Department of Social Work

Case Study Report

Name of the student: Abinya A

Name of the Agency: Continental Automotive Components India Private Limited
Period of Internship: From 24th May 2023to 04th July 2023

1. TITLE OF THE CASE STUDY

Payroll Management

2. CONCEPTUAL UNDERSTANDING OF THE TOPIC

Payroll is the total of all compensation a business must pay to its employees for a set
period of time or on a given date. It is usually managed by the accounting or human
resources department of a business. Small-business payrolls may be handled by the owner
or an associate. Payroll is usually outsourced to specialized firms.

Payroll can also refer to the list of employees of a business and the amount of
compensation
due to each of them. It is a major expense for most businesses and is almost always
deductible. It means that the expense may be deducted from gross income lowering the
taxable income of the company. Payroll can differ from one pay period to another
because of overtime, sick pay, and other variables.

3. RELEVANCE OF THE TOPIC

Like all the Industries, Continental also has a Payroll Management which is done by the
HR who takes care of the operations on the whole for this particular plant. They use
 different Software to Track the Attendance of the Employees in the HRMS. Employees
also can Claim their Work from Home and Other leaves like Earned leave, Compensatory
Off, Sick Leave, etc in the HRMS. The management of Continental maintains
confidentiality in payroll functions. Unlike, Some Companies, the management of
Continental does not outsource payroll services and hires, permanent employees, for that
matter, and work as a central function all over India.

4. POLICY RELATED TO THE TOPIC

Every country has its own set of state and central labour laws that companies need to
comply with. Non-compliance with these regulations can cause a company a lot of legal
trouble such as penalties and fines. That is why every company invests a huge amount of
money, effort, and time to meet compliance requirements from professional tax to the
minimum wage act. So, Continental Automotive Components India Private Limited as a
Manufacturing Unit adheres to the following payroll policies while performing its
functions and they are,

 Professional Tax (PT) Act, 2023

For the salaried employee or wage earner, whose earning is between Rs. 15,000 to
24,999, then there will be no deduction and they will earn an extra Rs. 2,400 Per
annum from the date of 1st April 2023. Earlier, the threshold of professional tax in
Karnataka was 15,000.
If the Salary of the employee is 25000 or more, then the deductible tax amount is 200
per month.
❖ Employees’ Provident Fund,1952.
Employees irrespective of their Basic Salary are allowed to registered under PF.
Employer Contribution is 12% + 1% in which 8.33% is allocated for Pension and 3.67 %
is allocated for PF.
Employees who have basic more than 15000, then all their 12% will be allocated only to
PF and it will be applicable to employee’s those who joined the company after 2015.
Employees who are working in an organisation since 2014 or before that will have
employee contribution 8.33% is allocated for Pension and 3.67 % is allocated for PF.
1% is allocated for EDLI (Employee’s Deposit Linked Insurance Scheme) – 0.5 % and
Administration Cost is allocated as 0.5 %

12 % is contributed by the employees which will be deducted in their monthly Base

salary.
❖ The Payment of the Gratuity Act, 1972.
According to the Act, Employees are entitled to receive 15 days of Salary as
gratuity in every year of his/her service, which is given to the employee only if they have
completed 4 years and 8 months or above with a particular company, if not they are not
eligible to draw their gratuity.

It is Calculate with a Formula –

(Last Drawn Monthly Basic + DA) * 15*Years of Service
26
❖ Payment Wages Act, 1936.
The Payment should be on or before 7 th of the respective month to all its employees. It
should be paid in Currency note or coin or after receiving an authorisation letter from the
employee it can be paid through cheque or credited on their salary account.
❖ Minimum Wages Act, 1948
Companies should abide by the Minimum wages set under the Indian Labour Law
that must be paid for skilled and unskilled labours. Minimum Wages are fixed by the
State and Central Government by considering basic requirements like food, Shelter,
clothing, education, medical assistance and entertainment.
❖ The Payment of Bonus Act, 1965.
This Act is applied to all the establishments and it provides for a minimum bonus of
8.33 percent of wages of employees. Every employee who has worked for 30 days or
more in a year and drawing salary of Rs. 10,000 or less are entitled for bonus.
❖ The Employees’ State Insurance Act,1948.
Employees who have month gross salary less than 21,000 are registered under
Employee State Insurance Act, 1948, where 0.75 % will be contributed by the employees
and 3.25% by the employer as for FY 2023-24.
5. SPECIFIC PRACTICES FOUND IN THE INDUSTRY

Since Continental has many branches in India, all the data with the calculation of
Monthly Take home Salary (Gross) would be sent to the Central Finance Department which
is located in Continental Elektrobit India Pvt.Ltd, Veerasandra, Bangalore. All the Payments
and Funds are released by the Central Finance Department. There is a default Excel Format to
Calculate the Salary.

The Salary Annexure Has Different Variables,

1. Total Annual Base Salary (ABS) [A]

 Basic Salary
 HRA (House Rent Allowance)
 Special Allowance

2. Retrials [B]
 Provident Fund (Contribution by the Employer)
 Gratuity

3. Total Annual Fixed Pay [A+B]

 Total Annual Base Salary
 Retrials

4. Other Elements
 Short-term Incentives at 100 % Achievement (C)
Which is fixed according to the company norms that differ for each grade.

5. Annual Cost to Company / CTC = [A+B+C]

 Total Annual Base Salary [A]
 Retrials [B]
  Short Term Incentives [C]

Calculations

Basic Salary = 40% of CTC (Cost to Company)

House Rent Allowance = 50% of Basic
Provident Fund = 12% of Basic
Gratuity = 4.81 % of Basic

 Total of Retrials = Provident fund + Gratuity

 CTC – Total of Retrials – Incentive amount = Total Annual Base Salary
(ABS)
 Special Allowance = Total Annual Base Salary – (Basic + HRA)

Monthly Gross Salary Will Be Calculated with A Formula

Component Value
(Total number of days per month * Number of working days (26))

Using the above-mentioned formula

Monthly Gross Salary is calculated for each employee by substituting the number of
Mandays by Each employee instead of the Number of Working days

Deductions

From Monthly Gross Salary, Few Components are Deducted

1. Professional Tax = 200 (if the Salary is <= 25000)
2. PF = 12 % of Basic
3. Gratuity = 4.81 % of basic
 4. Canteen
5. Transport

All these components together comprise Total Deduction

Take Home Salary = Monthly Gross – Total Deduction

For Example

If an employee’s
1. Basic Salary is 25000 (annual Base salary divided by the total number of days
in a month multiplied by the number of working days (26))
2. HRA is 15000 (annual HRA divided by the total number of days in a month
multiplied by the number of working days (26))
3. Special Allowance is 10000 (annual special allowance divided by the total
number of days in a month multiplied by the number of working days (26))

Then we should Calculate the same for the total number of Man-days

From the total number of working If an employee only attends 23 days

Then the
Basic = 25000/31(may)* 23 = 18548
HRA= 15000/31(may)* 23 = 11129
Special Allowance = 10000/31(may)* 23 = 7419
Total Monthly Base Salary = 37096

Deductions
PF = 12% of 18548 = 2225
ESIC = 0.75% if monthly base salary is less than 21,000
Canteen = 1000
Transport = 1000
Professional Tax = 0 because Basic Salary is less than 25000
Total Deduction = 5117.15
Take Home = 37096 – 5117.15 = 31978
Take Home Salary is 31978 for this particular Month.

6. Sources used from the industry

The trainee had a Personal Learning Session with the HR Executive Ms. Shilpa P and
Referred Policy Document related to Gratuity.

7. Conclusion

From this case study, the trainee understood the importance and predominant role that
payroll as an HR function holds. Even a small process in the payroll function should be
handled crucially to avoid errors. In order to avoid errors, the major payroll work like
scrutinizing, and approving the monthly salary chart of the employee takes place in each
unit in collaboration with the Payroll and Compensation Team of the Central Corporate
Office which is located in Veerasandra, Bangalore. Thus, delegation plays a major role in
the management of Continental when it comes to payroll functions.

8. Library and web references.

 Karnataka Professional Tax 2023-24 | Latest Update. (2023, March 30). Saral
Paypack. https://saralpaypack.com/blogs/karnataka-professional-tax-2023-24/
#:~:text=For%20the%20salaried%20employee%20or
 Mayashree Acharya, Senior Content Writer at Clear Tax. (n.d.). Clear tax. Retrieved
June 22, 2023, from https://cleartax.in/authors/mayashree-acharya
 Desk, S. (2022, June 9). All You Need to Know About Gratuity Regulations in 2023.
Vakil search | Blog.
https://vakilsearch.com/blog/about-gratuity-regulations-in-2023/#:~:text=an
%20employee%20is%20entitled%20to
 Minimum Wages Act 1948. (2022, October 15). Wikipedia.
https://en.m.wikipedia.org/wiki/Minimum_Wages_Act_1948