Payroll Management Services in India - (An overview)
Payroll process refers to the maintenance of employee financial records with respect to their salaries, wages, net pay, tax deductions, incentives and other statutory requirements like PF (Provident Fund) and ESI (Employees' State Insurance). An effective payroll management system ensures timely payment of salaries to employees, which reflects positively on the company's financial stability, thereby leaving no room for legal implications. Thus maintaining a high morale within the company! A payroll management system is essential for every organization alike - startup, medium-sized or large-scale.
The Benefits Of Payroll Management System (Benefits)
An effective payroll process involves a robust system that is compliant with payroll laws and labour laws as well. Here are some of the benefits of a complete Payroll Management system:
Easy Tax Filing And Reports:
Under the Income Tax Act, every salaried individual is liable to pay taxes as prescribed by the State and Central governments depending on the salary and exemption limit. A payroll software avoids mismanagement of taxes that could leave workers paying penalties. It also takes care of all the compliance and statutory requirements which helps the company in filing taxes easily.
Economical And Time-Saving:
Usually, payroll software is designed to integrate the existing accounting system. This helps organisations save time and money on calculating large amounts of data. Also, a few advanced versions have the provision to forecast and plan budgets for what companies spend on each employee.
Determine Compensation:
Every individual’s compensation, including salary, incentives and bonuses are included in the payroll system. This makes it easier for companies to evaluate employee performance at the time of appraisal and determine compensation.
Maintain Reputation:
A company must ensure to maintain adherence to all the country's tax obligations and labour compliances like TDS, ITR, ESI, PF, etc. This enhances an organization’s reputation as a stable employer and also helps in increasing the brand proposition.
How to Create a Payroll Management System
At bigvakil, our chartered accountants and accounting & taxation experts will take care of your end-to-end payroll process and compliances in the most efficient way. Our payroll management services cover the following:
Designing CTC Structure:
CTC or Cost to the Company is the total salary package the company pays to an employee directly or indirectly. CTC is inclusive of basic pay, allowances, reimbursements, gratuity, annual bonus, annual variable pay, etc. It may be defined as
CTC = Gross Salary + PF+ Gratuity
Some of the components of CTC are base salary (fixed based on the employee’s designation, years of experience and the industry of employment); gross salary which is the amount without inclusion of deductions like PF, medical insurance, income tax, etc; fixed pay; variables; TDS, etc.
Labour Compliance:
Labour law in India governs employers, employees, and trade unions, with a primary focus on the protection of employee rights. All organizations in India are required to adhere to various statutory compliances as set by different acts of the Labour law. Labour compliance is not only limited to filing PF returns, ESI returns, etc but also involves maintaining employee registers and other important records. There are multiple laws applicable to employers and employees, depending upon the type of their organization.
For example: Factories Act 1948 is exclusively for labourers employed in factories. It lays down standards for the welfare, health, and safety of the people employed.
Employees Provident Funds and Miscellaneous Provisions Act, 1952 is applicable to companies which have 20 or more employees. Under its Employee Provident Fund (EPF) social security scheme, both the employer and employee have to contribute a certain amount and upon the employee’s retirement, he/she will get a lump sum amount. This amount includes self contribution and employer’s contribution along with interest on both.
All employers are required to file EPF returns on a monthly basis by the 25th.
In the event of labour non-compliance, a company may be penalized or imprisoned for a period of up to three years.
At bigvakil, our legal professionals can identify the labour compliance that is applicable to your business and offer you the right guidance. We also ensure time mandatory labour compliance filings are executed without delays.
Tax Planning For Employees:
Planning of tax payments is essential for salaried individuals as it helps save on taxes. Depending upon your business entity, employees’ designations, and salary components; Our taxation professionals can offer the best advice on tax savings in line with the latest amendments and rules.
TDS Deduction And TDS Compliance:
According to the Income Tax Act, every earning individual or company making payments like salary, commission, interest, etc. are required to deduct a percentage before paying the full amount. This is Tax deducted at source or TDS. TDS percentages are prescribed by the IT Act.
Setting Up Of Reimbursement:
Reimbursement is the amount paid for costs incurred. Some organizations pay the employees back for business-related travel expenses, medical allowances, food and entertainment expenses, etc.
Right from reporting claims to reimbursements, bigvakil professionals help include your companies’ reimbursement policies. If you want to define reimbursement as part of your employees’ salaries then we can design the salary structure in a way to ensure all tax compliances are fulfilled.
Drafting Employment Agreement:
An employment agreement lays down the conditions of employment, and the rights, responsibilities and obligations of both parties during the tenure of employment. This agreement also helps employees in getting a fair understanding of the job responsibilities and the expectations of the company. In addition, it serves as proof in the event of a dispute or misunderstanding among both parties.
bigvakil’s legal documentation specialists are adept at creating employment contracts for your consultants, freelancers and part-time, full-time and contractual employees.
Drafting HR Policy:
Every company functions on the basis of certain guidelines, which are set by the top management and the HR team. These guidelines may include the code of conduct for employees, their duties and responsibilities, the company’s obligation towards the workers, discrimination policies, what activities are considered offensive by the company, employee benefits, disciplinary actions, etc. The organization is free to draft its own HR policies and procedures, however, they need to be aligned with the company’s goal, industry and law.
Drafting Leave Policy:
Leave policies are regulated by the state legislations’ Shop and Establishment Act and Factories Act as applicable. Generally, all State legislations hold a common provision where they provide seven holidays for national days and festivals.
Hence, it is at your discretion to fix the number of leaves and our lawyers can help you frame it better.
Planning Increments And Appraisals For Employees:
Performance appraisals and salary hikes motivate your employees to perform to the best of their abilities. Appraisals provide them with comprehensive, honest feedback on their strengths and scope of improvement.
We can assist you in planning out how to assign increments and appraisals to employees.
(Documents Required) for a E-Payroll system
- Certificate of Registration (CoR):
- Electronic Challan cum Return (ECR) document
- GST (Goods & Services) Certificate
- TIN (Taxpayer Identification Number) Certificate
