The approval of payroll is an essential step to avoid any issues at the end of the process. This article will guide you through the payroll process.
A lot of you might be thinking that payroll processing only involves the calculation of employees’ salaries. However, it’s more than that. The payroll process is a bit tedious but quite an important function in every organisation.
This function refers to the process of arriving at the employee’s net pay once the necessary deductions are made. If a company wants an efficient payroll process, it needs to ensure that the payroll administrator is planning the whole process carefully.
Overall Payroll Procedure
Below are some of the steps that a payroll administrator takes to meet a smooth payroll approval procedure:
- The first step involves the curation of the organisation’s pay policy. This includes the leaves, encashment policy, and other flexible benefits
- Once done, now is the time for you to calculate the other payslip components, such as LTA, HRA, variable pay, etc
- In this step, the payroll admin would gather the various payroll inputs, just in case they are available
- Finally, he/she calculates the gross salary, and non-statutory and statutory deductions, leading to the net pay
- After that, the admin releases the salary of the employees.
Significant Stages of Payroll Processing
The payroll process comes up with a higher risk of mistakes by the payroll department since the finance department keeps coming up with constant changes. This might hamper the process flow. Just in case such changes occur, the payroll officer must showcase immediate action. To make the whole payroll procedure smoother, the organisations have now divided it into three major stages. They are mentioned below:
Pre-Payroll Process
As the name suggests, the “pre-payroll process” is the whole procedure that is facilitated before the commencement of the final payroll process. There are some steps involved in the same. Let us understand more about them below:
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Defining the Notable Payroll Policy:
There are a lot of reasons which hamper the overall payable amount. Some of these reasons are pay policy, attendance policy, leave policy, etc. Therefore, the management must approve and define all these factors to ensure following the standard payroll procedure.
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Gathering the Inputs:
Before the final payroll is calculated, interaction with all the departments and personnel in the organisation is done. Through this discussion, the payroll department gathers some information about the salary revision data, attendance data, etc. The procedure for attaining this data would also depend on the notable size of the organisation.
This process might turn out to be complicated since it includes talking to every single department and then gathering the information. In this case, the organisation should have a tech-savvy payroll system. It should have integrated features like attendance management, leave management, employee self-service portal, etc.
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Input Validation:
Now that the organisation has received the noteworthy inputs, it should now check the data and inputs’ validation. The organisation needs to keep a view on whether or not the data adhere to the company policy. It has to be in a proper format. There should be no records of the inactive employee in the salary payment. Also, no employee should be left out during the whole payroll process.
Payroll Process
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Calculation of the Payroll:
During this stage, the data validated in the “pre-payroll process” is entered into the notable payroll system. You might be thinking about what is a payroll system. Well, it is software that keeps a track record of the various activities of the employees like leaves, salaries, working hours, taxation and deductions, etc. This system is meant to reduce employer efforts. Also, it can make the payroll process smoother.
Post-Payroll Process
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Statutory Compliance:
This step implements various statutory deductions like ESI, TDS, and EPF while the payroll is processed. This amount is then transferred to the government agencies by the company.
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Payroll Accounting:
For an organisation, paying the salaries to the employees is a significant operating cost. Therefore, the salary amount must be added to the organisation’s financial records. As an important component of payroll management, keeping a note of the reimbursement and salary data in the payroll system is vital.
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Payout:
The salaries can be processed through cheque, cash, or bank transfer. Also, most organisations are known to facilitate their employees with a significant bank account. After completing the payroll procedure, you should check out the company’s account. It should have a sufficient amount to pay the salaries to the employees.
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Reporting:
After completing the payroll run, it is time to send reports to the higher authorities. This report contains information such as employees’ costs based on the location and department. It is a vital duty of the payroll officers to extract the data and share the same with higher management.
Different Payroll Methods for the Business
There are three payroll methods that you can use for running the payroll. They are mentioned below:
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Excel-based Payroll Management
The excel-based payroll management is meant specially for startups and newly established businesses. In this kind of payroll management, the company makes use of excel to calculate the payroll. A standard payroll template is used for calculation.
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Payroll Outsourcing
Payroll outsourcing is a scenario in which a company needs to get some assistance from an external agency for managing the payroll function. In other words, the management hires some external help for the payroll functioning in the company. Many organisations currently don’t have an in-house team to manage the payroll. Instead, they use outsourcing for this.
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Payroll Software
To ensure that the payroll calculation in an organisation is smooth, it needs to ensure that the data collected is accurate. Payroll software can help in the same. It acts as a tool that can reduce friction while attaining the inputs. This payroll management software can offer various benefits. These include leave and attendance management, HR management, payroll computation, etc.
Conclusion
Payroll processing has to be efficient for the smooth running of an organisation. It is quite important that the finance department of the organisation follows a step-by-step process for the same. Also, the professionals in the finance department should be aware of the statutory compliances and tax deductions. If you need some more information on the same, you can get in touch with Vakilsearch. This firm would help you implement the noteworthy payroll approval process without any shortcomings.
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