What Is Payroll Processing? It’s Stages!

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The payroll administrator must plan each step of the payroll process to ensure efficient payroll management.

What is Payroll Processing?

The process of payroll processing system in HR is complex and involves more than just salary calculations. If you don’t know how to proceed, the process can seem daunting.

Payroll System Challenges and One-Step Solution

What exactly are the problems with payroll management? We’ll be looking at the issues that plague payroll management systems in this section.

You need to adhere to many rules and procedures, including federal laws and labour laws. These guidelines must be followed. Noncompliance is rarely a choice.

Analyzing the example of conformity will show us that human factors can cause mistakes. When one person is responsible for paying 30 people, errors are common. These errors are often made during hand calculations. These errors can lead to fines or charges.

Cost accounting is so complex that Hrms often postpone compensation. Manual methods, regulation, taxation and any other tasks require time. Manually determining each employee’s pay can prove exhausting and lead to delays. These delays can cause employees to become more frustrated, which leads to an increase in attrition.

It is not easy to cost-account for your SMEs. Payroll processing can present various issues that can impact your efficiency and compliance framework. Noncompliance sanctions are now commonplace. We discussed solutions to payroll processing issues in the previous post

What is Payroll Processing?

This is a list of tasks that the payroll administrator must complete during payroll processing.

Create a pay policy for your organization that includes flexible benefits, a leave policy, and other benefits.

Define the components of your payslip – basic and fixed pay, HRA, LTA, LTA, etc.

Other payroll inputs can be collected from the transport service provider and the food/canteen vendor.

Calculate the gross salary, and subtract the statutory and non-statutory amounts to arrive at the net salary

Last, let go of employee salaries.

Filing returns and deposit dues, such as TDS and PF, with the appropriate authorities.

  • An in-depth explanation of Payroll Processing In India

STAGE 1: Prepayroll Activities

Definition of payroll policy

This is the first step in establishing policies that you will use during payroll. These policies must be approved by management before they can become standards. These policies include the attendance policy and leave and benefits policy.

Gathering inputs

Next, gather inputs from different departments to accurately calculate payroll.

This data collection can be overwhelming at first. You should incorporate payroll software that includes features like leave and attendance management, ESM (Employeeself Service portal), and many more to make things easier.

Input validation

After you have collected all required data, verify that it is valid. A single error can ruin your entire payroll process.

You must ensure that all active employees are included in the list.

Verify that the data complies with company policy.


Stage 2: The actual payroll process

Calculation of payroll

To eliminate any errors, you should recheck the process.

What is a Payroll system?

These systems can be connected with a leave and attendance tracking system and an employee self-service portal. They are used to track employees’ work hours, calculate salaries, calculate taxes, deductions, print payslips, and perform other functions.

So, payroll software reduces employers’ efforts and allows them to focus on more urgent business problems.


Stage 3: The Post-Payroll process

Compliance with the law

The statutory compliances must be adhered to by the payroll administrator during payroll processing. Various statutory deductions – EPF, TDS and ESI – can be deducted during payroll processing.


Payroll accounting

An accurate book of accounts is essential for every organization. The most important entry in the book is the salary. Every salary data must be entered into the ERP or accounting system as part of the payroll process.


These steps will allow you to finally pay your salary via bank transfer, cash or cheque. For hassle-free transfers, it is better to have employees’ salary accounts. To make payments to your salary account, send the bank statements from your salary bank account with an employee ID, account numbers, salary amount, etc.


The final step is to create accurate reports that include information such as location-wise employee costs. These reports are sent to the finance department and the management team for further analysis.

These are the key ingredients to a smooth Indian payroll process. Once you have a good understanding of the process, it is time to use the information to increase the efficiency of your organization.

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