�ݺ�ߣ

Table of Content
1. What is payroll processing?
2. Steps involved in payroll processing
3. Functions of payroll processing in Business
4. Stages of payroll
(a) Stage 1: Pre-payroll Activity
(b) Stage 2: Actual Payroll Process
(c) Stage 3: Post-payroll Process

5. Types of allowances under Payroll Processing
(a) House Rent allowances (HRA)
(b)Transport Allowance (TA)
(c) Medical Allowances
(d) Meal Coupons/Education Allowances
(f) Leave Travel Allowances
(g) Other allowances
6. Methods of Payroll Processing
(a) Excel based Payroll Management
(b) Using Payroll Software
(c) Payroll Outsourcing
Table of Content

What is Payroll Processing?
• A task of managing salary or wages payments of the
employees by the company.
• Most companies use payroll software system to calculate
payrolls
• Or they use third party payroll processing outsourcing
services.

Steps involved in Payroll Processing
The steps involved while processing the payroll are-
1. Gathering the employee time information for a particularly
selected time period.
2. Managing all the given benefits and the made deductions.
3. Distribution of the payment for the calculated time period.

Steps involved in Payroll Processing

Functions of payroll processing in Business
• Developing a policy for pay in the organization that includes
leave encashment policy, flexible benefits, medical leave benefit
etc.
• Defining components like basic, House Rent Allowance (HRA),
variable pay and Leave Travel Allowance etc. in the pay slip.
• Gathering other payroll inputs like information regarding the
amount to be recovered from the employees for meals
consumed)

• Actual calculation of the gross salary, statutory and non-
statutory deductions, and arriving at the net pay of the
employee.
• Releasing the salary of employees.
• Depositing dues like Provident Funds, TDS, TA/DA etc. with
appropriate concerned authorities and filing the returns timely.
Functions of payroll processing in Business

Stages of Payroll
There are three stages under the payroll processing services.
These are-
1.Pre-payroll activities
2.Actual payroll process
3.Post payroll activities

Stage 1: Pre-Payroll Activity
The first stage in payroll processing in India is pre-payroll activities
which includes three steps to be completed for payroll calculation.
These steps are-
• Defining the payroll policy
• Gathering Inputs
• Validation of Input

Defining payroll policy
• Multiple factors affects net amount salary of employees.
• Consider the well defined policies of the company such as pay
policy, leave and benefits, etc.
• Policies must be approved by the management of the company
to ensure standard payroll processing is being followed.

Gathering inputs
• It involves interaction within multiple departments and officials.
• Information and data related to salary revision during mid-year,
attendance, leaves etc. to be collected.
• The task of gathering information can be hectic/overwhelming.
• Company’s must use smart payroll software having integrated
features such as leave and attendance management, employee
self-service portal, etc.

Input validation
• Inputs are collected or received.
• Validity of the data concerning compliance and adherence to
company policy, authorization, right formats, etc. needs to be
ensured and checked.
• Ensure that none of the active employee is missed out as well
as no inactive employee records has been included during
salary payment.

Stage 2: Actual Payroll Process
Payroll calculation
• Input data that has been validated is fed into the payroll
system for the actual payroll processing and calculation.
• The result after adjusting necessary taxes and other
deductions is the net pay of the employees.
• Reconciliate the values and numbers and verify it for accuracy
to avoid any errors and mistakes.

Stage 3: Post Payroll Process
The four steps involved in the last and final stage of Post Payroll
Process are-
• Statutory Compliance
• Payroll Accounting
• Payout
• Reporting

Statutory compliance
• At the time of payroll processing, all statutory deductions
like EPF, TDS, ESI are made.
• The amount is to be remitted to the respective agencies of
the government.
• The frequency of the remittance varies depending on the
type of the dues or transactions and such dues are made
through challans.

• Once the dues are paid, returns and reports are to be filed such
as for PF return filing, ECR has to be generated and filed.
Statutory compliance

Payroll accounting
• Organization keeps a record of all its financial statements
and transactions.
• Salary payments is one of the most significant costs which
has to be entered in the books of accounts.
• It is essential to check that all salary and reimbursement
transaction data is accurately fed and entered into
accounting system.

Payout
• Companies can pay salary by cash, cheque or even bank transfer.
• Companies provide employees with a bank account for salary.
• Company’s bank account must have sufficient funds to make the
payments.
• A bank advice salary statement is to be sent to the concerned

• Branch or department along with particulars and details like
employee id, bank account number, amount of wages/
salary, etc.
• If the company has opted for a payroll software that already
has self-service portal for employees, pay slip can easily be
published for the employees whenever they log-in to their
account and access it.
Payout

Reporting
• After completion of payroll for a particular month, finance
department and higher management may ask for reports
containing the data related to department wise employee cost,
location wise employee cost, etc.
• The responsibility of the payroll officer is to dig into the data to
evaluate and extract necessary information and share the reports
with the authorities.

Types of allowances under Payroll Processing
Allowances provided in India include the
following:
• House Rent allowances (HRA)
• Transport Allowance (TA)
• Medical
• Meals
• Leave travel
• Education
• Special allowance

House Rent Allowances (HRA)
House Rent Allowance (HRA) allowance exempted from taxes
has to be the lowest of the three following options:
1. 50 percent of the full salary in metropolitan cities or areas
(40 percent in non-metropolitan cities or areas)
2. Total paid rent which can be 10 percent of the total salary.
3. Received HRA by the employee.

Travel Allowances (TA)
• Transport allowances of up to Rs. 800 per month for an
employee travelling between their residence and work place
are exempted from taxes.
• In the case of physically handicapped employees, Rs. 1,600
per month is exempted from taxes.

Medical Allowances
For medical expenses below mentioned exemptions are allowed:
• Reimbursement of up to Rs. 15,000 for medical treatment of the
employee and their family members.
• Reimbursement of expenses incurred by an employee and family
members in an approved hospital.
• Payment of premium by the employer towards medical insurance
for the health care of the employees.

• Reimbursement of the premiums paid by the employee
towards medical insurance for his/her health or of that of their
family.
• Any expenses incurred by the employer on medical treatment
of the employee whose family is outside of India.
• Travel and housing expenses abroad for the employee or their
family including the expenses of one attendant accompanying
the patient for the purpose of medical treatment.
Medical Allowances

Meal Coupons
• Lunch and refreshments provided to the employees by the
employer for free or concessional rates are non-taxable.
Education
• Education payment of Rs. 50 per month per child [Rs. 150
in special cases] for up to two children of the employee is
exempted from tax.

Leave Travel Allowances
• Remunerations for meeting the travel expenses incurred by an
individual and their family members (this includes the spouse,
two children and dependent on the employee: parents,
brothers and sisters etc.) on holiday in India.
• The amount that is to be excluded depends upon the mode
used for travelling.

• Two journeys in a block of four calendar years are exempted
from taxes.
• If any individual is not using these exemptions, then the said
exemption can be carried over to the next block and can be
used in the calendar year following that block immediately.
Leave Travel Allowances

Other Allowances
Other exempted allowances are:
•Uniforms and work clothes (if any)
•Books, charts and periodicals
•Transportation expenses related to work
•Travel expenses on tours or on transfer of the employee
•Expenditures made by the helper engaged in the daily office
duties

•Daily ordinary charges incurred by the employee on account of
absence from
his/her normal place of duty during a tour
•Allowances granted to encourage academic research and training
in educational
and research institutions.
•Expenditures for the purchase or maintenance of uniforms
necessary for in-office duties.
Other Allowances

There are various methods available to do the process of payroll for
the business or company. The possible options and methods for
running payroll in a company are-
• Excel based payroll management
• Using payroll software
• Payroll outsourcing
Methods of Payroll Processing

Excel based payroll management
• Most of the businesses at the initial stages of operations and
having a handful of employees, usually use payroll management
that is excel based.
• Excel based payroll management uses the standardized payroll
calculation template to calculate payroll on excel sheets.
• The mathematical formulas are already set to help the payroll
officer do the calculations and computation.

Using Payroll software
• It must be ensured that inputs in payroll are coming from each
and every source that too timely and in a seamless manner.
• There are many advanced software for payroll management
available in the market that automates payroll computation.
• Payroll software are opted depending on the size and nature of
the business and for what it is to be used for.

Payroll outsourcing
• Outsourcing the payroll processing means that a business wants
some external agency to take care of all the stages of payroll
function.
• Organizations that do not have a dedicated person for payroll or a
proper payroll department go for this option.
• The service provider computes payroll based on the pay cycle,
information about salary provided to employees and other data
such as attendance, etc. taking care of all the compliances.

How can we help?
We can provide one window solution to all your payroll processing requirement. Outsource to us and
Relax!!
Our Advantages
 Dedicated & Highly experienced team of CA, CS, CWA, CMA
 More than 20 years of experience
 Providing services to both domestic and multinationals
 Complete handholding
Contact us: https://ezybizindia.in/

�ݺ�ߣ

Outsource your payroll processing with ezybiz india consulting llp

More Related Content

Outsource your payroll processing with ezybiz india consulting llp