Human Resource is the most vital resource for any organization. It is responsible for each and every decision taken, each and every work done and each and every result. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards. The lucrative compensation will also serve the need for attracting and retaining the best employees.

A payroll is a company's list of its employees, but the term is commonly used to refer to: the total amount of money that a company pays to its employees. a company's records of its employees' salaries and wages, bonuses, and withheld taxes.

Payroll process starts with collecting wage information for each employee. At the end of each pay period, you calculate gross wages. Companies have a variety of taxes that must be withheld from gross pay. You may also deduct amounts for retirement plan contributions. Many firms hire a payroll company to make all of the payroll calculations and to pay the amounts owed to employees.

Payroll calculation is a complicated process that varies from company to company. Each company may have its own payroll structure consisting of various payroll components that may be unique to that company only. In addition, many location specific laws such as labor welfare act, Payment of salary and wages act, and the Minimum wages act affect the payroll calculations. Under minimum wages act, the employees need to be given some mandatory salary components such as Basic, DA, and HRA.

Payroll processing involves accurate payroll calculations, disbursal, payslip generation, and managing payroll taxes and record keeping compliance. All these activities cannot be rushed into and must be performed with the help of us i.e HR360D to ensure that employees do not get erroneous paychecks and all statutory compliances are met.

Although payroll may be an administrative and routine function, your employees rely on you to get it right every time

Getting it right means:

Savings in Time, Cost and Effort
Reduced compliance risks
Employee trust and satisfaction

What Is Payroll

The term payroll generally refers to the process of identifying employees, calculating the pay and payroll taxes, recording the payroll transactions, making the payments, and completing required federal and state payroll tax forms. The diagram on the next page shows you an overview of the process.

Identify Employees

Not all people who perform duties for a business are employees. It is very important to accurately identify which workers qualify as employees because the law imposes different requirements for workers who are employees and those who are not. Every business must comply with the requirements of these laws. Proper identification also reduces fraud and waste.

Calculate the Payroll

To calculate a payroll means to make a calculation for a specific time period of total employee expense and then to determine the payments required.

The total employee expense includes three basic elements:
  • Gross pay expense
  • Payroll taxes expense
  • Benefits expense
Gross Pay

The term gross pay (sometimes called gross earnings or gross wages) means the total amount of compensation earned by an employee. This usually results in the employee receiving a paycheck. The amount earned could be for:

  • Salary: The term salary generally refers to a fixed amount per period (such as annually) that is not determined by hours worked. Salaries are earned by managers, administrators, supervisors, and other professional staff.
  • Wage: The term wage usually means an amount that is determined by hours worked or units of product completed (called piecework). Usually wages are earned by clerks and by skilled and unskilled labor.
  • Savings plan: Provident fund is an ideal saving plan for employees as it provides a taxable-free income at retirement. The best thing is that eligible family members can have access to the funds in the event of a disability, retirement or death.
  • Commission: Commissions are earnings based on a percentage of sales.
  • Bonus: Bonus earnings are extra amounts given as reward for achievement or meeting performance goals.
  • In kind: Payment in some form of property or services (rather than money) are called in kind and are part of gross pay unless specifically exempted by law.

Withholding

Payroll withholding means that an employer withholds (deducts) amounts from an employee’s gross pay. These amounts are then paid by the employer to taxing authorities and other third parties. The amounts withheld from an employee’s pay are called payroll deductions. The remaining amount that the employee actually receives is called net pay. Payroll deductions are not a tax on the employer; the employer is simply acting as a collection agent. The two categories of payroll deductions are:

  • Deductions required by law
  • Voluntary deductions by agreement