What are the Methods deployed to run Payroll
Today’s market allows you three different business methods deployed to run payroll, but the best one always stands out to be cloud-based platform. With diversifying benefits, you can choose from these methods according to your business & budget requirements.
The first and conventional method for payroll management system is through creating spreadsheets displaying all the details we discussed above. Predefined authorized personnel for payroll workflow is responsible for updating and revising the monthly data and calculating earnings and CTC with the help of in-build math functions.
You can easily estimate that this method can be highly prone to errors and human mistakes. Thus, this type of conventional method is more suitable for small business organizations due to their limited workforce.
When a company hands over its payroll management to an outer body or human, or hands over payroll job to a person, such a method is defined outsourcing. You can use this method when you don’t have any person to carry out financing.
Payroll Outsourcing lowers the transparency of financial transactions, which is an utmost priority for the company. However, this can cost you more but with a guarantee of error-free payroll solution.
While considering both financial and error-free processes, the payroll management platform is an effective money-saving option. It helps you automate your Payroll related management and calculate monthly Payroll, along with statutory compliance within just a single click.
Indian Government’s Payroll Compliance
After understanding why Payroll is essential and how payroll is processed, the next important thing is to understand the Government’s statutory payroll compliance. For an adequately smooth and organized payroll statement, you must update your company’s pay policy timely. These regulations include every aspect of the company’s benefits and employees’ benefits. Here are some of the essential statutory deductions that you must follow
Tax Deduction from Source (TDS)
TDS is the income tax deduction from an employee’s earnings during the Payroll related calculation itself, on salaried and non-salaried payments like rent, interest received from fixed deposits, etc. to minimize the tax evasion later. Different amounts have different deduction rates finalized by the Government.
Employees’ State Insurance (ESI)
ESI is liable for every organization and establishment that has employed ten or more persons. The main focus of ESI is to ensure healthcare to the Employee. Contributions for ESI from employee and employer are enlisted below
|Contribution||% of Gross pay|
Provident Fund (PF)
PF accounts for post-retirement income and benefits based on employees’ and employer’s contributions. This PF is divided into separate funds: EPF (Employees’ Provident Fund) and EPS (Employees’ Pension Scheme). The contribution breakup is
|EPF||12% of Gross||3.67%|
Let us see the tax liability for employees under the new tax regime for the final year 2020-21
|Income Tax Slab||Tax Rate|
|Up to Rs 2.5 lakh||NIL|
|Rs 2.5 lakh to Rs 5 lakh||5%|
|Rs 5 lakh to Rs 7.5 lakh||10%|
|Rs 7.5 lakh to Rs 10 lakh||15%|
|Rs 10 lakh to Rs 12.5 lakh||20%|
|Rs 12.5 lakh to Rs 15 lakh||25%|
|Rs 15 lakh and above||30%|
What are the Major Challenges Faced in Running Payroll
There arise two major challenges to run a complete payroll
Adherence to Statutory Compliance
As discussed previously, any company’s pay policy must be fully in compliance with the statutory laws formed by the Government. It avoids any penalties and fines needed to deal.
If you are still using the conventional method of processing payroll through spreadsheets, then your authorized accounting person must revise these compliance. Else you can choose an automated payroll management system that provides you with in-build accordance with these rules.
Keeping all the Data Intact
Because data like attendance, leave, and time management is essential for payroll processing, one must reverify the same time to time with proper validation. Modern platform ensures the integrated management of all these data for streamlined Payroll processing.
The Characteristics of Perfect E-Payroll System
There are many characteristics of the E-payroll system that differs from one provider to another. Thus, it is essential to outline the significant features that stick to your priority and are best suited to your organization.
Payroll Management that is highly compliant with rules and regulations must be your priority. Specific platform available in the market streamlines a payroll that adheres to the Government’s standards for tax and deductions. Choosing such platform can make you free from revising these laws timely.
After distributing salary to employees, the financial records are stored in your company’s accounting/ERP for future requirements. The platform can guarantee you a fully integrated accounting management for secure post payroll processing.
Integrated Attendance and Leave Management
A system with integrated leave and attendance helps ease the data collection process and finalize the Payroll process with almost zero human errors compared to conventional human-driven methods.
As the size of your organization increases, your platform must provide you appropriate scalability. It must be able to serve you efficiently in any situation.
Employee Self Service Module
Imagine that if your Employee can provide information on tax exemption and investment details through his/her employee portal without any HR intervention. The payroll management platform can facilitate your employees with ESS login providing your business more flexible and streamlined payroll. Employees can also generate form-16 regarding tax deductions for the subsequent year.
Our services can also remind you through our website.