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Processing Of Payrolls: All You Need To Know About it!

Payroll errors will occur sooner than you expect. Focus for a moment on the workers for whom monthly salaries are the only source of income. Imagine what if the wage is not properly paid or there is a pause in salary payment. These irregularities can affect employee morale and eventually affect the profitability of businesses.

When ensuring correct and prompt payment of wages is vital, it is also essential to abide by different laws and regulations, such as PF, PT, labor law, and other statutory enforcement.

Failure to adhere to such laws will carry significant financial and legal consequences. To help companies with the same there are payroll companies and software that make the payroll processing smooth.

Payroll: What Is It?

Payroll is a list of workers which the employer pays for. Payroll also applies to the overall amount of money paid to the workers by the employer. Following are the functions that aid a business

  • The real estimation of gross wage deductions, both statutory and non-statutory, and the net pay
  • Depositing duties such as PF, TDS, and so on with relevant authorities and filing of returns
  • Developing the compensation strategy for companies like leave encashment schemes, flexible salaries, etc.
  • Collecting other payroll reports (e.g., food vendor of an organization who can provide information on the sum to be retrieved from staff for consumed meals)
  • Employee salary release
  • Determining payslip elements such as variable pay, LTA, and HRA.

A payroll officer has to plan carefully. There are often ongoing activities that require attention and a persistent need to track shifts in withholding, social security fund donations, etc. The entire cycle can be divided into three stages: prepaid, real payroll and post-payroll activities.

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Stages Involved In Payroll Processing


Defining The Payroll Policy

Multiple factors influence the total amount that is to be billed. At that time the various policies of the organization, such as pay policy, leave and benefits policy, attendance policy, etc., play a role.

As a first phase, to ensure regular payroll processing, these policies need to be well defined and approved by Management.

Input Validation

Once inputs are obtained, you need to test the validity of the data about company policy adherence, the matrix of authorization/approval, appropriate formats, etc.

You must also confirm that no current employee is missing and that no dormant employee records are used for payment of salary.

Gathering Inputs

The payroll method involves working with various departments and employees. Information can be available such as data on the mid-year compensation adjustment, attendance data, etc.

Calculating The Payroll

At this point, the approved input data for the actual payroll processing is loaded into the payroll system. The effect is the net pay following the adjustment of required taxes as well as other deductions.

When the payroll cycle is over, reconciling the values and testing for consistency is also a good practice to prevent any errors.

Post Payroll Process

The following are the steps involved in the post-processing stage of payrolls.

Reporting Of Information

If you complete a month’s payroll run, the finance and high-level management team can ask for reports such as division wise staff costs, location wise staff costs, etc.

As a payroll officer, digging in the details, extracting the necessary information and sharing the reports becomes your responsibility.

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Statutory Compliance

At the time of payroll collection, all legislative deductions such as EPF, TDS, and ESI are deduced. The corporation subsequently pays back the sum to the appropriate government bodies.

Accounting Of Payrolls

A growing company keeps all of its financial transactions in the record. Salary charged is one of the major operating expenses that must be recorded in the account books.

It is important to ensure that all compensation and reimbursement data are properly fed into the accounting / ERP system as part of payroll management.

Paying The Amount

The salary can be in cash, by check or by wire transfer. Usually, companies provide a compensation bank account to workers.

When you’ve done the payroll, you need to make sure that the bank account of the organization has enough money to make the payments. You will then give a pay bank advice statement to the branch in question.

This statement comes with information such as employee id, bank account number, salary amount, etc.

If you opt for a payroll program with a self-service system for workers, you can conveniently post the payslips, and workers can sign in to their account and view the payslips.

Payroll Software

Payroll Software is used for monitoring and streamlining the process of making employee payments. Businesses utilize Payroll Software to optimize tasks such as calculating salaries, withholding tax and transferring monthly payments into their workers ‘assigned bank account.

Payroll software for small businesses can be of great help.

The benefit of using Payroll Software is that it helps relieve accounting workers from many of the administrative activities involved in making payments, which would otherwise be very time-consuming. It also eliminates instances of human-induced errors.

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Listed below are some of the best payroll software in the industry.

  • QuickBooksPro
  • OnPay
  • Xero
  • PeopleSoft
  • Workday Payroll
  • Patriot Payroll
  • Zenefits

It is undeniable that payroll processing helps a company keep a financial record and payroll software small companies do make a lot of difference as it makes the whole process smooth.

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