Know everything about Payroll Management

Last Updated On: Nov. 19, 2021, 11:25 p.m.
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KNOW EVERYTHING ABOUT PAYROLL MANAGEMENT

 

 

What is Payroll?

Payroll is a list of employees who get paid by the company. Payroll also refers to compenstaion of money employer pays to the employees. It invloves:

  • Developing organization pay policy including flexible benefits, leave encashment policy, etc.
  • Defining payslip components like basic, variable pay, HRA, and LTA
  • 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)
  • The actual calculation of gross salary, statutory as well as non-statutory deductions, and arriving at the net pay
  • Releasing employee salary
  • Depositing dues like TDS, PF, etc. with appropriate authorities and filing returns

 

What is the Payroll Management Process?

Payroll refers to the amount of money a company pays to its employees and workers in terms of salaries and wages. It also includes the records of employee information. 

The payroll management process is what an organization does in the process of administering and implementing payroll functionalities. Some of these functionalities include managing staff financial reports, such as wages/salaries, paying bonuses and incentives, deductions, and other such details. 

 

What are the Stages to Processing Payroll?

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.

There are three stages in Payroll process. They are

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.

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 Process

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 Process

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.

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