements.
2. Dependence on multiple payroll input sources:
● Getting information from different sources, like attendance records and HR
systems, can be tough.
● Many companies used Excel sheets before, but they have problems, like
depending on formulas and difficulty in managing changes to employee
information.
VARIOUS METHODS AVAILABLE TO DO PAYROLL
FOR YOUR BUSINESS:
The possible options for running payroll can be:
● Excel-based payroll management
● Payroll outsourcing
● Using payroll software
