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All organisations, big or small, spend a great deal of time on salary disbursements. From enrolling their employees and calculating their monthly payroll to staying compliant and disbursing paychecks timely — the payroll process is extensive and time taking.
It requires the employers to pay keen attention to the compliance laws to avoid any penalties. This means that one tiny mistake and they have to perform the entire process once again. However, on a brighter note, to avoid this never-ending monthly hassle, employers can use an automated payroll software.
What is a Payroll Software?
A typical payroll software executes payroll in minutes, files taxes, controls onboarding and exit of employees, disburses salaries, and generates insightful reports.
Before we get started on the components of effective payroll software, let’s take a look at the four major components of payroll in India:
Core components of payroll in India
1. Gross Salary
It is the employee’s salary before any mandatory deductions. These deductions are:
- Professional tax (PT)
- Provident fund (PF)
- Employee state insurance (ESI)
- Common recurring deductions such as conveyance
2. Net Salary
Net salary is what employees get in hand after the above deductions. Government deductions in India include PT, PF, ESI, and TDS.
Other components of net salary include:
- Basic pay
- House rent allowance (HRA)
- Special allowance
- Food and transport allowance
- Leave allowance
Some of these components are Flexi benefit components of salary that employees can declare before the start of financial year and save taxes on them. For more details around Flexi benefit components, refer to this blog post.
3. Ad-hoc pay
It includes bonuses or other performance-related incentives and commisions.
4. Other benefits
Companies further offer other benefits such as gratuity on completion of 5 years, family insurance, etc. These long term benefits are usually settled once an employee retires or resigns.
Now that you know about the payroll process in India, let’s look at the core components of an effective payroll software.
Features of an effective payroll software
Minimises errors and saves time
While manually managing payroll, it is human to make mistakes. However, the problem arises when these mistakes end up costing companies in the long run.
On the other hand, automating payroll is not only efficient but also minimises the scope for errors. Furthermore, businesses can execute payroll in minutes rather than weeks, which means that the time saved can be spent on other crucial business ventures.
Quick and easy account integration
When managing payroll manually, there is an exchange of information between the HR department and the accounting department. This leaves scope for error. An effective payroll system can integrate the accounting into a single platform where payroll-related information is stored
Generates accurate payslips
Managing payroll without a dedicated system can be extremely cumbersome. An effective payroll management system acts as a repository of employment records and payroll details. It can automatically generate accurate payslips, salary statements, and salary benefits.
Track employee attendance
Tracking the attendance of employees, shift timings, leaves, and holidays is simple with a payroll software. For instance, RazorpayX Payroll tracks employees’ attendance and calculates their salaries accordingly, in just one click.
Tax deducted at source, or TDS, is an essential element of processing payroll. Before paying salaries, employers must deduct a certain percentage thereof as statutory dues/taxes. These deductions include Tax Deducted at Source (TDS), Employee Provident Fund (EPF), Employee State Insurance (ESI), and Professional Tax.
Companies have to deposit the amount owed to the Government when it is due. Payroll automation calculates the amount owed to the Government under different heads and pays it in no time.
Apart from this, companies are also required to submit documents to the Government to prove their due diligence. Hence, another important component of an effective payroll management system is staying updated with the state’s changing tax policies, and labour laws of the country.
An integrated HR software
An all-in-one HR software is the hallmark of effective payroll management software. Payroll management is closely associated with the functioning of HR. It only makes sense that HR functions like generating offer letters, managing attendance, employee directory, and reimbursements be facilitated by the payroll management software.
When everything is integrated, both employer and employee can manage everything from one place. This saves time and effort, which can be utilised elsewhere.
Group health insurance
Ensuring the well being of the employees was traditionally done by large companies alone. However, with time, even small, micro, and medium enterprises lookout to offer health insurance to their employees.
Effective payroll software provides customised insurance plans to the companies for their employees.
For instance, with RazorpayX Payroll, businesses with teams as small as two employees can take group insurance for as low as Rs. 300/month per employee. What’s more, employees can also initiate a claim in less than five minutes.
Every organisation is different and has unique needs and different statutory compliances to fulfil.
An effective payroll management system needs to allow organisations to customise the software to suit their needs and requirements and help with the unique compliances.
An employer should be able to add benefits, bonuses or one time deductions they wish to introduce for employees into the payroll system as well.
An effective payroll system takes the data, analyses it, and generates insightful reports like salary registers, attendance reports, reimbursements, etc.
An employer can thus see patterns and trends with the records of attendance, leaves, payroll, benefits, deductions, and much more in one place.
Most organisations are not used to operating a payroll management system. Employers face challenges while understanding and operating the software.
It, therefore, makes sense for payroll software companies to offer a step-by-step demonstration for businesses, and offer 24 x 7 customer support for speedy resolutions.
What’s the way forward?
Payroll management is a complex task that requires acute attention to detail. An effective payroll management system takes care of all the relevant elements and ensures a hassle-free experience for the organisation.
RazorpayX payroll is one such software that automates salary disbursements, offers seamless integration with slack, takes care of statutory compliance and so much more.
Make a smart choice and book a free demo right away!