Payroll Checklist

What is a payroll

Check for changes in employee data – Check if there were any changes in the employee’s details, such as marital status, address, bank account number, etc.

Check if the minimum hours worked quota was completed- Every company has a percentage for a minimum amount of hours worked to be eligible to receive the full salary. Also, remember to account for any special events like sick leaves, holidays, etc.

Check for changes to employee benefits – Remember to check for any changes to plans like health insurance, travel reimbursement, etc.

Account for changes to fixed and variable pay- When an employee receives a pay raise or moves to a higher position of authority, their fixed pay changes to reflect that. Apart from the fixed pay, there may also be variables like bonus pay, incentives, commissions, etc. These components should reflect appropriately in the payroll.

EPS, EPF, and health and education cess fulfillment – There are three types of payroll contribution – EPS, EPF, and Health and education cess. Employer contributions make up employment costs, and employee contributions make up payroll costs and employee income tax. Employment costs, aka employer payroll contributions, are further subdivided into different components: Employer provident fund (EPF), employee pension scheme(EPS), and Employee state insurance (ESI). Employers pay 16.75% of employment tax, in which EPS and EPF are 12%, while ESI is 0.75%. Health and education cess account for 4%.

Check if any corrections for overpaying or underpaying were left over from the previous cycles. If there was an incident where an employee received more or less pay, that has to be corrected in this payment cycle.

Submit form 16- Form 16 is the certificate issued under section 203 of the Income Tax deducted at source (TDS). It shows how much tax the employer. It acts as proof of the tax the employer has deducted. A person is eligible for form 16 if they are a salaried employee whose tax has been deducted from the source.

Make sure you are statutory compliant- Before processing the final payslip, make sure you are statutory compliant. An inability to do so can result in severe penalties.

Payroll FAQ's

Payroll refers to the total sum paid to the employees by the company. It is the list of people paid by the company for their services.

  • Basic Salary: Basic salary accounts for around 35-50% of the total salary component. This amount varies from field to field.
  • Variable salary: It is the component of wages dependent on the employee's performance. It includes things like performance bonuses, goal achievement bonuses, etc.

Allowances

Allowances are certain financial benefits employers give employees apart from their salary. They may be entirely or partially taxed. The allowances differ from industry to industry.

 

  • Travel allowance- It is the allowance given to employees to cover travel expenses.
  • HRA(house rent allowance) - A portion of the employee's salary goes to cover the rent cost if they live in rented accommodation. It provides tax benefits to the employee and can be used to lower the tax amount paid.
  • Dearness allowance - Its a proportion of wage paid to mitigate the effects of inflation on the employees. It only applies to govt employees and is not available to private employees.
  • Gratuity: Gratuity is a one-time payment to employees leaving the company. Employees are only liable if they have worked for five years or more.

This answer usually lies in how your company is processing your paycheck. Usually, payroll is processed on the final working day of the month. If the last working day is a holiday, then it's customarily processed on the following business day.

As per govt rules, EPF is contributed by both the employer and employee. Both the employee and employer contribute 12 % each to the EPF, for a total of 24%. However, while 12%of the employee's salary goes to EPF, the employer contributes 8.33% to the total, with 3.67 going towards the EPS.

Payroll Checklist Template

Free Download