This article discusses the appropriate process for calculating manual payroll and how to find accurate deductions in wage payments to employees.
Regardless of the size of your company, the most crucial thing for you to do as an employer is to appropriately compensate your staff for the hours they put in. When processing employee payroll, calculations of real earnings, deductions, working hours, and other elements are necessary.
The payroll must also account for other essential factors like voluntarily made deductions. Calculating payroll manually takes a lot of effort and consideration. Here, you’ll find all the details you need regarding payroll calculation.
Employees Working on an Hourly Basis
Even if you are working on the manual process to calculate the payroll, you can apply a time clock for that purpose for better evaluation of the entire process. Automated time clocks can accurately record the total working hours every week.
Therefore, it becomes easier to calculate the working hours of your company’s employees who have been working on an hourly basis. These payroll calculators for manual payroll purposes are based on the frequency of payment and the hourly wage of workers.
Hence, if an employee has been working in your company for ₹200 an hour on a biweekly schedule of pay, he will get 40 hours x 2 weeks = 80 hours x ₹200/hour = ₹16000 as a gross regular payment.
Overtime Payroll Calculation on an Hourly Basis
If you calculate overtime for employees working on an hourly basis while making your company’s payroll calculator, the overtime payment will be 1.5 times the worker’s pay rate regularly. For example 80 hours at the regular wage rate of pay as shown above plus the overtime calculation: 10 hours x 2 weeks = 20 hours. The gross payment will be ₹200 x 1.5= 400.
Payroll Calculation for Salaried Workers
Your company’s salaried employees must be paid under each working period. Since most of the time there is no need to compute the overtime working hours, the manual payroll process is simpler. When necessary, you can verify the status of your employees’ payments. Employees that are paid a salary and work for your organisation are given an annual wage based on the seasons of the year. The annual salary is also divided into equal portions for each payment month.
Payroll Calculation Process In India
The formula for manual payroll calculation in India is as follows:
- Net Salary = Gross Salary – Gross Deductions
- Gross Salary = Basic Salary + HRA + Allowances + Arrears + Bonus Reimbursements
- Gross Deductions = Public Provident Fund + Professional Tax + Insurance + Loan repayments (if any)+ Income Tax + Leave adjustments
Elements Included in Salary Structure in India
The essential elements included in the salary structure in India are the following:
- Gross Salary
- Net Salary
- CTC
- Prerequisites
- Allowances
- Deductions and Reimbursements
- Form-16
- Payslip
- Ad hoc Components
- Expenses/Incentives/Bonus/One-time payments
- Details of Company PAN, TAN, PF, ESI, PT, LWF (if applicable)
- Details of Company Bank account
- Details of Signatory D
- Declarations of Employee Investment
- Details of Employees Financial status
- Annual CTC / Gross of all the employees
- Details of Previous Salary of the employees.
Manual Payroll Process in India
The payroll cycle in Indian companies includes pre-payroll activities, payroll processes, and post-payroll activities. In some companies, there is a fourth stage of the process as well that divides the post-payment process into two parts.
The payroll management team in the company and the HR managers are responsible for the manual process. If you are an entrepreneur, you need to recognise the entire process to ensure a better functioning system in your company.
Details of the Manual Payroll Calculation Stages
The manual payroll phases are described in detail below so that you may easily comprehend the full payroll procedure.
Activities in the Pre-payroll Process
Companies and organisations consider the pre-payroll process as the most crucial one. The entire process is associated with the finance of the company and the salaries of the employees. Therefore, if you want to calculate the actual payroll, you must assemble the data inputs from the assembled sources. The most essential steps in the first phase are
- The taxable, non-taxable and partially taxable charges in the employee’s salary.
- Payroll data collection
- Requirements of actual data to calculate the payroll accurately
- Data validation before moving to the next step of the payroll calculation process
Payroll processing
The next process after the pre-payroll process is payroll processing. Here you need to perform several works to calculate the actual compensation to pay your employees. You must also accumulate the payroll data for this purpose. The payroll data include details of leave and attendance of the employee, shift calculations of the workers, tax and deductions, expenses, and incentives.
You can utilise the results in your system to determine the compensation amount to pay your employees after receiving the validated data. Calculate the changes for mandatory taxes and tax deductions, though. The most crucial phase in the procedure to ensure the accuracy of payroll calculation is data verification.
Post Payroll Activities
The post-payroll activities are the last stage in the manual payroll calculation process. The post-payroll activities include declarations, reporting, and statements of the employer that must be submitted to the corresponding bodies. The reporting for the post payroll comprises reports from the relevant sources to validate the payroll submission.
The entire stage is divided into three processes:
- Payroll accounting
- Payout
- Reporting.
Filing Payroll in India
Every Indian company must file payroll calculations in different forms. The forms are
- Form 24Q
- Form 12B
- Form 12BB
- Form 15H
- Form 15G
- Form 16
- Form 16A
- Form 16B
- Form 10C
- Form 26QB
- Form 26AS
- Form 27C
- Form 24G
- Form 64A
- Form 24Q
- Form 12BA
- Form 27EQ
- Form 49B.
Conclusion
Therefore, it can be concluded that manually calculating payroll is a time-consuming process and requires careful attention to produce precise results. For a faster and more precise calculation, you can alternatively use a paperless payroll method.
The paperless payroll process gives your employees more flexibility and gives them access to all payroll information whenever they need it. Contact the reputable legal experts at Vakilsearch to gain a better understanding of the payroll procedure. Call us to receive professional legal solutions for all of your legal, tax, and compliance issues.
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