What is Payroll?


Payroll is the list of employees of a few companies eligible to receive payments and other work benefits. The amounts should receive each from various projects as per the task performed. The payment includes salaries, wages, bonuses, withheld taxes, and compensation. A company may handle the phases of in house payroll process or outsource the phases to a payroll processing company.

In addition,Handling the employees salary or wages in the right way is essential. However Employers need to be very careful to ensure that their employees may promptly receive the funds, as they are legally eligible. There are also various laws for labour that may affect payrolls, such as overtime pay and minimum amount of wages.

What is payroll ?

Function of payroll

  • Developing the worker policy of the organization, including flexible benefits, leave encashment policy, etc.
  • Describing pay slip elements like Basic, variable pay, House rent allowance (HRA), and LTA.
  • Collecting other employee data like organizations’ food vendors may provide information about the recovered amount from the employees for consumed meals.
  • The exact calculation of gross salary, statuary, and no statuary deductions and net pay arriving.
  • Releasing employee salary
  • Depositing various dues like TDS, PF, etc., with proper authorities and filing returns.

What is Payroll Processing?

Payroll processing is a critical function of a business that turns around calculating every employee’s net salary by taking in the data like working hours, attendance, leave, and many more. An authorized accountant wants to take all these data with appropriate validation for the correct employee payment calculation. There are always various tasks that change after a specific time interval. These changes can be changes in your tax parts, company policy, investment schemes, and statuary laws.

What are the Stages to Processing Payroll?

A payroll officer wants to do careful planning because there are always a continuous tasks that want attention and a regular need to control changes to the contribution, withholdings to social security funds, etc. The entire process can split into three stages: pre, actual, and post.

Defining policy

Firstly,The net amount to be given is affect by many factors. There are various policy of companies such as pay policy, leave, benefits policy, and attendance policy.And this policies need to be well establish and approve by the management to ensure standard payroll processing.

Collecting Inputs

Secondly,The payroll process includes interacting with multiple personnel and department. There can be some information such as mid-year salary, revision data, attendance data, etc.

In smaller company or organizations, these inputs receive from a combined source or some teams. But in a larger organization, the collecting data task may look immense. If you use smart software with integrated features like an attendance management system, employee self-service portal, leave, etc. The input collection process doesn’t remain a problem.       

Input Validation

Once inputs are received, you need to check for data validity regarding adherence to company policy, approval form, right formats, etc. It would be best to make sure that no active employee miss out and no inactive employee records are involved for salary.

Actual Payroll Process

At Last stage, the verify input data is file into this system for actual processing. The output is the net pay after setting the necessary taxes and other deductions. Once this process is over, it is always a good practice to adjust the values and verify for accuracy to avoid any mistakes.

Post-Payroll Process

Statutory Compliance

All legal deductions like TDS, EPF, and ESI are deducted at the time of processing. The company then forwards the amount to the particular government agencies. The number can change depending on the type of dues. In some cases, the dues payments are made via challans. After all, dues are paid, the return reports are filed, E.g.:- For filing PF returns, ECR is made and filled.

Payroll Accounting

Each organization keeps and maintains a record of all its financial transactions because salary paid is one of the essential operating costs that must be recorded in the books of accounts. In employee management,it is necessary to check all the reimbursement data and salary data which is filled correctly into the accounting system or ERP.


You can pay salary to the employees by cash, cheque or even bank transfer. Many organizations provide salary bank account to their employees. Once you complete employee payment process, you assure that the company has enough funds to make the salary payment after sending a salary bank advice statement to the concerned branch. This statement issue with particulars like employee id, bank account number, wages, etc. If you option for payroll software with an employee self-service portal, you can quickly issue the payslips, and employees can log in to their account and access the payslips.


Once you complete the employee salary process for an appropriate month, the Finance and high management team may ask for reports such as wise employee cost according to department, location, etc. As a payroll officer, it’s your responsibility to discover the data, collect the required information and share the reports with the respective departments.

Methods of Payroll

There are various methods, which are available for your business.

Excel-based payroll management

Many organizations that are at the first stage of operations and have a new handful of employees usually go for excel based workers systems.Excel payroll management includes doing payroll calculations on excel sheets using a standard employee payment calculation template. Use the mathematical formula that helps the officer to do computation. While this method doesn’t involve any cost, but it has fundamental limitations such as:-

  • High risks of clerical and mathematical errors as data record manually.
  • Difficulty in adding and removing the employees from the list of payroll.
  • Possibilities of duplicate data and omission of entries at particular times.
  • Necessary to monitor tax updates and other statutory charges like PF and PT etc.

Outsourcing Payroll

Outsourcing payroll means you need to outsource an external agency to take care of your payroll function. Many companies that don’t have any dedicated employees for payroll ,so they go for this option. Companies provide employee salary details and other data such as attendance leaves and reimbursement details to the service provider based on their pay cycle. The payroll service provider then calculates payroll and also takes care of statuary compliance. As we know payroll is an essential function and companies want full transparency and control, but they sometimes hesitate to outsource payroll.

Payroll software

As we discussed above, you need to make sure that payroll inputs are coming from every source in an absolute and timely manner. The main purpose of using software is to reduce the conflicts in getting the inputs.

Advanced payroll management software is also available in the market that automates payroll computation and gives attendance management, Hr management, and employee self-service portal service.This software for your business depends on the size of your business and use cases.


Finally ,The Payroll gives benefits to the companies by hiring trained individuals and paying them for their performed tasks. However ,you need to be very careful before handling the employee paynet process because it is the most crucial responsibility to take care of the employees based on the salary, deductions, and facilities.

The payroll officer needs to do planning carefully and control the contribution changes. There are three critical stages as we discuss above, and that stages are most important while processing the payroll.

Leave a Reply