Steps of Payroll Process

1. Check whether there is any revision/change in the Salary Structure of employees

2. If yes, make necessary changes in the Salary Structure of the employees concerned
3. Check whether any new employees have joined or any employees have left
4. If new employees have joined, update his salary structure
5. If any employees have left, update the date of leaving
6. Put the input data given by the client into the prescribed format of the software
7. Upload Pay Days of all the employees (cross check twice with Maker-Checker Formula)
8. Calculate Earned Basic/HRA/TA/SA/OT/Incentives/Others/Gross Salary as per the formula
9. Check whether Earned Gross Salary exceeds Structural Gross Salary. If yes, find out the
reasons, if any. (May be due to arrears/OT/Incentives/leave
encashment/Bonus/Gratuity/etc.)
10. Identify coverable employees under EPF/ESI/LWF/PT/TDS
11. Calculate the deductions to be made (EPF/ESI/LWF/PTAX/TDS/Advance/Canteen/Others)
as per the formula
12. Check regarding non-deduction of coverable employees and deduction of uncovered
employees.
13. If arrear salary is being paid due to revision of salary, calculate additional
EPF/ESI/LWF/PT/TDS deductions
14. Calculate Net Salary after deducting (i) Total Deductions from (ii) Earned Gross Salary
15. Compare the Salary Sheet with that of the previous month to check any variation.

Note:-

1. Employees’ EPF contribution is to be calculated as per the EPF policy of the company:-
(i) Whether all the employees are being extended EPF benefits irrespective of their
basic salary (including employees whose basic salary exceeds Rs.15000/-)
(ii) Whether the EPF benefits are being extended to only employees whose basic salary
does not exceed Rs.15000/-
(iii) If EPF benefits are extended to all the employees, EPF contribution is calculated on
the whole basic salary or upto Rs.15000/-
2. When the EPF policy is to extend EPF benefits only to employees whose basic salary does
not exceed Rs.15000/-, care has to be taken to give EPF benefits to employees whose
his/her basic salary, during the course of employment, exceed Rs.15000/-, by way of EPF
deduction upto Rs.15000/-.
3. In case, a covered employee wish to contribute more than the prescribed limit of 12 %,
calculate his/her EPF contribution accordingly.
4. In case of ESI, care has to be taken to deduct ESI contribution of employees whose gross
salary exceed Rs.15000/-till the end of the Contribution Period.
5. LWF deduction shall be made at the rate and on the specified months as per state
requirements.
6. PTAX deduction shall be made at the rate and on the specified months as per state
requirements.
7. In Maharashtra and Madhya Pradesh, PTAX slab rates are different for the month of
February and March respectively.

Calculation of different Variables:

1. Earned Salary = [Structural Salary/No. of Days in a month (28/29/30/31)*Pay Days]

2. Overtime per day = 2 * Structural Gross Salary / No.of Days in a month (28/29/30/31)
3. Overtime per hour = 2 * Structural Gross Salary / No.of Days in a month (28/29/30/31) / 8