Payroll Management in India
Payroll is an important aspect and it’s a very sensitive process within the organization. If you are a business owner than you know the importance of having a sound payroll system as employees within your organization aspect that you follow the best payroll policies and also that their salaries are credited on time. At the same time, it is also important for the business owner to know what all it takes to run a payroll. Hence, in the payroll process starts with the entering the details of all your employees like Name, Date of joining, structuring and all the related information. Payroll is run on a month regular basis and incorporates some of the following activities:
- Issuing Pay Slips to Employees: Pay slips are the statement that highlights the various details of a particular months pay. It includes the number of leave days, the gross salary, the actual salary, the reimbursement made during that month and other details can be mentioned in the pay slips. Hence, pay slips are what every employer gives to each employee on a month on month basis and it includes the tax computation statement which highlights how the tax computation looks like what are the various heads. This gives both employee and employer the opportunity to check the various salary components and an opportunity to resolve any differences made in the calculation. Hence, pay slips ensures that salary payment process is transparent and reliable.
- Filing of various returns: Month on month you need to pay the taxes calculated for each employee and file proper declarations and include things like professional tax returns, TDS, provident funds, ESI and other declarations depending on rules and practices that are applicable for that organization. Hence, filing of returns of regular basis monthly, quarterly or yearly as applicable should be practiced by the payroll agency.
- Leave Management: As the name indicates, payroll manages the number of leaves taken, how many leaves where they applicable. The leave management is a customized part which varies from company to company and primarily depends on the Leave policies within the company. As the leave policies are taken into account while deciding which leaves are to be counted as Leave without pay and which to be counted as paid leaves. Hence, an accurate and transparent leave management helps reduce the ambiguities between the employee and the employer.
- Tax declaration and calculation: Deducting proper taxes is the responsibility of the employer. Typically, at the beginning of a financial year or whenever a new employee joins, Indian government has introduced provisions where they can give a declaration to the company as to what kind of tax saving are applicable for an employee. For example, saving under Section C is of up to Rs. 1 Lac or education loan, HRA or medical allowances are applicable or any other bills. Based on whatever declaration is submitted by each employee individual tax deduction and calculations are conducted. This is an important part of payroll services as if you deduct less tax than you are accountable to the government of India and if you deduct more tax employee would feel cheated. Hence, a secure and robust tax declaration and calculation is an important aspect of payroll services.
- Managing Payroll Changes – During the normal course of a business there are various changes that happen in a payroll of employees. For example, based on the performance of the employee their salaries might be revised or they might receive some bonus or sales commissions. Hence, payroll is a very flexible entity and we have seen businesses that have changed the payroll structure of the entire organization. Payroll changes happen regularly and hence a payroll company needs to evaluate the impact of these changes in the tax deductions and calculations. Hence, it can be said that managing payroll is a regular activity keeping in mind the changes happening within the company.
- Salary advances or loans management- Dependingupon company policies and need of the hour several companies support their employees at times of temporary cash crunch by giving interest free loan or there could be a small salary advance that an employee has taken to meet the emergency at hand. Hence, these things are also to be taken into account by a payroll agency and evaluate what are the tax implications, repayment schedule, when those advances loans are being set off and what is the related taxation for supporting this activity.
- Employee Expense management– Every employee has an associated expenses associated with them. These could include medical expenses, travel expenses, telephone expenses and many other heads under which these expenses are being made and based on company policies these are to be reimbursed. Now, these can be reimbursed can be made without any supporting bill but then you an organization would be liable to pay the associated taxes. Hence, these are actually reimbursement and not a part of salary structure. The reimbursement is always associated with a suitable bill. For example, reimbursement made under medical head is Rs. 15000 and hence if you have a bill of Rs. 15000 then these would be not be counted as a taxable part of it. Now, each head has an upper limit attached to it for reimbursement purposes and hence these are to be calculated by the payroll agency.
- Issuing Year end Form 16– Form 16 is generally issued at the end of the financial Year. Form 16 is a statement that highlights all kinds of payment that the employer has made to an employee and how the tax savings have been done, tax computation has been done are captured in Form 16. Form 16 is an obligation on the part of an employer and he has to issue it or otherwise there is a government penalty.
- Payroll reports- These include the payroll reports that are useful to management to know how many employees are there in the organization, what kind of salaries they are getting and what kind of reimbursements are being made and many other customized payroll reports can be made based on the requirement of the employer that can help them analyze their manpower for efficiently.
- Timely Release of Payments from bank – Another major aspect of Payroll agencies is to run timely release of payments from bank so that they can be made in time. This includes communicating with the bank about the payments to be made to each employee and is also accompanied by opening of bank account of each employee.
Above are some the activities that are regularly done by payroll agencies to maintain the payroll process of an organization and any noncompliance can lead to penalties and also lead to employee dissatisfaction because of a weak payroll system. As you would have seen from the above a lot of Indian tax and Indian labor laws knowledge is needed while doing the payroll process and hence it’s important to have a qualified and experienced payroll team to manage the payroll of your organization.
If you are an organization looking for payroll agencies in India then MM Enterprises offers customized and reliable payroll solutions at an affordable price. You can ask for a custom quote by clicking here