Class 5. payroll processing 1 v7.0

Jon Boyes
Employability and Graduate Development
CHMP
www.hrspot.co.in
Kolkata | Bhubaneswar | Hyderabad
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Payroll Processing
Certified Human Resource Management Professional
Payroll Processing 1

Payroll Processing
Payroll Processing
Introduction to
Compensation and Benefits

Payroll Processing
 Company provides a return to its employees for the services rendered by them
towards the fulfilment of organization goal
 Return in the form of monitory or non monitory or is a mixture of both

Payroll Processing
Monetary returns are
known as
COMPENSATIONS
Non Monetary returns are
known as
BENEFITS

Payroll Processing
Payroll Processing
Objectives of

Payroll Processing
C&B Program is a tool used by employers
to effectively attract, retain and motivate employees

Payroll Processing
Payroll Processing
Different Components of

Payroll Processing
 Salary/Remuneration
 Overtime
 Incentive
 Bonus
 Commission
 Leave Encashment
Compensation

Payroll Processing
 Pick up and Drop
 Work from Home
 Free Lunch and Dinner
 Corporate Mediclaim
 Preferable Week off
 Holiday Package
 Free Phone
 Life Insurance
 Club Membership
 Free Training
Benefits

Payroll Processing
Payroll Processing
Introduction
to CTC

Payroll Processing
 CTC is a term for the total salary package of an employee.
 It indicates the total amount of expenses an employer spends on an employee
during one year.

Payroll Processing
Payroll Processing
Features and Components
of CTC

Payroll Processing
Components Features
Basic Preferably (30 – 60) % of CTC in most cases; fully taxable
House Rent Allowance 40% of Basic in Non Metro Location; 50% of Basic in Metro
Location; partially taxable
Leave Travel Allowance LTA is exempted from tax twice in a 4 years block
Conveyance Allowance Earlier [INR. 19,200 per Annum is exempted from Tax]; Now [CA
and MA cumulatively 40,000 per Annum is exempted from Tax]
Medical Allowance Earlier [INR. 15,000 per Annum is exempted from Tax]; Now [CA
and MA cumulatively 40,000 per Annum is exempted from Tax]
Other Allowance The Balance (CTC – Everything); fully taxable
Provident Fund 13% (employer’s contribution) of Basic(Ceiling limit basic
1,80,000); fully tax exempted
Gratuity 4.81% of Basic; fully tax exempted
Employee State Insurance 4.75% (employer’s contribution) of Gross Pay, only if Gross Pay is
less than 2,52,000 per Annum; fully tax exempted

Payroll Processing
Payroll Processing
Gross Pay and Gross Salary

Payroll Processing
 Cost To Company = The entire package
 Gross Pay = CTC – (Employer’s PF + Gratuity + all other deductions, if
any, except ESI)
 Gross Pay is required for ESI calculation

Payroll Processing
 Gross Salary = CTC – All Deductions (Employer’s PF + Employer’s ESI +
Gratuity + all other deductions, if any)
 Net Salary = CTC – All Deductions (Employer’s PF + Employer’s ESI +
Gratuity + Employee’s PF + Employee’s ESI + all other deductions, if any)

Payroll Processing
Cost To Company
Employee Receivable
Employee
NOT
Receivable
Employer Contribution
to Govt.
to Self
Basic
HRA
Leave Travel Allowance
Conveyance Allowance
Medical Allowance
Other Allowance
Provident Fund
(Employer)
Employee State Insurance
(Employer)
Gratuity

Payroll Processing
Gross Pay = CTC – All Employee Not Receivable (Except ESI)
Employee Receivable
Employee
NOT
Receivable
to Govt.
to Self
Basic
HRA
Medical Allowance
Other Allowance
Provident Fund
(Employer)
(Employer)
Gratuity

Payroll Processing
Gross Pay = CTC – All Employee Not Receivable (Except ESI)
Employee Receivable
Basic
HRA
Medical Allowance
Other Allowance
(Employer)
Gross Pay is important for
ESI eligibility check only
If GP is more than Rs. 2,52,000
not eligible for ESI

Payroll Processing
Gross Salary = CTC – All Employee Not Receivable
Employee Receivable
Employee
NOT
Receivable
to Govt.
to Self
Basic
HRA
Medical Allowance
Other Allowance
Provident Fund
(Employer)
(Employer)
Gratuity

Payroll Processing
Gross Salary = CTC – All Employee Not Receivable
Employee Receivable
Basic
HRA
Medical Allowance
Other Allowance

Payroll Processing
Payroll Processing
CTC Designing

Payroll Processing
Payroll Processing
CTC Designing
Example 1

1,80,000*40/100
= 72,000
Basic
40% of CTC
Payroll Processing
CTC Structure: INR 1,80,000 per annum in Kolkata

72,000*50/100
= 36,000
HRA
50% of Basic
Payroll Processing

72,000*13/100
= 9,360
Provident Fund
(Employer)
13% of Basic
Payroll Processing

72,000*4.81/100
= 3,463
Gratuity
4.81% of Basic
Payroll Processing

1,80,000 – 9360 – 3463
= 1,67,177
Gross Pay
(CTC – PF – Gratuity)
Payroll Processing

Employees State Insurance
(Employer)
4.75% of Gross Pay
Payroll Processing
1,67,069*4.75/100
= 7,941

16,000Leave Travel Allowance
Payroll Processing

19,200Conveyance Allowance
Payroll Processing

15,000Medical Allowance
Payroll Processing

1,036Other Allowance
Payroll Processing

1,80,000 – 9360 – 3463 – 7941
= 1,59,236
Gross Salary
(CTC – PF – Gratuity – ESI)
Payroll Processing

Payroll Processing
CTC Structure: INR. 1,80,000 per annum in Kolkata
.
Components Amount
Basic (40% of CTC) INR. 72,000
HRA (50% of Basic in Metro Location) INR. 36,000
LTA INR. 16,000
Conveyance INR. 19,200
Medical INR. 15,000
OA INR. 1,036
PF (employer) (13% of Basic) INR. 9,360
Gratuity (4.81% of Basic) INR. 3,463
ESI (employer) (4.75% of Gross Pay) INR. 7,941
Gross Pay = CTC – PF - Gratuity

Payroll Processing
CTC Structure: INR. 1,80,000 per annum in Kolkata
Components Amount
Basic INR. 72,000
House Rent Allowance INR. 36,000
Leave Travel Allowance INR. 16,000
Conveyance Allowance INR. 19,200
Medical Allowance INR. 15,000
Other Allowance INR. 1,036
Provident Fund INR. 9,360
Gratuity INR. 3,463
Employees State Insurance INR. 7,941
Total INR. 1,80,000
CTC= 1,80,000
Gross Pay (CTC – PF – Gratuity)=
1,80,000 – 9360 – 3463= 1,67,177
Gross Salary (CTC – PF – Gratuity –
ESI)= 1,80,000 – 9360 – 3463 –
7941= 1,59,236

Payroll Processing
Payroll Processing
CTC Designing
Example 2

6,00,000*50/100
= 3,00,000
Basic
50% of CTC
Payroll Processing
CTC Structure: INR 6,00,000 per annum in Bhubaneswar

3,00,000*40/100
= 1,20,000
HRA
40% of Basic
Payroll Processing

1,80,000 (maximum ceiling
limit)*13/100
= 23,400
Provident Fund
(Employer)
13% of Basic
Payroll Processing
CTC Structure – INR 6,00,000 per annum in Bhubaneswar

3,00,000*4.81/100
= 14,430
Gratuity
4.81% of Basic
Payroll Processing

6,00,000 – 23,400 – 14,430
= 5,62,170
Gross Pay
(CTC – PF – Gratuity)
Payroll Processing

Employees State Insurance
4.75% of Gross Pay
Payroll Processing
Gross Pay more than 2,52,000
per annum, so ESI is 0

1,00,000Leave Travel Allowance
Payroll Processing

20,000Conveyance Allowance
Payroll Processing

20,000Medical Allowance
Payroll Processing

Other Allowance
Payroll Processing
2,170

6,00,000 – 23,400 – 14,430 – 0
= 5,62,170
Gross Salary
(CTC – PF – Gratuity – ESI)
Payroll Processing

Payroll Processing
CTC Structure: INR. 6,00,000 per annum in Bhubaneswar
Components Amount
Basic (50% of CTC) INR. 3,00,000
HRA (40% of Basic in Non Metro Location) INR. 1,20,000
LTA INR. 1,00,000
Conveyance INR. 20,000
Medical INR. 20,000
OA INR. 2,170
PF (employer) (13% of Basic: more than 1,80,000) INR. 23,400
Gratuity (4.81% of Basic) INR. 14,430
ESI (employer) (4.75% of Gross Pay: more than 2,52,000) INR. 0
Gross Pay = CTC – PF - Gratuity

Payroll Processing
CTC Structure: INR. 6,00,000 per annum in Bhubaneswar
Components Amount
Basic INR. 3,00,000
House Rent Allowance INR. 1,20,000
Leave Travel Allowance INR. 1,00,000
Conveyance Allowance INR. 20,000
Medical Allowance INR. 20,000
Other Allowance INR. 2,170
Provident Fund INR. 23,400
Gratuity INR. 14,430
Employees State Insurance INR. 0
Total INR. 6,00,000
CTC= 6,00,000
Gross Pay (CTC – PF – Gratuity)=
6,00,000 – 23670 – 14430=
5,62,170
Gross Salary (CTC – PF – Gratuity –
ESI)= 6,00,000 – 23400 – 14430 –
0= 5,62,170

Payroll Processing
Payroll Processing
Class Activity

Payroll Processing
CTC Structuring
All Students will be asked to make CTC structure for different Metro and Non
metro locations.
1.CTC 2,50,000; location Kolkata; Basic 35%
2.CTC 3,25,000; location Bhubaneswar; Basic 45%
3.CTC 4,75,000; location Hyderabad; Basic 55%
4.CTC 1,75,000; location Noida; Basic 40%
5.CTC 6,55,000; location Thiruvananthapuram; Basic 50%
Individual Activity: 120 min

Class 5. payroll processing 1 v7.0

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