What is Payroll? Basics, Process, Compliances and Methods

Therefore, it’s crucial what is cost of capital and why is it important for business in 2019 for organizations to use efficient payroll processing practices and technology solutions to ensure compliance, accuracy, and efficiency in their payroll processing. Employers must also withhold and remit federal income taxes on their employees’ gross pay, as well as a professional tax, depending on the state where their talent resides. To keep track of employee’s leaves and attendance, gathering leave and attendance data are very important.

What Is Labor Burden? How To Calculate Your True Payroll Costs

If companies fail to adhere to these statutory compliances, they will have to face heavy penalties. All active employees must be considered for validating data, and former employees must not be included in salary and compliance payments. Validation of employee inputs eliminate the risk of committing mistakes in the payroll processing, and the consequences faced while rectifying them.

How Can EnKash Help Streamline Your Payroll Processing?

1. It is convenient to use spreadsheets because they will have only a handful of employees to manage at the initial stage.
2. Therefore, you can rely on an expert to avoid such hurdles – Global Squirrels.
3. Missing these will leave you out of compliance and could cause costly fines and penalties from Indian government agencies.
4. So to make it easy, you must incorporate payroll software, which will consist of features like attendance and leave management, Employee Self Service Portal(ESS), and many more to make it hassle-free.

We are writing this for more than 60 million small business owners in India, breaking down the entire process to help you get payroll right, and also to show you how simple it actually is. Statutory compliance in HR refers to the lawful structure and regulations within which organizations must operate while dealing with their employees. If payroll is delayed due to any reason, employees tend to underperform which may end up affecting the company’s revenue in the end. If we look at India’s history, the first income tax act was introduced in 1860 by Sir James Wilson, the first finance minister under British rule in India.

A Step-By-Step Guide to Payroll Processing in India

Depending on the state, this nominal tax ranges from ₹150 to ₹200 and is capped at ₹2,500 annually. However, unlike the EPF, which provides a lump sum to employees under qualifying circumstances, the EPS provides individuals with a regular monthly pension once they reach retirement at 58. Individuals can only access their EPS benefits early as a lump sum withdrawal if they are at least 50 years old and have completed less than 10 years of service. A unique feature of the EPF is that contributions to this fund inventory account: adjustment type affect go into an interest-bearing account, and the investment amount, returns generated, and redeemed amounts are all exempt from taxation. Individuals can withdraw their EPF funds if they have been unemployed for more than 60 days, and EPF benefits also pass on to an employee’s dependents if they pass away. While this may sound overwhelming, with some preparation, global businesses can easily and compliantly hire and pay top Indian talent from anywhere, even without setting up a local entity.

An EOR is a third-party entity that allows businesses to quickly and compliantly hire and pay talent internationally without first undergoing entity establishment. Global companies with established entities in India may choose to build an in-house finance team to run payroll internally for their Indian workforce. Employees can access their EPF funds to help with certain financial needs, like purchasing a house, repaying a loan, or pursuing higher education.

Once the payroll is completed, companies need to ensure that the bank account has sufficient funds to make the salary payment. Then you need to send a salary bank advice statement to the concerned branch. It involves various duties designed to pay employees on time and correctly while abiding by regulatory regulations. While processing payroll, data plays an imperative role; leave and attendance data are significant payroll calculation elements.

With good payroll software, mundane tasks can be automated, and complex ones can be simplified. The most important yet untouched element in payroll processing is the morale of an employee. Therefore, you can rely on an expert to avoid such hurdles – Global Squirrels.

Step 7: Document & Store Your Payroll Records

Any employer can get its factory or organization registered under ESI through the ESIC website after falling into the eligibility criteria. Earlier, the registration the difference between accounts payable vs accounts receivable process was done manually, and a lot of documentation was required. To ease the process, the government has implemented a new online process. There are specified rates for ESI contribution paid to the ESI corporation for both employee and employer. When deducting salary for Loss of Pay(LOP) due to leave or other reasons, the number of days calculation for a given pay period significantly impacts.