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What Is Payroll In HR? – A Comprehensive Guide To Payroll Management Process

  • payroll software in India
  • 10 min read
  • February 5, 2024
payroll-in-hr

payroll-in-hr

Every company runs payroll, right? but integrating payroll in HR is not the more well-known term. Considering that, in business, paying employees is really important but can be quite complex. It involves turning the time and work they put into actual money, which keeps them motivated and happy. Time and leave counting can be considered in hr and payroll paying employees by counting that is considered in payroll management.

In this blog post, we’ll explain what is payroll in HR, the different terms and steps involved, and all the important things you should know about this key business task.

If you do not know then will explain that,

  • Payroll is basically the company’s financial record of all the money the employer gives to the employees, including regular pay, bonuses, and other rewards.

  • The company has to keep track of this for each employee from the time they start working until they retire or leave. Making sure to process payroll in HR on time and following all the rules is a big part of running a company.

In India, payroll processing means figuring out how much each employee should be paid. It’s a complicated process because it involves calculating things like basic salary, bonuses, net salary, daily wages, and other payments like Provident Fund and taxes.

This process is crucial, but it can be tricky, and mistakes might affect the morale and productivity of employees who rely on getting paid on time. Payroll in HR is a significant part of how a company manages its human resources.

What is Payroll In HR?

payroll-process

Payroll in HR is the process of giving money to a company’s employees for the work they’ve done by measuring their working time and days.

Here’s what payroll management involves:

  • Setting up rules and processes for Payroll in HR in the company.

  • Figuring out the total salary, and gross salary, and deducting things like taxes and other payments.

  • Deciding on what goes into an employee’s payslip, like basic pay, bonuses, housing allowance, and more.

  • Giving employees their salary management and payslips.

  • Paying the necessary dues, like taxes and provident fund, to the right authorities.

  • Keeping track of all the expenses related to payroll processing.

In the past, most businesses used manual methods & spreadsheets to do HR and payroll, but now, there are automated software tools that make it easier.

To sum it up, payroll is not just about giving money to employees; it involves a lot of steps, from bringing in new employees to setting rules, deciding on pay, calculating and checking the money, giving out salaries, handling taxes, and keeping records.

The basic idea is to figure out how much money each employee should get, taking into account all the different payments and deductions.

Read more: Compliance Benefits of Using Payroll Services – Switch to Superworks!

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Main 3 Stages of Payroll Management In HR

payroll-management-in-hr

The Payroll in HR process is like a series of steps that we do in the same way every month. It’s about figuring out how much money employees should get after we consider taxes and other deductions. In simple terms, it’s making sure employees get the right amount in their pockets each month.

The stages of the payroll process include:

1. Pre-Payroll Process

Pre-Payroll Process

Deciding how much each employee gets paid depends on different factors. The company has certain rules that play a role when it’s time to pay. These rules need to be clearly defined and approved by the management to make sure payroll service is done the same way each time.

The main rules considered include:

  • How much do employees get paid

  • Rules about taking time off and other benefits

  • Policies on reimbursing expenses

Doing payroll involves talking to different parts of the company and getting the right info. In big companies, this can be a bit overwhelming. But in smaller companies, info usually comes from one place or a few teams. Using smart payroll software with features like attendance tracking and employee self-service can make collecting info easier.

Important info needed for payroll includes:

  • Details about new employees’ pay

  • Changes in employee pay during the year

  • Extra payments that aren’t regular

  • Time and Attendance details based payroll solution management

  • Special deductions like loan payments or other recoveries

  • Declarations about investments from employees

  • Bills for things the company needs to repay

  • Details about taxes, both old and new rules

  • Info about an employee’s past job and taxes

In simpler terms, before paying employees, the company decides on rules, and then they gather all the needed info to make sure everyone gets the right amount.

2. Actual Payroll Process

payroll-processing

This is where the real work of payroll in HR happens! When we talk about payroll, the main thing on people’s minds is figuring out what is included in payroll. Super payroll has features like tracking employee hours as well.

So, at this point, all the info we collected and checked is put into the payroll system to actually calculate how much everyone should get paid.

You can check the different parts like ESI, EPF, LWF, PT, bonuses that are required by law, and the right taxes. This helps us figure out the final amount, which is what employees take home after taxes and other deductions. After doing the payroll, it’s a good idea to double-check everything to make sure there are no mistakes.

3. Post-Payroll Process

Post-Payroll Process

There are multiple processes in the payroll process.

Checking Payroll:

Checking payroll and components is an important step where we make sure the actual money paid each month matches what was planned.

We keep accurate records of how much each employee is supposed to get, the money held back for taxes, and other details in the company’s financial records.

Checking payroll helps avoid payroll mistakes.

Paying Employees:

This is the exciting part – telling employees that their salary has been added to their bank accounts! Organizations usually use bank transfers for this, but some may still pay in cash or with checks. Details like the employee’s name, ID, bank account number, PF details, and the amount of wages are sent to the bank.

After finishing Payroll in HR, the company needs to make sure there’s enough money in its bank account to pay everyone. If the company uses payroll software with an ESS portal, employees can log in anytime, anywhere to see their payslips.

Following the Rules:

After deducting things like TDS, EPF, ESI, LWF, and PT during payroll, the company sends the deducted money to the government agencies.

Creating Reports:

To understand and plan for the company’s future, detailed payroll reports are made. After running payroll for a month, reports about employee costs in different departments and locations are analyzed. These reports are shared with the finance and senior management teams.

Payroll or HR professionals are responsible for digging into the data, extracting necessary info, and sharing similar reports regularly, helping to keep track of things like leave payments, gratuity, and bonuses in the company’s sustainability plan.

Also, See: Payroll Outsourcing Service and Payroll Software- What to Pick!

How is Payroll Calculated in India?

payroll-calculated-in-india

Whether you use HR payroll software in India, or not – but this formula is used to calculate payroll:

Breaking in parts:

Gross Salary is made up of Basic salary, HRA, DA, Allowances, and any one-time payments or incentives (like Arrears, Reimbursements, Bonus, etc.).

Gross Deductions include Professional Tax, Employees’ State Insurance, Public Provident Fund, Income Tax, Insurance, Leave adjustments, and any one-time deductions (like Loan recovery).

Importance Of Statutory Compliances For Payroll Management

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In India, companies need to be careful about how they pay their employees. They have to follow certain rules and laws, and it’s super important to stick to them. This is known as – statutory compliance. If companies don’t do this, they can get fined a lot of money.

So, companies must know the law well and follow the rules to avoid any problems or fines. Some common rules they must follow when paying employees in India include:

  • Professional tax

  • ESI fund and PF funds

  • TDS (Tax Deduction at Source)

  • Gratuity

Payroll Processing Methods That Every Business Follows

Payroll Processing Methods

The payroll process is like a series of steps that we do in the same way every month. It’s about figuring out how much money employees should get after we consider taxes and other deductions. In simple terms, it’s making sure employees get the right amount in their pockets each month.

There are several methods most of businesses use, here are same:

1. Using Papers and Spreadsheets

Some small companies, especially when they are just starting, use papers or spreadsheets to manage payroll company. Papers & Spreadsheets are easy to use when there are only a few employees. This method involves using templates with formulas for calculating salaries and compliance payments.

While it’s cheap, it becomes challenging as the company grows, and it’s not the best when compared to automated methods. It’s also tricky to check for errors. In this case, you need to upgrade yourself.

2. Payroll Outsourcing

Outsourcing payroll means hiring an outside agency to handle the company’s payroll. This option is often chosen by companies that don’t have their own payroll team or have workforce management software.

The company provides the outsourced agency with information about employee salaries, leaves, attendance, and other details each month.

3. Use Automation Tools

Many tools and payroll software in India exist to automate payroll calculations, reducing manual work and increasing efficiency.

Automated payroll software solves the problems of using spreadsheets or outsourcing. The payroll management software helps avoid mistakes and errors. However, the payroll processing software needs to be updated regularly to stay in line with the latest compliance laws.

Wrapping Up,

In conclusion, effective payroll and strategic HR management is an integral aspect of Human Resources, ensuring that employees are accurately and timely compensated while adhering to legal regulations.

To streamline and enhance this intricate process, companies can leverage advanced tools like Superworks Payroll Software. This payroll management software provides a reliable solution for managing payroll efficiently, automating calculations, and ensuring compliance with legal requirements.

By incorporating automation technology, organizations can simplify payroll processes, minimize errors, and focus on fostering a productive and compliant work environment.

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Alpesh Vaghasiya

The founder & CEO of Superworks, I'm on a mission to help small and medium-sized companies to grow to the next level of accomplishments. With a distinctive knowledge of authentic strategies and team-leading skills, my mission has always been to grow businesses digitally. The core mission of Superworks is Connecting people, Optimizing the process, Enhancing performance.

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