From timely and accurately disbursement of salaries to maintaining statutory compliance, a payroll system is an integral part of a company’s operations. Understand how to employ one.
For smooth operation, every organisation needs to implement different systems. Whether operational, management or strategic, these systems help track information and resolve disputes. Furthermore, they help eliminate unwanted errors and save time and resources spent on correcting them. A prime example would be the payroll process system.
An employer implements this for their employees. Employees are the foundation of any organisation. As a result, organisations must ensure their employees are satisfied, and one way to do so is by paying their salaries on time and consistently. This is where payroll management comes in.
We will discuss payroll meaning, its challenges, types of payroll processing services, and more in this article.
What Is Payroll?
Payroll refers to the complete information about the amounts an organisation pays to its employees. Payroll and salary are not the same. While salary is the amount earned by employees, payroll is the whole process of designing policy for the organisation, calculating incentives, including the deduction of taxes and provident funds, and distributing the same in a timely fashion.
From employee onboarding to retirement, human resources takes care of all that. Thus, it is necessary to understand payroll meaning in HR to define payroll. Hence, the payroll process means gathering all information related to an employee’s payroll, from their hiring to their departure. The payroll services can either be handled internally or outsourced based on business requirements and resources.
Steps To Execute Payroll
With remote work becoming more popular, you can even implement a cloud payroll system. Following are the steps to execute payroll accounting in your business :
- Define the policy
The first step of an organisation is to set a payroll policy. It should include everything from benefits, leaves policy, deductions, overtime, etc.
- Make a list
The next step is to list all the employees who need to be paid by the organisation. This will act as a forever record. Any new enrollments can be added to the same.
- Gather and validate employee information
For compliance with tax laws, you need to have basic information about the employees. These include their PAN(Permanent Account Number), permanent address proof, bank account details, etc. For smooth operations, you can collect these when they join. It may be possible for different departments to collect different information. Hence, before entering this information into the system, coordinate with each department properly.
- Calculate the salaries and taxes
Calculate the employee’s net pay after considering all the deductions, bonuses, incentives, leaves, reimbursements and taxes. In addition, to maintain income tax compliance, calculate the tax dues, employee’s provident fund, and more.
- Distribute salaries and pay taxes
Once all the calculations are done, the next step is to input all this information, make payslips and then distribute the same. Further, file the returns timely and pay any tax dues.
Challenges In Managing The Payroll Management Process
The meaning of payroll company may vary across businesses. While for some it’s their own company, it’s a third party for others. However, organisations may face specific challenges while managing them. Here are a few.
- Manual errors while entering data
- Delayed, missed, under or over salary payments
- Not updating employee information in the system
- Missed income tax due dates
- Incorrect tax forms or details
- Lack of coordination between departments leads to late approvals of paid leaves or reimbursements.
- Misuse of employee’s confidential information
- No reliable backup of employee information
Types of Payroll Processing Methods
Following are the types of payroll processing methods.
One of the most popular and common methods used for payroll processing is the Excel or spreadsheet method. In this method, all the employee details are entered into Excel. With the Excel formula, the net salary and compliance amounts are calculated. However, as the company size grows, this method can be challenging.
You can have a payroll system either in-house or outsource the same to professional third-party payroll service providers. This eliminates the stress of payroll as well as missing any statutory compliance. The outside agency takes care of everything.
- Processing solution
Another method is employing payroll processing software in your systems. Even if you outsource your payroll system, it may still be immune to human errors. However, with automation processing software, the process will be faster, more efficient, and eliminate the risk of manual errors.
Best Payroll Solution For Your Business
Implementing a payroll management system project requires proper time and resources. In a company with multiple employees, paying each one individually is a time-consuming task. It is also difficult to track the payments. PayU can solve this problem with PayU Payouts. Let’s see how?
- Simple and convenient
With PayU, you simply add funds to your account, add employee details in your dashboard and your work is done. The software will do instant payouts, including reimbursements, to your employees every month. The payments can be made even on bank holidays.
- Easy tracking
You can download the reports as well as track the status of the payments from your dashboard. It offers easy tracking through automatic mapping of the UTR or Reference number with the respective debit transaction. In addition, you can access the dashboard through your mobile as well.
- Multiple secured payment options
The online payment method offers multiple payment options including net banking, UPI, cards, and much more. Furthermore, the payment links are sent to vendors, where they can choose the payment mode.
- For all businesses
Whether you are an eCommerce firm, insurance company, banking company or even a gaming platform, you can make instant disbursals and payments like employee’s salary, commissions to agents, customer refunds, and more.
Whether you are a small business or a large business, you need a proper payroll system in place. This payroll system can help in reducing employee turnover and avoid tax penalties. So, it’s best to employ one as early as possible.
Before selecting a payroll software, consider the following :
1. Size of your business
2. Software company’s reviews and reputation
3. Availability of reports to track payments
It refers to the employee time recorded in the company’s payroll system on which the salaries are calculated and paid by the company.
Usually, the salaries are paid monthly in India. Hence, the time gap between the two monthly salary payments is known as a payroll cycle.