Payroll Processing

Payroll Processing
  • Payroll processing refers to the task of managing the payment of wages by a company to its employees. The steps involved in payroll processing typically include gathering employee time information for a selected time period, managing benefits & deductions, and distributing employee pay for that time period.
  • Collecting Input Data from client like Attendance, Information of New Joinees, Resigned Details, Increment, Incentive, Advance, Loan etc. Processing the same at our Payroll Package and generate Pay Register in PDF/Excel format along with different type of Reports as per Client Requirement.
  • Calculation of Overtime, Bonus etc.
  • Maintaining Attendance Record, Leave Record, Wages Register etc
  • Prepared Salary Sheet Branch wise, Unit wise, Location wise
  • Preparation of Arrear Sheets
  • Provide monthly Salary Slip to the individual employees through e-mail
  • Preparation of Bank Transfer List, Cash Payment List
  • Prepare Full & Final of Left employees
  • Prepare MIS Report
  • Handling queries of the employees related to their Attendance, Salary, Advance, Loan and Reimbursement etc.
    • Excel based payroll management
    • Payroll outsourcing
    • Using payroll software

      payroll processing chart

      Payroll is a list of employees who get paid by the company. Payroll also refers to the total amount of money employer pays to the employees. As a business function, it involves:

      1. Developing organization pay policy including flexible benefits, leave encashment policy, etc.
      2. Defining payslip components like basic, variable pay, HRA, and LTA
      3. Gathering other payroll inputs (e.g., organization’s food vendor may supply information about the amount to be recovered from the employees for meals consumed)
      4. The actual calculation of gross salary, statutory as well as non-statutory deductions, and arriving at the net pay
      5. Releasing employee salary
      6. Depositing dues like TDS, PF, etc. with appropriate authorities and filing returns

      In short, we can say that payroll process involves arriving at what is due to the employees also called as ‘net pay’ after adjusting necessary taxes and other deductions.

      The equation for calculating the net pay
      Net pay = Gross income- gross deduction

      Where,

      Gross income or salary = All types of regular income + allowances + any one-time payment or benefit
      Gross deduction = All types of regular deductions + statutory deductions + any one-time deductions

      What are the stages to payroll processing ?

      A payroll officer needs to do careful planning. There are always ongoing tasks that need attention and a constant need to monitor changes to withholdings, contribution to social security funds, etc. The entire process can be split into three stages, pre-payroll, actual payroll and post payroll activities.

      Payroll Processing Step

      Pre-payroll activities

      Defining payroll policy

      The net amount to be paid is affected by multiple factors. The company’s various policies such as pay policy, leave and benefits policy, attendance policy, etc. come into play at that time. As a first step, such policies need to be well defined and get approved by the management to ensure standard payroll processing.

      Gathering inputs

      Payroll process involves interacting with multiple departments and personnel. There can be information like mid-year salary revision data, attendance data, etc.

      Payroll Processing Mind Map

      In smaller organizations, these inputs are received from a consolidated source or fewer teams. However, in a larger organization, the task of gathering data may look overwhelming. If you are using a smart payroll software having integrated features like leave and attendance management, employee self-service portal, etc. inputs collection process does not remain a problem.

      Input validation

      Once inputs are received, you need to check for validity of the data concerning adherence to company policy, authorization/approval matrix, right formats, etc. You also need to ensure that no active employee is missed out and that no inactive employee records are included for salary payment. Read top 6 payroll validations to ensure accurate payroll.

      Actual payroll processing

      Payroll calculation

      At this stage, the validated input data is fed into the payroll system for actual payroll processing. The result is the net pay after adjusting necessary taxes and other deductions. Once payroll process is over, it is always a good practice to reconcile the values and verify for accuracy to avoid any errors.

      Post – payroll processing

      Statutory compliance

      All statutory deductions like EPF, TDS, ESI are deducted at the time of processing payroll. The company then remits the amount to the respective government agencies. The frequency can vary depending on the type of the dues. In most cases, payment of dues is made via challans. After all dues are paid return/report are filed. E.g., for filing PF return, ECR is generated and filed.

      Payroll accounting

      Every organization keeps a record of all its financial transactions. Salary paid is one of the significant operating costs which has to be reported in the books of accounts. As part of payroll management, it is essential to check that all salary and reimbursement data is fed accurately into accounting/ERP system.

      Payout

      You can pay salary by cash, cheque or bank transfer. Typically organizations provide employees with salary bank account. Once you complete payroll, you need to ensure that company’s bank account has sufficient funds to make the salary payment. Then you need to send a salary bank advice statement to the concerned branch. This statement is issued with particulars like employee id, bank account number, amount of wages, etc. If you are opting for a payroll software that has employee self-service portal, you can easily publish the payslips and employees can log-in to their account and access the payslips.

      Reporting

      Once you complete payroll run for a particular month, finance and high management team may ask for reports such as department wise employee cost, location wise employee cost, etc. As a payroll officer, it becomes your responsibility to dig into the data and extract required information and share the reports.

      Statutory compliance in Indian payroll

      When you run payroll, being statutory compliant means that you are paying as per the applicable employment norms set by the central and state legislation. The common statutory requirements that apply to Indian businesses include the provision for minimum wages, payment of overtime wages to workers, TDS deduction, contribution to social security schemes such as PF, ESI, etc.

      While computing salary you need to consider all these deductions and contributions. Income tax is one such deduction. At the beginning of the year, the employee is asked to make a declaration about his additional incomes, tax saving investments, etc. called as ‘income tax declaration.’ Accordingly, employee’s tax liability is calculated, and TDS is deducted.