Collecting Relevant Data

Payroll department has to collect the data required for processing payroll. The data includes the data
received from employees such as details about investments on which tax deductions are to be claimed,
Data received from HR department such as Attendance data, Joining dates of new joiners and details
about non-statutory deductions and Data received from other departments such as Canteen charges,
Fines and Damages etc.

Computation of Salaries

Payroll department has to compute the amount payable to each employee as Salaries. This includes
calculation of Basic salary, Computation of allowances, Computation of one-time payments such as
Bonus, Incentives, OT etc. and also calculation of deductions such as Statutory deductions like PF and ESI
and Non-statutory deductions like Loans, LOPs and advanced salaries.

Disbursement of Salaries

Payroll department has to inform Finance department about the total amount to be paid as salary to the
staff. Payroll department creates a journal voucher. On the basis of journal voucher finance department
posts the amount in the accounting or ERP system. The details of salary are then sent to the bank in a
file called ‘Bank Transfer File’ which intimates the bank to deduct the total amount from company’s
account and add the respective amount in each employee’s account.

Distribution of pay slips

Payroll department has to print and distribute pay slips or salary slips to the staff. salary slips are an
official document that shows computation of salary and YTD salary which is the amount of salary paid to
the employee till date from the start of the year.

Filing Returns

Payroll department has to remit the amounts deducted from salaries to the respective departments
such as Provident Fund department, Employee State Insurance department, Gratuity trust, Income tax
department etc. The payroll department also has to prepare and submit reports to these statutory
bodies, giving details about the amounts deposited. These two activities together are called as Filing
Returns. Thus, it is very important that the payroll executive is aware about all the statutory compliance
requirements needed to be fulfilled.

Employee Communication

Payroll department has to communicate with employees clearly and consistently. The communication
can be with regards to the changes being made in the payroll process or department or with regards to
the changes in policies or procedures of running payroll. The communication with employees can also be
for resolving the queries asked by the employees about computation or disbursement of salaries.

Generate MIS

Payroll department has to Generate MIS at regular intervals. The reports have to be accurate, clear and
easy to understand. The reports help the senior management to take informed decisions. Similarly,
some reports such as variance report help the payroll department to keep check on the process. It is
also important to generate MIS in shortest time and with utmost accuracy.

Answering Government Queries

Payroll department has to handle audits and answer the queries raised by statutory bodies such as EPFO
and ESI about computation and payment of Statutory dues deducted from employees’ salaries. The
queries can be minor issues such as mistake in calculation or major issues such as non-adherence of a
rule.