The Ultimate Guide to Effectively Managing Payroll Systems

What is Payroll?

Payroll is the end-to-end process of hiring employees, calculating their monthly salaries, bonuses, benefits and tax deductions such as EPF, PT, TDS and ESI.

It is important to carry out the payroll process correctly to avoid salary delays. Additionally, an efficient payroll system ensures integrity and financial stability, which in turn boosts employee morale.

If you are struggling with payroll, this blog post is for you. We will introduce you to the different methods of payroll accounting and explain what they bring to you. But before that, let’s take a look at the different steps involved in payroll accounting.

Stages of payroll accounting

Processing payroll requires careful planning and consists of many activities. Below you will find an overview of all the steps involved in payroll accounting.

Staff Integration Process

This is the process of inducting new employees into the company, setting up their accounts and obtaining documents like PAN and Aadhaar card. When you do payroll for the first time, you need to create a list of all the employees in the company and then keep adding new employees.

In the initial stages, making this list is easy, but as your business grows, it becomes difficult. This is where intelligent payroll software can help. It has features like employee self-service that make collecting employee data a breeze.

2. Establish payroll policies

This step includes determining the wage and salary policy for your company. You must take into account the wage and salary policy, i.e. H. the net amount to be paid to different employees depending on their role and position and divide the salary structure based on the benefits you offer like flexible benefits, HRA (House Rent Allowance), etc. You also need to establish your vacation and attendance policies.

Pro Tip: Payroll software allows you to do all of these things in one place without any paperwork. The software automatically splits the salary into all components once you enter the number.

3. Capture the input

Normally, employees' details like PAN and bank details are collected during the onboarding process. Other data required for payroll accounting includes employees' vacation and attendance data, income tax returns, entitlement to various benefits, shift times, exemptions and reimbursements. In small companies, the finance and HR teams work together to obtain this data.

Pro Tip: With smart payroll software, you can quickly handle all of these processes in one place and even have employees file tax returns. Since there are two tax regimes in India, the software should support both the old and new tax regime.

4. Validation of inputs

After you have collected the inputs mentioned in the previous step, you need to validate them so that everything complies with company policies. Also check that all active employees have been included in the record and inactive employees have been deleted before payroll execution.

5. Calculation of payroll

This is the process of actually calculating wages and salaries. After deducting the necessary deductions and taxes, you get the “net or gross salary” for all employees. Calculating payroll using spreadsheets or manual methods is complicated. A missing zero or an extra one can lead to serious errors in payroll. This has various effects, from incorrect salary payments to incorrect tax returns to employee distrust.

6. Payment of employee salaries

After you have completed all the payroll calculations, you need to ensure that there are enough funds in your business account to transfer the salary to the employees' payroll accounts. A salary account statement is then sent to the respective branch. This statement contains details like employee name, employee ID, salary, etc. All this hassle can be avoided if you use payroll software like IceHrm.

7. Pay statutory taxes

There are statutory deductions that companies must calculate when making payroll, e.g. B. TDS (Tax Deducted at Source), PF (Provident Fund), ESI (Employee State Insurance). These amounts are calculated and then submitted to the relevant government portals. If you do not pay these amounts on time, your company may face legal sanctions.

That is why you need to take into account all these deductions when calculating salaries. Income tax is one such deduction. At the beginning of the year, employees are asked to declare their taxes and choose one of the following tax regimes.

Payroll challenges

Managing payroll is a complex and time-consuming task, and there are a number of challenges that payroll managers can face. Some of the most common payroll challenges include:

Labor and Tax Compliance: Payroll clerks must be familiar with and comply with all applicable labor and tax regulations. This can be challenging because these laws and regulations can be complex and change frequently.
Data Accuracy: Payroll professionals must ensure that all employee data is accurate and up-to-date. This includes information such as hours worked, wage rates and tax deductions. Even a small error in data entry can result in incorrect payslips for employees.
Punctuality: Payroll must be processed accurately and on time each pay period. This can be challenging, especially for large companies with a complex payroll system.
Security: Payroll data is highly sensitive, and those responsible for payroll must take measures to protect it from unauthorized access and misuse.
Managing Remote Employees: With the increase in telecommuting, payroll professionals are increasingly faced with the challenge of managing payroll for employees who are not located in the same office. This can be challenging because it can be difficult to track employee hours worked and ensure employees are paid correctly.

Features of an ideal payroll software

Most, if not all, payroll management challenges can be solved with payroll software that automates payroll.

Comprehensive Payroll: The software should be able to handle all aspects of payroll, including calculating employee salary, generating paychecks, and filing taxes.
Accuracy and Compliance: The software should be accurate and comply with all applicable labor laws and tax regulations.
Ease of Use: The software should be easy to use for both payroll professionals and employees.
Security: The software should have robust security features to protect employee data from unauthorized access and misuse.
Scalability: The software should be scalable to meet the needs of businesses of all sizes.
Affordability: The software should be affordable for businesses of all sizes.

In addition to these essential features, the ideal payroll software may also have other features that are important to specific businesses, such as:

Integration with other HR systems: The software can be integrated with other HR systems such as time tracking and performance management systems to optimize HR processes.
Self-service features: The software can allow employees to access their payroll data and make changes to their payroll settings online.
Advanced Reporting and Analytics: The software can provide advanced reporting and analytics features to help companies track payroll trends and make informed decisions.

Revolutionize your payroll experience with Icehrm's Payroll Management System. Dive into a world of streamlined processes, precision, and efficiency. Explore the power of error-free payroll, and elevate your business to new heights. With Icehrm, the future of payroll management is here – experience it for yourself and lead your team towards financial success!