Stay clear of the complex payroll and compliance issues with a well-designed payroll checklist
Here are some basic steps to follow while running the payroll process.
1. 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.
2. 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.
3. Check for changes to employee benefits – Remember to check for any changes to plans like health insurance, travel reimbursement, etc.
4. 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.
5. 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%.
6. 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.
7. 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.
8. 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 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.
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.
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.