Payroll process refers to the maintenance of employee financial records with respect to their salaries, wages, net pay, tax deductions, incentives and other statutory requirements like PF (Provident Fund) and ESI (Employees’ State Insurance). An effective payroll management system ensures timely payment of salaries to employees, which reflects positively on the company’s financial stability, thereby leaving no room for legal implications. Thus maintaining a high morale within the company! A payroll management system is essential for every organization alike – startup, medium-sized or large-scale.

The Benefits Of Payroll Management System (Benefits)

An effective payroll process involves a robust system that is compliant with payroll laws and labour laws as well. Here are some of the benefits of a complete Payroll Management system:

Easy Tax Filing And Reports:

Under the Income Tax Act, every salaried individual is liable to pay taxes as prescribed by the State and Central governments depending on the salary and exemption limit. A payroll software avoids mismanagement of taxes that could leave workers paying penalties. It also takes care of all the compliance and statutory requirements which helps the company in filing taxes easily.

Economical And Time-Saving:

Usually, payroll software is designed to integrate the existing accounting system. This helps organisations save time and money on calculating large amounts of data. Also, a few advanced versions have the provision to forecast and plan budgets for what companies spend on each employee.

Determine Compensation:

Every individual’s compensation, including salary, incentives and bonuses are included in the payroll system. This makes it easier for companies to evaluate employee performance at the time of appraisal and determine compensation.

Maintain Reputation:

A company must ensure to maintain adherence to all the country’s tax obligations and labour compliances like TDS, ITR, ESI, PF, etc. This enhances an organization’s reputation as a stable employer and also helps in increasing the brand proposition.

(Checklist) for an Effective E-Payroll system

  • Company Documents: Certificate of Registration, Electronic Challan cum Return (ECR) document, Company GST AND TIN and other company documents are required to set up an efficient payroll management system.
  • Choose a payment schedule: A flexible and fixed schedule – weekly, bi-weekly, semi-monthly, and monthly payroll schedules.
  • Classify employees: Classify employees on the basis of contractors, freelancers, permanent employees, interns, and schedule payments accordingly.
  • Terms of compensation: To keep a tab on employee hours, office timings, over time, etc company compensation terms have to be updated in the E-Payroll system.

How to Create a Payroll Management System

At Startupgenie, our chartered accountants and accounting & taxation experts will take care of your end-to-end payroll process and compliances in the most efficient way. Our payroll management services cover the following:

Designing CTC Structure:

CTC or Cost to the Company is the total salary package the company pays to an employee directly or indirectly. CTC is inclusive of basic pay, allowances, reimbursements, gratuity, annual bonus, annual variable pay, etc. It may be defined as
CTC = Gross Salary + PF+ Gratuity

Some of the components of CTC are base salary (fixed based on the employee’s designation, years of experience and the industry of employment); gross salary which is the amount without inclusion of deductions like PF, medical insurance, income tax, etc; fixed pay; variables; TDS, etc.

Labour Compliance:

Labour law in India governs employers, employees, and trade unions, with a primary focus on the protection of employee rights. All organizations in India are required to adhere to various statutory compliances as set by different acts of the Labour law. Labour compliance is not only limited to filing PF returns, ESI returns, etc but also involves maintaining employee registers and other important records. There are multiple laws applicable to employers and employees, depending upon the type of their organization.

For example: Factories Act 1948 is exclusively for labourers employed in factories. It lays down standards for the welfare, health, and safety of the people employed.

Employees Provident Funds and Miscellaneous Provisions Act, 1952 is applicable to companies which have 20 or more employees. Under its Employee Provident Fund (EPF) social security scheme, both the employer and employee have to contribute a certain amount and upon the employee’s retirement, he/she will get a lump sum amount. This amount includes self contribution and employer’s contribution along with interest on both.

All employers are required to file EPF returns on a monthly basis by the 25th.

In the event of labour non-compliance, a company may be penalized or imprisoned for a period of up to three years.

At Startupgenie, our legal professionals can identify the labour compliance that is applicable to your business and offer you the right guidance. We also ensure time mandatory labour compliance filings are executed without delays.

Tax Planning For Employees:

Planning of tax payments is essential for salaried individuals as it helps save on taxes. Depending upon your business entity, employees’ designations, and salary components; Our taxation professionals can offer the best advice on tax savings in line with the latest amendments and rules.

TDS Deduction And TDS Compliance:

According to the Income Tax Act, every earning individual or company making payments like salary, commission, interest, etc. are required to deduct a percentage before paying the full amount. This is Tax deducted at source or TDS. TDS percentages are prescribed by the IT Act.

Setting Up Of Reimbursement:

Reimbursement is the amount paid for costs incurred. Some organizations pay the employees back for business-related travel expenses, medical allowances, food and entertainment expenses, etc.

Right from reporting claims to reimbursements, Startupgenie professionals help include your companies’ reimbursement policies. If you want to define reimbursement as part of your employees’ salaries then we can design the salary structure in a way to ensure all tax compliances are fulfilled.

Drafting Employment Agreement:

An employment agreement lays down the conditions of employment, and the rights, responsibilities and obligations of both parties during the tenure of employment. This agreement also helps employees in getting a fair understanding of the job responsibilities and the expectations of the company. In addition, it serves as proof in the event of a dispute or misunderstanding among both parties.

Startupgenie’s legal documentation specialists are adept at creating employment contracts for your consultants, freelancers and part-time, full-time and contractual employees.

Drafting HR Policy:

Every company functions on the basis of certain guidelines, which are set by the top management and the HR team. These guidelines may include the code of conduct for employees, their duties and responsibilities, the company’s obligation towards the workers, discrimination policies, what activities are considered offensive by the company, employee benefits, disciplinary actions, etc. The organization is free to draft its own HR policies and procedures, however, they need to be aligned with the company’s goal, industry and law.

Drafting Leave Policy:

Leave policies are regulated by the state legislations’ Shop and Establishment Act and Factories Act as applicable. Generally, all State legislations hold a common provision where they provide seven holidays for national days and festivals.

Hence, it is at your discretion to fix the number of leaves and our lawyers can help you frame it better.

Planning Increments And Appraisals For Employees:

Performance appraisals and salary hikes motivate your employees to perform to the best of their abilities. Appraisals provide them with comprehensive, honest feedback on their strengths and scope of improvement.

We can assist you in planning out how to assign increments and appraisals to employees.

(How can we help) with Payroll Management

Our team of accounting professionals and payroll specialists work closely to calculate and manage your organization’s payroll. We ensure to provide your employees compensation, including bonuses, reimbursements, provident funds and other benefits on time, every month as per your company’s payroll cycle. We also process taxes, keep tabs on your new joinees’ information, as well as prepare and execute pay orders through an electronic system.

Our legal professionals ensure that labour compliances such as EPF registration, TDS returns, IT returns and others are filed on time.

(Documents Required) for a E-Payroll system

  • Certificate of Registration (CoR):
  • Electronic Challan cum Return (ECR) document
  • GST (Goods & Services) Certificate
  • TIN (Taxpayer Identification Number) Certificate

FAQs on Payroll Management

How are payrolls processed at Startupgenie?

At Startupgenie, the payroll process can be split into three stages;

  • Pre-payroll: During the pre-payroll, the dedicated relationship manager gathers inputs like the type of business, the number of workers in the organization, the industry, and other details of the company. Next, our payroll officer will define the payroll policy with respect to designing the CTC structure and the mandatory labour compliances for your business.
  • Actual payroll: The actual payroll process is where the salaries of employees are computed and processed.
  • Post payroll: In this stage, all the statutory deductions like IT (income tax), EPF (employee provident fund), TDS (tax deducted at source), ESI (Employees’ State Insurance) are deducted, and contributions and reimbursements are taken care of. Also, employee tax liabilities are calculated based on the latest tax slabs as applicable for the individual. Once the process is completed, we will send the investment declaration form to company employees as per the conditions under the IT (income tax) Act. Finally, the pay statements will be generated and shared.
  • Generally, the payroll period is from 1st to 30th/31st of every month. Hence, we will collect data at least 5 days prior to the end of the month (i.e., by 26th).

What are the statutory deductions?

Statutory deductions are P IT (income tax), EPF (employee provident fund), TDS (tax deducted at source), ESI (Employees’ State Insurance) which are deducted according to the individual’s annual compensation and the state legislations.

What is the difference between reimbursement and allowance?

An allowance is a fixed sum that a company may decide to pay its employees to cover additional expenses. For example travel allowance, overtime allowance, medical allowance, etc. All financial benefits that employer offers under the head “salaries” are taxable. Certain allowances are partially or fully exempted. Reimbursements are the amounts that a company pays back to its employees who may incur business-related expenses. For instance, many companies provide medical reimbursements where employees can claim the amount by presenting appropriate bills and proof of expenditure.

Our payroll system is well-secured, and guarantees to protect your company data and employee information. With a robust security system in place, we do not compromise on the security of bank account numbers, addresses, pay rates, and other details required to process the payroll and tax forms.

How do I ensure my data remains confidential with Startupgenie?

Our payroll system is well-secured, and guarantees to protect your company data and employee information. With a robust security system in place, we do not compromise on the security of bank account numbers, addresses, pay rates, and other details required to process the payroll and tax forms.

What are the methods to manage payroll?

Payroll management can be outsourced, managed on our own or through software. But it is best when outsourced as it is cost-effective and saves time and money. Not to mention, the opportunity to closely work with the payroll specialists and financial experts who are well versed on the latest tax rules and compliances.

What are some of the employee benefits and perks, employers/companies offer?

Some of the common benefits that companies offer are medical reimbursements, health insurance, paid vacations, leave encashment programmes, wellness program fundings, etc. However, the statutory benefits as mandated by law are earned leaves; social security like ESI, PF, pensions, group insurance policies, maternity benefits; payment of gratuity, etc. These benefits differ depending upon the type of company and the state where it is located.

Why should I outsource my payroll process?

Managing accounting, payroll, tax and other financial responsibilities is very tedious and complex, especially more so if your business is a start-up venture. Hence, by outsourcing payroll process, you can save time and money; be assured of accuracy in calculation and deductions; get expert guidance from payroll specialists, and accounting and financial professionals.

How many employees should I have to avail Startupgenie’s services

There is no minimum and maximum limit when it comes to the employee count. We can process payroll even for one employee!

Why Startupgenie

35 Working Days

Just tell us a little bit about your business and you’ll have the incorporation certificate in 35 working days (subject to government approval). It’s that simple. In addition to yours, we handle an average of 400 requests or more every month.

Realistic Expectations

By handling all the paperwork, we ensure a seamless interactive process with the government. We provide clarity on the incorporation process to set realistic expectations.

300-Strong Team

With a team of over 300 experienced business advisors and legal professionals, you are just a phone call away from the best in legal services.