How to process payroll in 8 easy steps
How to process payroll in 8 easy steps
Payroll is defined as the process of paying salaries to a company’s employees and it begins with preparing a list of employees who are to be paid and ends with recording those expenses. The process involves arriving at what is due to the employees for a particular payroll cycle after adjusting the necessary deductions like TDS, meal coupons, employees’ PF contributions, etc.
It is one of the highest expenses to be made at the beginning of a month, so certain complexities and underlying possibilities must be taken into account. The process should be properly monitored and evaluated. Here are 8 easy steps to process payroll for an organization:
It is the first step of the payroll process where a list of onboard employees must be made who is to be paid under the payroll system. This is a crucial step as the list must contain correct data and not any mistakes. Processing of payment is done altogether based on this list.
Define your policy
It is yet another important step of payroll. Your business should define its policies and the management should be approving them time to ensure the payroll payment process is executed on a standard basis. These policies include pay policy, leave and attendance policy along with other employee benefit policies.
Collect input from employees
Inputs or credentials such as PAN, Adhaar, address proof, bank account details, etc. are important employee inputs that are to be filled and updated correctly on the payroll processing system. Usually, employees are required to share this information with their relevant concerning departments before joining.
Validation of collected employee inputs
The inputs so collected from a wide scale of employees to be made payments under the payroll system must be validated and cross-checked to avoid any kind of future hassles or errors. They should be checked concerning the company’s policy, approval model, standards, etc. to ensure all active employees are taken into consideration and former employees are listed for this salary allowance.
Calculation of payroll
In this stage, the validated payroll inputs are fed into the main system for processing and this result in net payment calculations after adjusting necessary deductions and taxes due. Usually, with the help of spreadsheets, this is done and so there are fewer chances of any error value or mistake in inputs as every data is verified. If automated payroll software is used, then the maximum risk of clerical errors is eliminated.
Disburse employee salaries
Every business needs to ensure that its bank account has enough funds to process payroll payments to their employees i.e. their salaries on time. A salary bank advice statement is sent to the concerned bank so that it can disburse the salaries as early as possible. All these can be time-consuming so to avoid them the one-click feature of salary disbursement can be automated into the payroll software system.
Payment of statutory dues
At the time of payroll processing, all statutory deductions like TDS, PT, ESI, PF, etc. are to be thoroughly deducted as per the company’s standards. Then the payment of respective employees is to be processed in their updated bank accounts with the due dates.
Tax computation sheets and payslips must be distributed
The last and final step involves payslip distribution to employees along with their tax computation sheets. In the automated payroll system, this becomes much more feasible because businesses dint have to distribute individually but it goes to all in an automated process. Employees can log in to their accounts in order to access their updated payslips.
However, every business must undertake how to keep up with compliance, manage any spreadsheet complications causing errors in input values, manage proper data security and remove any kind of lack in payroll activation and flexibility. These days, it is better not to go for a manual payroll process as it can land up to many discrepancies later.