Payroll process and payroll

management process
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3RD SEM INFORMATION TECHNOLOGY
 Payroll process
 Steps involved in payroll process
 Components of payroll
 Payroll management
 What is payroll ?
 Payroll is the total amount of money paid by
an Organization (Business) to its employees
over a set amount of time.
 Payroll is the sum of all financial records of

salaries, wages, bonuses and deductions.

 The administration of employees' salaries,

wages, bonuses, net pay, and deductions.

 Payroll is administered on the monthly basis

and annual basis.

Payroll process
 Payroll process includes a list of steps that
are carried out to make the payrolls
compliant with the organizations
requirements.
 Payroll process implies to check the previous

payroll records to check for arrears and any

left-over’s that need to be compensated.
 STEPS INVOLVED IN PAYROLL PROCESS

Payroll
Payroll
process
process

Generate
Generate
Calculate
Calculate pay
pay Read
Read input
input
output
output

Generate Read
Read
Calculate
Calculate Generate Generate
Generate Read
Read emp
emp
Calculate
Calculate net
net individual
individual
gross
gross pay Payroll paychecks master
master record
pay pay
pay Payroll record
record paychecks record timecard
timecard

Calculate
Calculate Calculate
Calculate Calculate
Calculate Calculate
Calculate
regular
regular pay
pay overtime
overtime taxes
taxes deductions
deductions
COMPONENTS OF PAYROLL

•Employee ID, Employee Name (Employee Details)

•Date of joining, Daily Attendance record (Attendance Details)
•Basic salary, Allowances, Overtime pay, Bonus, Commissions, Incentives,
Pay for holidays, Vacations and Sickness, Value of meals and Lodging etc.
•There are some deductions such as PF, Taxes, Loan installments or
Advances taken by employee
 Payroll management
 Human Resource is the most vital resource for any
organization. It is responsible for each and every
decision taken, each and every work done and each
and every result. Employees should be managed
properly and motivated by providing best
remuneration and compensation as per the industry
standards. The lucrative compensation will also
serve the need for attracting and retaining the best
employees.
 Remuneration Received by an Employee
 Organized practice that involves
balancing the work-employee relation
 Integral Part of Human Resource
Management
TYPES OF COMPENSATION
 Direct Compensation
 Indirect Compensation

Introduction to compensation
 Compensation component
Job analysis , Pay structure ,
Salary structures
 DIRECT COMPENSATION
•Directcompensation refers to monetary benefits offered and provided to
employees in return of the services they provide to the organization.
•They are given at a regular interval at a definite time.
 INDIRECT COMPENSATION

Indirect compensation refers to non-monetary

benefits offered and provided to employees in lieu of
the services provided by them to the organization.
 NEED OF COMPENSATION
 Employee Motivation <-> Increased Productivity
 Effective Organization Operations
 Employee Retention – Attract and Sustaining the Best Talent.
 Enhancement of Job Evaluation
 Creation of Healthy Competition
 Business Growth and Expansion Possibilities
o Payroll Management generally includes activities in two
major areas: Payroll Accounting and Payroll
Administration.
o Payroll Accounting consists of: 1) Calculating the
earnings of employees and the related withholding for
taxes and other deductions, 2) Recording the results of
payroll activities, and 3) Preparing required tax returns.
Payroll Administration deals with the managerial
aspects of maintaining a payroll, many of which are
distinct from the accounting aspect of payroll. Payroll
administration includes: 1) Managing employee
personnel and payroll information, 2)Compliance with
State and local employment laws

Payroll management system

             

Payroll Management provides quality payroll processing

and personnel services at competitive and affordable
rates.

Payroll Processing Methods:

Manual System
Accountant
Payroll Software
Payroll Outsourcing

Payroll management process

Manual System
Manual payroll system is the traditional payroll system which involves pen
and ink, adding machine, spreadsheet, etc instead of computers, software
and other computerized aids.
Accountant
Accountant is a professional having a degree/diploma course in
finance/accountancy. He/she is responsible for all the activities related to
payroll accounting.
Payroll Software
In today’s computerized environment, payroll system has also developed
itself into automated software that performs every action needed by the
payroll process. It helps in calculating the payable amounts and
deductions very easily.
Payroll Outsourcing
Payroll outsourcing involves a third party (an outsourcing company) in the
calculations of salaries and deductions.

Payroll processing methods

  

Figure: Various Payroll Processes

 Significance of payroll
outsourcing
Outsourcing industry is growing at a higher rate. HR outsourcing helps the HR
professionals free themselves from the daily routine work and take part in the
strategic level processes. Organizations really do not take HR as a strategic
function; it is merely treated as paper work division. Therefore they want to
reduce the cost being spent on HR activities. 

In India payroll outsourcing is one of the HR processes and is being outsourced

since 1997. Payroll outsourcing involves an external organization performing all
the activities related to payroll management. HR Consultancies such as Ma Foi
and many other firms have come up with payroll outsourcing. 

Outsourcing organizations strive for providing cost saving benefits to their clients.
The organizations use its marketing division thoroughly to acquire more number
of clients and retain them. Payroll outsourcing does not provide much cost
reduction but it yield in high quality. Since compensation outsourcing requires lot
of market survey and industry knowledge, it is not easy for an organization to
carry the tasks with its operational business activities. 
Reasons of payroll outsourcing
 Cost effective
 Time saving
 Legal protection
 Profit generation
 Error free
 Speed
 Security
 No worries
 Figure:Reasons
Figure: Reasonsfor
for Payroll
Outsourcing Payroll
Outsourcing
Thank you