The payroll tally process is critical in any organisation with employees. Payroll calculation can be complex, depending on salary structure and the applicable laws and regulations. Any errors in calculations have an immediate impact on employee morale and productivity.
How to process payroll in easy steps?
These are the steps in the payroll process, broken down as follows:
- Pre-payroll process
- Payroll calculation process
- Post-payroll process
Let’s take a closer look at each of these.
● Creating a Payroll Policy
Step number one is to determine the minimum wage for each position. Leaves and benefits are monetized in a variety of ways by different organizations. You can get cash for unused vacation time. Pay for overtime varies from company to company. Annual bonuses are paid out by some companies. The payroll policy should be approved by the company’s upper management.
● Data collection
During the onboarding process for new employees, information about the employees is typically gathered and recorded. Their PAN number, as well as any other identifying numbers or details, may be included in this data set.
● Data on attendance and performance
Attendance data is also required for payroll. Payroll must be informed if any bonuses or benefits are owed by the relevant department. Payroll should keep track of any bonuses or raises an employee receives for achieving specific goals. With a payroll system integrated into business management software, data is more easily accessible and accurate.
Validation of data is required to ensure accuracy and conformity with the policies of the organization and the law. Payroll must make certain that no former employee is still considered an active employee for payroll purposes.
Payroll calculation process
As a result of the data input, payroll is generated. After gross income and gross deductions are deducted, payroll is calculated manually or using payroll software to calculate net pay.
Gross income/salary is the sum of regular income, any allowances, and any one-time payment or bonus that may be included in it. Regular deductions, statutory deductions, and one-time deductions, if any, make up the gross deduction. A person’s net pay is the difference between their gross earnings and their gross deductions.
● Payroll accounting
Payouts and deductions must be factored into the total amount of money paid out. Accounting procedures dictate how the relevant transactions should be recorded and entered. If the company uses standalone payroll or HR software, the information must be entered into the accounting system.
● Salary payout
As a rule, the vast majority of wages are transferred to employees’ bank accounts. The organization’s bank account must be sufficiently funded before the payroll disbursal process can begin. The net pay of each employee is used to generate a salary bank advice statement, which includes the employee’s account number.
Physical or digital pay stubs and tax information are generated and sent to employees. Payroll reports must be generated and submitted to management.
Statutory deductions must be paid by the proper government agencies from employees’ wages. You have to pay your taxes on time and file your tax returns on time.
Government agencies are required to withhold statutory deductions from employees’ wages, as required by law. You have to pay your taxes on time and file your returns on time. If you know the rules of accounting, then the payroll process becomes easier to understand.