Indian Payroll system

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PAY ROLL
AN IMPORTANT HR ACTIVITY
A LEGAL REQUIREMENT
A RECORD OF DETAILS OF PAYMENT MADE TO
EMPLOYEES
FACILITATES SMOOTH DISBURSEMENT OF
PAYMENT
SYSTEM DEPENDS ON CO.POLICY
DIFFERS FROM INDUSTRY TO INDUSTRY
LAWS GOVRNING IT IS CHANGING

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PAY ROLL
 Payroll is defined as a method of administrating
employees’ salaries in the organizations. The process
consists of calculation of salaries and tax deductions of the
employees, administrating the retirement benefits and
disbursements of salaries to employees. It can also be
called as an accounts activity which undertakes the salary
administration of employees in the organization.
Administrating the employees’ salaries is not an easy task,
the HR and accounts department work together to
calculate and disburse the salary to the employees. Thus,
payroll management can be further subdivided into two sub
processes, i.e. Payroll accounting and payroll
administration.

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PAY ROLL
 HAS ADMINISTRATIVE DIMENSION
 HAS LEGAL DIMENSION
 HAS HR DIMENSION
 HAS MANAGERIAL DIMENSION
 HAS MACRO/NATIONAL DIMENSION
 HAS FINANCIAL DIMENSION

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Payroll Management terms
What is Payroll and how it has been processed?
Payroll is the salary processing system.
Payroll is divided into two parts-Monthly and Annual
Monthly payroll includes the following :
 Basic salary
 Dearness Allowance
 HRA
 Conveyance/Petrol
 Medical
 Education
 Telephone
 Special allowance
 Other Perks
 Deductions

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Payroll Accounting & Payroll
Administration
 Payroll Accounting
Payroll accounting involves calculations of employees’
salaries and tax deductions. It also undertakes the activities
such as preparation of tax returns, maintaining the payroll
records, etc.
 Payroll Administration
Payroll Administration involves managerial activities such
as maintaining employees’ records, referring employment
laws. Here, the HR comes into picture which maintains the
daily record of employees attendance.

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Payroll Management
Annual payroll
* Medical Reimbursement - Rs 15,000/- max p.a.
* LTA
* Meal Vouchers - Rs 50 per working day ( Sodexho /Accor )
 Payroll can be seen from two aspects. One is from HR side
and other from Finance/Accounts side.
 The HR persons process the payroll by means of sending
attendance details or better say LWP details and other
complete details that an employee is going to get in a
particular month.
 And after receiving those details the FiananceDept. start
making entry into payroll software

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Statutes Governing PAY ROLL
 Indian Factories Act 1948
 Shops and Commercial Establishments Act 1961
 Beedi and Cigar Workers (Condition of
Employment) Act 1966.
 Plantation Labour Act 1951
 Motar Transport Workers Act 1961
 Building & Other Construction
Workers ( Regulation of Employment and Conditions of
Service) Act 1996
 Inter-State-Migrant Workers (Regulation of Employment &
Conditions of Service) Act 1979
 Mines Act
 Contract Labour (A & R) Act
 EPF & MP Act
 ESI Act

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INITIAL/BASIC STEPS TO
CREATE PAYROLL
 An employee data base (i.e.) a Master List to
created which contains all the details of the
employees like, Date of Joining, Education,
Work Experience, Personal details (DOB,
Contact info), Salary break up details
 Attendance/ Leave record details

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OTHER RELATED INPUTS FOR
PAYROLL
 The salary break up details of all the existing employees
 Employee Bank account No./PAN No.if any
 Attendance of all employees:: LOP details
 Salary Revision (w.e.f that particular month)
 New Recruits (To be calculated form the date of Joining)
 Full and final Settlements (If any are to be calculated separately not with
payroll)
 Additions-Arrears if anything to be paid, Reimbursements
 Deductions-
 Provident Fund, ESI, Professional Tax, Income Tax, LIC
 LOP, Loans/Advances, Other recoveries, Miscellaneous
 TDS

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Payroll Generation
 Payroll generation depends totally on number of days in month. Say
Feb (28 days). Total salary package will be paid accordingly, but while
deducting a LWP it would be calculated on basis of 28 days.
Thus it’s irrespective of any number of holidays etc.
 The Industrial Employment (Standing Orders) Act, 1946 (Ref. model
Standing Order) the salary should be calculated on 30days for Monthly
rated employee and 26days for daily rated employee, to maintain the
constant PF deductions & LOP of an employee
 As per government norms 26 days are calculated for salary in every
month, there is no partiality to the workers like skilled or semi skilled or
clerical job the role applicable to all, but some of the private concerns
follow 30 or 31 days for their own benefit. 26 days are consider salary
calculation period. It is 30 days irrespective of the Sundays and
holidays for monthly wages and 26 days for daily wages.

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MAJOR INTERFACING MODULES
OF PAYROLL MANAGEMENT
SYSTEM
 EMOPLOYEE PROFILE
 LEAVE
 TIME & ATTENDANCE
 TDS/INCOME TAX
 TDS, P.TAX, ESI AND PF REPORTS

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PAYROLL IMPLEMENATION STEPS
 Step 1 :- Pre-requisite before taking up the payroll
process work
-The purpose behind the re-engineering process of
the entire payroll-l
-To suggest bottle necks and improvements
-To clearly UNDERSTAND the expectations the
scope of the payroll processing
-There will be trial run for a month to ensure that we are
in line with the
- Expectations.

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PAYROLL IMPLEMENATION STEPS
 Step 2 :-Adherence to the corporate policy
- Ensure that procedures are in place to maintain the records of Corporate
policies related to pay roll at regular intervals.
- Ensure that proper effect to the pay roll is given in accordance with the
Policy guidelines defined by the Company
- Understand the salary components in terms of fixed and variable.
- Understand the benefits available to employees on monthly and yearly
basis.
- Understand local laws and compliance of the same related to payroll
process.
- Receiving job details along with job code allocation. The job code
allocation is to be given according to the type of the job description.

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PAYROLL IMPLEMENATION STEPS
 Step 3
- Collecting time sheets with attendance sheets
If the on line system is maintained, then it will ensure automatic checking with
the attendance register and time sheets. Otherwise the attendance sheets and
the time sheets are to be compared manually.

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PAYROLL IMPLEMENATION STEPS
 Step 4- Receiving details
- Terms of appointment, Attendance details Receiving details of salary structure,
- Promotion-Changes of Grade, Salary Structure, Department etc. will be
initiated in case of promotion on the basis of the information received from
personnel department.
- Increment- The increment letter of an employee is to be collected and
necessary changes are to be incorporated in the system.
- Confirmation: Confirmation letters are to be collected & necessary changes
are to be incorporated in the system.
- Details of disciplinary action taken- if it has any effect on salary, the same to
be incorporated in the system.
- Resignation- The final settlement is to be disbursed, based on the notice
period and in consultation with the Finance Department
- Retirement- can be normal or voluntary. Accordingly the final settlement is to
be made.

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PAYROLL IMPLEMENATION STEPS
 Step 5 -UPDATING SALARY DETAILS
- The terms of appointment
- Salary Structure
- Annual benefits
- Attendance details
- Overtime details
- The details of reimbursement
- The promotion, increment and confirmation details
- The details of departmental transfers
- The details of resignation, retirement and retrenchment
- The employee advance position

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PAYROLL IMPLEMENATION STEPS
 Step 6- GENERATION OF REPORTS FOR CHECKING-
- Salary register
- Variance Report
 Step 7 -RECTIFICATION OF MISTAKES/CORRECTIONS /
MODIFICATION
 Step 8 -GENERATION OF REPORTS
- Salary register (Monthly)
- Pay slips
- Advance register
- Bank Statement
- Other deductions and allowance statement
 Step 9-MIS REPORTS-As per Management’s requirements and
Reports to comply with local authorities, if any.

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PAYROLL IMPLEMENATION SYSTEM

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