What is Payroll Management? Complete Payroll Guide
A timely salary should be a must to maintain the employee's trust and enthusiasm in your company. It is possible to make payroll mistakes more quickly than you might expect. Imagine for a moment the situation of employees whose only source of income is their monthly salary. Imagine if the salary is not paid accurately or if the release of the salary is delayed. Employee morale can be negatively affected by such irregularities, resulting in a reduction in productivity for the organization.
While ensuring accurate and timely payment of salary is important, adhering to the various laws and regulations such as labour law, PF, PT, and other statutory compliance is also critical. Non-adherence to these laws can attract serious legal and financial consequences. Well, there are so many complications considering the payment process. May it be new hiring in the company, or adding the increment amount, everything needs to be managed in the most proper ways.
To make sure that your employees are happy and you are law compliant, you need to have a proper understanding of what payroll is and how to run the payroll process effectively. We will start with the basics of a payroll management system and how can it help your organisation.
What is Payroll Management Software?
The purpose of payroll software is to assist HR professionals or payroll professionals in managing the entire lifecycle of payroll process operations from start to finish.
The payroll process involves more than just calculating paychecks, as any HR or payroll professional will tell you. Every month, employees are enrolled onto the company's payroll, compliance is ensured, and payroll records are maintained until exit. By using payroll software, professionals can manage all these activities effortlessly from one location.
Payroll Management Involves:
-Developing a pay policy for the organization, including flexible benefits and leave encashment policies.
-Determining the components of a payslip, such as basic pay, variable pay, HRA, and LTA
-Gathering other payroll inputs from different sectors.
-The actual calculation of gross salary, statutory and non-statutory deductions, and resulting in a net salary
-Paying employees timely on releasing date
-Depositing dues such as TDS, PF, etc. with the appropriate authorities and filing tax returns.
Isn’t it something that needs the utter attention of the organisation? Well, surely yes! A company or any organisation cannot afford mistakes in the payment process and so it becomes an important factor to look forward to always.
What is the importance of Payroll Management in the business?
Managing payroll guides involves a wide range of activities to safeguard an organization's most valuable asset - its employees. Whenever it is done manually, with an outdated system, or through a spreadsheet, it becomes complex, time-consuming, and sometimes inaccurate. Payroll professionals can streamline other payroll tasks with dedicated software, thereby creating more time for important business initiatives.
It involves multiple factors when it comes to the Payroll Management software in the business. You can expect the below-mentioned things from the best payroll management system:
Payroll processing manually leaves the door open for unintentional errors that could prove very costly. You can automate both complex and simple payroll tasks with payroll software. Payroll software keeps the process organized, easy, and efficient, from preparing payroll to closing out the pay period.
Payroll is a recurring expense for any business. Payroll expenditures increase as your business grows, and you need complete visibility into one of the biggest contributors to your profit and loss statement. Using payroll software, you can generate all these reports, from employee salary registers to their statutory to bonus payments, enabling you to track expenses down to their last rupee.
There have been instances where businesses have been penalized for non-remittance of taxes. Using payroll software allows you to adapt to changing tax laws, select statutory requirements applicable to your business, control your PF contributions, and more. You can always be confident that your organization is making accurate tax deductions.
-Integration with third-party app
Every month, staff coordinate with multiple teams to obtain input for payroll processing.
A growing business will only make the process more complex and time-consuming. Secure integrations allow you to access data from multiple teams in one location. By integrating payroll software with HR and accounting platforms, you can bring together three different, yet equally important departments.
-Secure Payroll Data
Payroll systems contain sensitive information about your employees, such as salaries, taxes, and bank accounts. With fine-grained access controls, payroll software can enhance the integrity of your payroll data. You will be able to differentiate between the multiple roles played by each department and eliminate unauthorized access. Provide your payroll staff with the same interface, but allow them to see only the information they need by their roles.
Stages of processing payroll of the company
It is important for a payroll officer to plan carefully. It is always necessary to monitor changes to withholdings, contributions to social security funds, and other ongoing tasks. Pre-payroll, actual payroll, and post-payroll activities can be divided into three stages.
What are pre-payroll activities?
Pre-payroll management includes the process before the payroll is executed. Let’s know the pre-payroll management activity.
-Know what is Payroll Policy
Multiple factors influence the net amount to be paid. At that point, various company policies such as the pay policy, the leave and benefits policy, the attendance policy, etc., come into play. To ensure standard payroll processing, such policies must be well-defined and approved by the management.
-Gather all the input information
There are multiple departments and personnel involved in the payroll process. The information may include mid-year salary revision data, attendance data, etc. Generally, smaller organizations receive these inputs from a single source or from fewer teams. A larger organization, however, may find the task of gathering data overwhelming. It is not a problem to collect inputs if you are using a smart payroll system that integrates features such as leave management and attendance management, employee self-service portal, etc.
-Validate the input
Inputs must be checked for validity in terms of adherence to company policy, authorization/approval matrix, right formats, etc. In addition, you must ensure that no active employee is overlooked and that no inactive employee records are included in salary payments.Also read : Payroll Software to Make your Work Life Easier
Current Payroll Process
-Calculation of total payroll
The validated input data is fed into the payroll system for processing. Taxes and other deductions are subtracted from the net pay after adjusting for them. It is always a good idea to reconcile the values after the payroll process has been completed in order to avoid any errors.
All statutory deductions, such as EPF, TDS, and ESI, are deducted at the time of processing payroll. As a result, the company remits the amount to the appropriate government agencies. Depending on the type of dues, the frequency may vary. In most cases, dues are paid via challans. In the end, dues are paid and returns/reports are filed. For example, ECRs are generated and filed in order to file PF returns.Accounting for payroll
Every organization maintains a record of all its financial transactions. A significant operating expense that must be reported in the books of accounts is the salary paid. Payroll management requires ensuring that all salary and reimbursement data is accurately entered into the accounting/ERP system.
You may pay your salary by cash, check, or bank transfer. Most organizations provide their employees with a salary bank account. The next step after completing payroll is to ensure that the company's bank account has sufficient funds to pay the employee's salary. You will need to send a salary bank advice statement to the relevant branch. The statement contains information such as the employee's id number, bank account number, amount of wages, etc. Payroll management software that offers an employee self-service portal allows you to easily publish payslips, which employees can access by logging into their accounts.
Are there any challenges in Payroll Management?
We all know the challenges that come with the payment process. Considering payment processes, it should be considered the smoothest process.
Maintaining statutory compliance is a requirement
Non-compliance with statutory laws may result in fines and penalties and, in the worst-case scenario, may result in the business being unable to continue operations. Today, there are advanced payroll management programs that automatically process payroll in accordance with statutory compliance requirements.
Multiple sources of payroll inputs
The payroll must be processed after all relevant data has been gathered from sources such as attendance records, conveyance records, HR records, salary revision information, etc., making it a complicated process.
When it comes to payroll management software, it comes under the business management process where it is the responsibility of HR that comes under it. There are various factors intentionally or unintentionally, that comes along with when payroll is executed with it.
Choosing the best Payroll Management that suits your business should be installed and integrated with the organisation’s management system.