What Is Payroll System in Hr? Payroll processing is method of paying employees or contractors. This is usually done on the 15 th and 30 th of every month, but can be done more frequently. The processing period is called pay run. Meda Text is the largest Text only Media Website . A Blog site that attracts more then 2 million viewers monthly.
Payroll system additionally refers to a period of period where each worker acquires an amount by which it will be paid out to them by the organization. Payroll system may be found in almost all organizations, or any organization wherein there are employees. For instant these payroll systems are usually used by the administration to ascertain the salary of workers.
Payroll is the process of handling payments for employees. Payroll can be done by an individual or with the help of third parties like human resource professionals or payroll service providers. A payroll system is a set of functionalities provided by an information technology (IT) system automating processing of payslips, tax returns, employee records and time off requests. This section will cover the definition of payroll, its importance to an organization, introduction to payroll management software and its types.
What is the Payroll Management System?
Payroll Management System is the system by which an employer can manage the salaries of the employees. The salary structure includes salary, allowances, deductions, and net payable to the employees. It also deals with the generation of pay slips. Complicated Computations that are performed manually can be automated using the payroll software.
Every company will have different departments like marketing, finance, information technology, research and development, human resources. Human Resources department is the crucial part of any organization because employees are considered as the real assets and also the HR department needs to look after the employee welfare and make the facilities easier.
With the increase in competition among business enterprises. Human Resources are considered to be the most important part of any company. It is said that if any company has a Human Resource then it will definitely have many advantages. This is the reason, why the importance of the HR Department is increasing day-by-day. With the continuous advancement in the latest technologies, the management of employees and their records have become tough to handle. To prevent this, many companies have linked their payroll system with the HR activities which is called as payroll management system.
An HR Payroll Software is beneficial for any kind of business enterprise. Human Resource department performs various activities such as payroll processing, maintaining salary details of every employee in the organization, keeping track of deductions, time and attendance, loans, allowances, and bonuses. Human Resources department collectively works together to calculate the available leaves, encashment of leaves and loss of pay for all the employees and then process their salaries.
Benefits of Payroll Software in HR- for a better future!
Easy to Process – It makes the tasks easier. As it requires very less input because it has software in which one has to feed all the information of employee to get the data of calculating wages, finding taxes, paying taxes to the government, financial records which also includes the bonuses, deductions and net pay. These records need to be maintained and recorded by the employer for future references or verification.
Performance Management – Performance management records the performance information of each and every employee. Hence, it helps the employers to get a clear view related to the performance and skills of their employees which further helps the management in scheduling training according to the needs and requirement of each employee. This type of employee performance review can be highly beneficial when it comes to planning and overall productivity improvement.
Optimized Process – HR Payroll System helps companies to reduce the number of employees who are manually working in the maintenance of the attendance, salary, working hours, income taxes etc..Frequently repeating the payroll tasks sometimes lead to boredom and results in the error. So, it is always advisable to optimize the process so that accurate information is available.
Accuracy – HR Management System help business enterprises to reduce or rather eliminate the errors in the process of payroll. Payroll process is used to get more accurate data. The inconsistency can be easily tackled. It will provide only appropriate and reliable payroll information which minimizes the inefficiency.
Payroll software is an ideal system and smoothens the HR and payroll process for any organization. It also reduces the possible errors during the performance of payroll system and enhances the system’s performance. Choose the best HR Payroll Management software which is highly secured as it consists of information about your organization and its employees.
What are the Stages to Processing Payroll?
A payroll officer needs to do careful planning. There are always ongoing tasks that need attention and a constant need to monitor changes to withholdings, contribution to social security funds, etc. The entire process can be split into three stages, pre-payroll, actual payroll and post payroll activities.
Pre-Payroll Activities
Defining Payroll Policy
The net amount to be paid is affected by multiple factors. The company’s various policies such as pay policy, leave and benefits policy, attendance policy, etc. come into play at that time. As a first step, such policies need to be well defined and get approved by the management to ensure standard payroll processing.
Gathering Inputs
Payroll process involves interacting with multiple departments and personnel. There can be information like mid-year salary revision data, attendance data, etc.
In smaller organizations, these inputs are received from a consolidated source or fewer teams. However, in a larger organization, the task of gathering data may look overwhelming. If you are using a smart payroll software having integrated features like leave and attendance management, employee self-service portal, etc. inputs collection process does not remain a problem.
Input Validation
Once inputs are received, you need to check for validity of the data concerning adherence to company policy, authorization/approval matrix, right formats, etc. You also need to ensure that no active employee is missed out and that no inactive employee records are included for salary payment. Read top 6 payroll validations to ensure accurate payroll.
Actual Payroll Process
Payroll Calculation
At this stage, the validated input data is fed into the payroll system for actual payroll processing. The result is the net pay after adjusting necessary taxes and other deductions. Once payroll process is over, it is always a good practice to reconcile the values and verify for accuracy to avoid any errors.
Post-Payroll Process
Statutory Compliance
All statutory deductions like EPF, TDS, ESI are deducted at the time of processing payroll. The company then remits the amount to the respective government agencies. The frequency can vary depending on the type of the dues. In most cases, payment of dues is made via challans. After all dues are paid return/report are filed. E.g., for filing PF return, ECR is generated and filed.
Payroll Accounting
Every organization keeps a record of all its financial transactions. Salary paid is one of the significant operating costs which has to be reported in the books of accounts. As part of payroll management, it is essential to check that all salary and reimbursement data is fed accurately into accounting/ERP system.
Payout
You can pay salary by cash, cheque or bank transfer. Typically organizations provide employees with salary bank account. Once you complete payroll, you need to ensure that company’s bank account has sufficient funds to make the salary payment. Then you need to send a salary bank advice statement to the concerned branch. This statement is issued with particulars like employee id, bank account number, amount of wages, etc. If you are opting for a payroll software that has employee self-service portal, you can easily publish the payslips and employees can log-in to their account and access the payslips.
Reporting
Once you complete payroll run for a particular month, finance and high management team may ask for reports such as department wise employee cost, location wise employee cost, etc. As a payroll officer, it becomes your responsibility to dig into the data and extract required information and share the reports.
Statutory Compliance in Indian Payroll
When you run payroll, being statutory compliant means that you are paying as per the applicable employment norms set by the central and state legislation. The common statutory requirements that apply to Indian businesses include the provision for minimum wages, payment of overtime wages to workers, TDS deduction, contribution to social security schemes such as PF, ESI, etc.
While computing salary you need to consider all these deductions and contributions. Income tax is one such deduction. At the beginning of the year, the employee is asked to make a declaration about his additional incomes, tax saving investments, etc. called as ‘income tax declaration.’ Accordingly, employee’s tax liability is calculated, and TDS is deducted.
Let’s see how to calculate tax for any individual. In India, we have four tax brackets with an increasing tax rate.
Based on above tax slabs, you can calculate monthly tax liability and deduct TDS. The TDS is then deposited monthly with the government, and a quarterly report of all deductions is also filed. Once you complete TDS returns for the fourth quarter, you can issue form 16 to employees. The employees use this form 16 as proof of tax deducted at the time of filing their individual income tax return.
Non-adherence with the statutory law can lead to hefty fines and penalties. That is why you need to be up to date on all tax and payroll statutory changes.
Challenges in Handling Payroll Management Process
The payroll process becomes challenging due to two main reasons.
The Requirement to stay Statutory Compliant
As mentioned before, non-adherence to statutory laws can lead to levy of fines and penalties and in the worst case may even threaten the existence of the business. Today there are some advanced payroll management software that automatically processes payroll in compliance with statutory laws.
Dependence on Multiple Payroll Inputs Sources
Before payroll can be processed, you need to get all the data together from sources such as attendance register, conveyance facility availed record, data from HR team like salary revision information, etc., making it a complicated process. For many years HR and payroll officers were managing payroll on excel sheets, but excel sheets have problems like dependency on excel formulas for salary calculation, complexity in adding and removing employees and other limitations like manual data entry, difficulty in extracting information, etc.
Various Methods Available to do Payroll for your Business
The possible options for running payroll can be
- Excel based payroll management
- Payroll outsourcing
- Using payroll software
Excel based Payroll Management
Many businesses who are at an initial stage of operations and have a handful of employees usually go for excel based payroll management.
Excel based payroll management involves doing payroll calculation on excel sheets using standard payroll calculation template. The mathematical formulas are set that help the payroll officer do the computation. While this method does not involve any cost, but it has its inherent limitations like
- High chances of clerical and mathematical errors as data is entered manually
- Difficulty in adding and removing employees from payroll list
- Chances of duplicate data and omission of entries at times
- Need to monitor tax updates and other statutory changes like PF, PT etc
https://www.slideshare.net/slideshow/embed_code/key/3hNR7OOAloHcejAlternative to spreadsheets for payroll management from Greytip Software
Payroll Outsourcing
Outsourcing payroll means you want an external agency to take care of your payroll function. Many organizations who do not have a dedicated person for payroll go for this option. Based on their pay cycle, every month they provide employee salary information and other data such as attendance, leaves, reimbursement details, etc. to the payroll service provider. The service provider then computes payroll and also takes care of statutory compliance. Since payroll is a crucial function and businesses want to have full transparency and control over it, they often hesitate in outsourcing payroll.
Payroll Software
As discussed above, for running successful payroll, you need to ensure that payroll inputs are coming from every source in a timely and seamless manner. The intent of using software is to reduce the friction in getting the inputs. There are advanced payroll management software available in the market that not only automates payroll computation but also serve as a holistic leave and attendance management, HR management and employee self-service portal. Depending on the size of your business and use cases you can opt for an appropriate payroll software for your business.
Best Payroll Software for your Organization
The move from manual payroll system to automated one can save a lot of time. It not only helps in faster and accurate payroll processing but also keeps the employees, management and regulatory bodies happy.
There are some features that you should consider while selecting a payroll software.
Ease of Operation
Payroll function can be very cumbersome. You should opt for a system which has comprehensive but straightforward workflows. If the software is intuitive, it reduces the need for software training and guidance. Also, make sure that the software provider is providing well-updated documentation so that you can access the information anytime as you may need.
Scalability
As organization size increases your software also need to serve you appropriately. The limitation can be in terms of employees data it process or in terms of the availability of features like leave and attendance management, reimbursement model, etc. The software offerings should be such that you can opt for advanced features at a reasonable price without much difficulty.
Employee Self-Service Module
One of the primary payroll input providers is the employee. He provides information such as income tax saving investment declaration, type of flexible benefit opted, etc. The interaction between the payroll officer and employee is usually very event-based. To understand the significance of ESS module let’s assume a case of income tax declaration in two scenarios:
So, we saw how a simple tool like employee self-service portal can reduce the manual intervention and automate payroll data collection for accurate tax computation.
Integration with Time, Attendance and Leave Management System
Time Management
Typically this module is used to track time spent on projects or specific activities. Consulting firms such as audit firms, specialist doctors, etc., who manage critical projects require a robust time management module for tracking time and at times this data may also be used for billing clients.
Attendance
While most small organization go for manual attendance system, medium and large organizations have started using smart automated tools such as biometric method, auto-tracking via system log-in, access cards, iris capture, etc. The data is stored in a system and linked to the payroll software that uses this data to calculate attendance days, overtime, etc. For seamless payroll processing, check that software supports attendance management and is configurable with access control machines.
Leave Management
In every organization, employees are entitled to take a certain number of leaves such as privilege or annual leave, casual leave, sick leave, holiday, etc.
If the software has leave management feature, HR can directly credit these leaves to the account of every eligible employee. As and when required, the employee can apply for leave through the system. A good system should also be able to define a workflow to notify the employee’s manager for either approval or rejection. A robust payroll software with built-in leave management feature can help attain accurate payroll.
Integration with the Accounting System
Your accounting/ERP system needs to record every financial transaction including payroll information like department wise employee cost, individual payroll components like reimbursements, tax due and paid, etc. Some payroll software have integration with accounting software via API( a way to push data directly from one software to another).
In the absence of such integration, the payroll officer needs to provide all transaction details to accounts department. The accountant then manually posts it in the form of journal entries in accounting/ERP software like Tally ERP, SAP, Quickbooks, etc. These integrations can help finance and payroll team work together and avoid any manual entry of data.
Conclusion
What Is Payroll System in Hr.Today, increased payroll is one of the most greatest duties of all business mEvery organization uses an software’s for payroll. A payroll system is very important component in hr management. It provides tracking of total time worked by the employees, calculate the salary and benefits for employees, record employee attendance , maintain employee personal details, create payslips and many more…