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.
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.
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
- High chances of clerical and mathematical errors as the data are entered manually
- Difficulty in adding and removing employees from the payroll list
- Chances of duplicate data and omission of entries at times
- Need to monitor the tax updates and other statutory changes like the PF, PT, etc.
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.
Challenges in Handling Payroll Management Process
Because of these two reasons, payroll management processing becomes difficult
The requirement of statutory compliance
Nonadherence to the statutory laws can lead to a penalty of fines and in the worst case, it will even threaten the existence of the business. However, when you register with IndiaFilings you automatically process payroll in compliance with the statutory laws.
Dependence on multiple payroll input sources
Before the payroll is processed it is necessary to get all the data together from varied sources like the attendance register conveyance facility availed record, data from the HR team like salary revision information, etc. making it a tedious process.
For years the HR and payroll managers managed the payroll on excel sheets but excel sheets have problems like dependency on excel formulas for calculation of salary, complexity in adding and removing the employees, and other limitations like manual data entry, and difficulty in extracting information.
