Payroll – Overview
 

Payroll refers to the process by which employers calculate, manage, and distribute employee salaries, along with statutory deductions like taxes, provident fund (PF), professional tax, and others. It also involves filing government returns, maintaining records, and ensuring compliance with labor laws.
 

Key Components of Payroll
 

Category Details

Gross Salary Total salary before deductions (includes basic pay, allowances, bonuses)

Deductions Taxes (TDS), EPF, ESI, professional tax, loan repayments, etc.

Net Salary Take-home pay after all deductions

Employer Contributions Provident Fund (EPF), ESI, gratuity, bonus, etc.

Reimbursements Travel, fuel, medical, etc., if applicable
 

Payroll Process – Step-by-Step
 

1. Employee Onboarding

   • Collect PAN, Aadhaar, bank details, tax declaration, and employment contract.

2. Define Salary Structure

   • Basic pay, HRA, special allowance, bonuses, etc.

3. Track Attendance & Leaves

   • Integration with HR or attendance systems to calculate pay accurately.

4. Calculate Gross Pay

   • Based on working days, overtime, and incentives.

5. Compute Deductions

   • Statutory deductions like:

     • EPF (Employees’ Provident Fund)

     • ESI (Employee State Insurance)

     • TDS (Tax Deducted at Source)

     • Professional Tax (if applicable)

     • Labour Welfare Fund (in some states)

6. Generate Payslips

   • Detailed salary statement for employees.

7. Pay Employees

   • Salary credited to bank accounts, typically monthly.

8. Statutory Filings & Compliance

   • Filing returns and depositing contributions (PF, ESI, TDS) with government authorities.
      

Statutory Payroll Compliance – India (Example)

Compliance Frequency Form / Portal

EPF (Provident Fund)Monthly ECR through EPFO portal

ESI Monthly ESI portal

TDS on Salaries Monthly deduction, quarterly return Form 24Q

Professional Tax Monthly or annually (varies by state)State-specific portals

Form 16AnnuallyGiven to employees (TDS summary)

Labour Welfare Fund (LWF)Half-yearly or annually State-specific rules
 

Payroll Software & Tools

To simplify the process, many companies use payroll software:

• Popular Tools: Zoho Payroll, Greyt HR, Razorpay X Payroll, Keka, ADP, QuickBooks Payroll

• Features Include:

  • Salary calculations

  • Automated tax deductions

  • Payslip generation

  • Compliance reports

  • Employee self-service portals
     

Benefits of a Structured Payroll System

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• Ensures timely and accurate payments

• Maintains statutory compliance

• Reduces manual errors and administrative overhead

• Increases employee trust and satisfaction

• Enables easy access to financial data for audits or funding
   

Common Payroll Mistakes to Avoid

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• Misclassification of employees

• Not deducting or depositing taxes on time

• Misreporting in statutory returns

• Ignoring changes in labor laws

• Incorrect salary breakup (affecting tax efficiency)
   

 Payroll Outsourcing

If managing payroll in-house is difficult, many companies outsource payroll to third-party providers. Services include:

• Salary processing

• Compliance management

• Tax filings

• Employee onboarding documentation