The following is a list of the steps involved in effectively performing payroll from the ground up.
The Steps in the Payroll Process:
1. Employees who are already onboard
Businesses should board employees and prepare a list of paid employees as the first step in processing payments.
2. Establish a payroll policy.
To ensure regular payroll, organizations should create their policies and have them approved by management at this stage. Payment policies, leave and travel policies, employee benefits policies, etc. are examples of these policies.
3. Collect employee feedback
In order to process salary, employee inputs such as PAN, address, bank account details, etc. are essential. Typically, the teams involved collect these benefits from employees when they first join.
4. Ensure that employee inputs are accurate
Once the input is detected, double-check the details for accuracy in business policy, authorization model, and more. Also, make sure that all working employees are included in the payroll and compliance, and that no former employees are included.
5. Payroll calculation
Guaranteed inputs are provided in the payroll system at this level. After adjusting the applicable deductions and taxes due, total payment figures are generated. Spreadsheets are used to perform these calculations. As a result, reconciliation and price verification to avoid any injustice become a challenge. On the other hand, automated payment software may reduce the risk of writing or mathematical errors.
6. Pay employees' salary
Then, to make a payment transfer, firms must ensure that their bank account has sufficient funds. Thereafter, a bank statement of salary advice is sent to the relevant bank, instructed to issue the salary. All of these time-consuming tasks can be completed using the default payment software with a single click of the paycheck.
7. Pay your statutory obligations
All mandatory deductions, such as PF, TDS, ESI, and PT, are deducted during salary processing. Then, on scheduled dates, these payments are made to the relevant government departments.
8. Hand out pay stubs and tax computation sheets
Employees who distribute payslips and their tax returns are involved in this phase. Businesses do not have to distribute individual payslips when using an automated payment system. Employees can easily access their payslips by logging into their accounts.
Obstacles in the payroll management process
When it comes to paying the salaries of Indian workers, businesses must comply with the legal structure. There are 4 sections of this building.
If not done correctly, the process of being compliant is complicated and costly. Because each of these is calculated individually, compliance is complicated. Statistics are based on the salary information of each employee. Furthermore, firms must report such computations to the government on a regular basis via 4 distinct websites.
Most firms work on compliance using spreadsheets and other manual methods, which is not the most effective approach to be compliant. The statistics are complex, time-consuming, and inaccurate.
And laws change all the time!
The introduction of the Dual Tax Regime in Budget 2020, for example, altered the TDS process on employees' salaries. With this new amendment, lower income tax slabs were implemented, along with some exemptions and deductions.
Businesses had a difficult time putting these changes into spreadsheets and deciphering the new legislation. Furthermore, conveying the ramifications of such adjustments to their staff proved to be a difficult task.
Another example is the Atmanirbhar Bharat Abhiyaan amendments that were announced. The government made modifications as part of the relief package, such as lowering EPF contributions, lowering TDS rates, and extending the ITR reporting deadline.
Businesses must comply with all requirements under the law, and failing to do so can result in severe legal consequences and inevitable penalties.
Problems with spreadsheets
According to the report, about 57 % of Indian firms still process payments using paper or spreadsheets.
- Although there are no upfront costs for manual setup, computations using spreadsheets or any other manual approach are tedious and time-consuming.
- Spreadsheets can be useful in some situations. However, because the wide variety of personnel grows, so does the wide variety of spreadsheets.
- This process is being worked on by multiple teams, all of whom have access to the spreadsheets. Any misused data can have a negative impact on business cooperation.
- Spreadsheets lack the functionality required to comply with tax regulations month on month.
Employees are obliged to supply a significant amount of sensitive data in the form of official documents to the payroll team in order to process payroll. These include information on an employee's bank account, rental agreements, and PAN and Aadhaar numbers
- Employee data can be compromised, and failure to protect it can seriously damage a company's reputation.
- Paper-based papers are easily misplaced. Even if the documents are saved in spreadsheets, they can be hacked with just a password.
A lack of adaptability
Employees come to the payroll department on a regular basis to get their information updated. The staff keeps rental agreements, bank account information, and other important papers up to date on a regular basis to ensure that the process operates smoothly.
- Multiple update requests necessitate a significant amount of time and effort on the part of the affected teams. If these records aren't kept up to date, salaries may be credited incorrectly.
- Employees may miss deadlines for submitting records. This effectively halts the entire operation.