Payroll Management: A Guide

It is easier than you think to make payroll mistakes. Think about the employees whose only source of income is their monthly salary. What if the salary is not paid accurately or the salary is not released on time? In such cases, morale can be affected, subsequently affecting business productivity.

While ensuring accurate and timely payment of salary is important, adhering to the various laws and regulations such as labor law, PF, PT and other statutory compliance is also critical. Non-adherence with these laws can attract serious legal and financial consequences.

You need to know what payroll is and how to run payroll effectively if you want to make sure your employees are happy and you comply with the law. Here are the basics of payroll.

What is Payroll?

Your company pays your employees through payroll. Employers also refer to payroll as the total amount they pay their employees. Payroll entails:

1. Developing organizational pay policies, including flexible benefits and leave encashment policies.
2. Defining basic pay, variable pay, HRA, and LTA on a payslip
3. Compiling other payroll inputs (for example, a food vendor may provide information about the amount to be recouped from employees for meals consumed)
4. Calculating gross salary, statutory and non-statutory deductions, and determining net salary
5. Releasing employee salary
6. Depositing dues like TDS, PF, etc. with the appropriate authorities and filing returns

We can say that payroll involves arriving at what an employee is entitled to, also called 'net pay', after adjusting necessary taxes and other deductions.

Obtaining net pay involves the following equation.

Net pay = Gross income- gross deduction

Where,

Gross income or salary = All types of regular income + allowances + any one-time payment or benefit

Gross deduction = All types of regular deductions + statutory deductions + any one-time deductions

What are the Stages to Processing Payroll?

A payroll officer must plan carefully. It is always necessary to keep an eye on changes to withholdings, contributions to social security funds, etc. Pre-payroll, actual payroll, and post-payroll activities can be divided into three stages.

Pre-Payroll Activities

Defining Payroll Policy

The net amount to be paid is affected by multiple factors. The company's various policies such as pay policy, leave and benefits policy, attendance policy, etc. come into play at that time. As a first step, such policies need to be well defined and get approved by the management to ensure standard payroll processing.

Gathering Inputs

The payroll process involves interfacing with multiple departments and personnel. Information like mid-year salary revisions, attendance data, etc. can be included.

This information is collected from a single source or from fewer teams in smaller organizations. Gathering data may seem overwhelming in a large organization. When you are using a smart payroll software that includes features like leave and attendance management, employee self-service portal, etc., input collection does not pose any problem.

Input Validation

Inputs must be checked for compliance with company policies, authorization/approval matrixes, and correct formats. Additionally, it is important to ensure that salary payments for active employees do not include records of inactive employees. Here are six tips to verify payrolls accurately.

Actual Payroll Process

Payroll Calculation

Here, the validated input data is fed into the payroll system for actual payroll processing. After taxes and other deductions are subtracted from the gross salary, the net pay is calculated. To avoid errors, it is always a good idea to reconcile the values and check for accuracy after the payroll process is completed.

Post-Payroll Process

Statutory Compliance

During the payroll process, EPF, TDS, and ESI are all deducted. The appropriate amounts are then remitted. The frequency varies depending on the type of dues. Most dues are paid with checks. Once dues are paid, reports and returns are filed. A PF return, for example, is filed with an ECR.

Payroll Accounting

Every organization keeps financial records. A large part of the operating costs is the salary paid. Payroll management includes ensuring that all salary and reimbursement data is entered into an accounting/ERP system correctly.

Payout

alternatives include cash, checks, and wire transfers. Some companies provide their employees with salary bank accounts. Once the bank account of the company has sufficient funds to make the salary payment, payroll should be completed. A salary bank advice statement must then be sent to the branch. Information on the statement includes employee identification numbers, bank account numbers, wage amounts, etc. A payroll software that includes an employee self-service portal makes it easy to publish payslips that employees can access from their accounts.

Reporting

After payroll is complete, finance and high management may request reports that include department-by-department employee costs, location-by-location employee costs, etc. Payroll officers are responsible for digging into the data and extracting the necessary information.

Statutory Compliance in Indian Payroll

Payroll is statutory compliant when you follow the applicable employment norms set forth by the federal and state governments. Business owners in India are required to pay a minimum wage, to pay overtime wages, to deduct TDS, and to contribute to social security schemes like PF and ESI.

When calculating salary, these deductions and contributions must be taken into account. One example is income tax. A tax declaration must be filed by the employee at the beginning of the year. As a result, the employee's tax liability is calculated, and TDS is deducted.

Now let's see how to calculate tax for individuals. Indian tax brackets have four tiers with increasing tax rates.

By calculating your monthly tax liability and deducting TDS based on the above tax slabs, you can determine your monthly tax liability. Tax deductions are deposited with the government monthly, and a quarterly report of all deductions is also provided. Form 16 can be given to employees if you have completed TDS returns for the fourth quarter. When employees file their individual income tax returns, they use Form 16 as a proof of their deductions.

For those who do not follow statutory law, penalties and fines can be severe. Because of this, you need to keep up to date on all changes to tax and payroll laws.

Payroll Management Challenges

Two main reasons make payroll management challenging.

The Requirement to stay Statutory Compliant

The non-observance of statutory laws can threaten a business's existence as well as bring fines and penalties. In today's world, there are several payroll management programs that automatically process payroll in accordance with statutory requirements.

Payroll input from multiple sources is crucial.

You must gather data from various sources to process payroll, such as attendance records, conveyance records, salary revision information, etc., resulting in a complex process. Payroll officers have used excel sheets for many years, but excel has several shortcomings, including the reliance on formulas for salary calculation, the difficulty in adding and removing employees, and other difficulties, such as manual data entry and difficulty obtaining information.

Using different methods for payroll in your business

Payroll can be done in a variety of ways

• Excel based payroll management
• Payroll outsourcing
• Using payroll software

Excel based Payroll Management

In the early stages of operations and with a small number of employees, many businesses rely on excel-based payroll management.

A standard payroll calculation template is used to calculate payroll on Excel sheets. The payroll officer calculates the payroll using the template formulas. Although this method does not incur any costs, there are some inherent limitations, such as

• Due to the manual entry of data, there is a high likelihood of clerical or mathematical errors
• occurring when adding and removing employees from the payroll list
• list, due to the possibility of duplicate data and omissions
• Need to monitor tax updates and other statutory changes like PF, PT etcPayroll Outsourcing

A payroll outsourcing company will handle your payroll functions. This is a popular option for companies without a dedicated payroll department. They provide their payroll provider with information about their employees' salaries, attendance, leaves, reimbursements, etc., each month. These information are then used to calculate their payroll and comply with statutory requirements. Many businesses hesitate to outsource payroll because it is a crucial function over which they want complete control and transparency.

Payroll Software

Payroll inputs need to come from every source in a timely and seamless fashion in order to run successfully. In order to reduce friction in getting input, software is used. Many payroll management systems are available on the market that not only automate payroll calculations, but also handle leave management, human resources management, and employee self-service. According to the size and use cases of your business, you can select an appropriate payroll software.

Best Payroll Software for your Organization

Automation can significantly reduce payroll processing time. In addition to making payroll processing faster and more accurate, it keeps employees, management, and regulatory bodies happy.

Payroll software should have certain features.

Ease of Operation

Not all payroll software is user-friendly. A user-friendly workflow is what you should look for in a system. Software that is intuitive makes training and guiding users easier. To ensure you have access to the information whenever you need it, the software provider should provide well-updated documentation.

Scalability

has become increasingly important as businesses have grown. Limitations can be associated with the data it processes or the availability of features such as leave and attendance management, reimbursement models, etc. With little difficulty, advanced features should be available at a reasonable price.

Employee Self-Service Module

Employees are one of the main payroll input sources. The information he provides includes tax saving investment declarations, the type of flexible benefit chosen, etc. Typically, payroll officers communicate with employees on an event-by-event basis. Understanding the importance of ESS module can be understood by considering two scenarios of income tax declaration:

In conclusion, we saw how an employee self-service portal reduces manual intervention and automates the collection of payroll data to calculate taxes accurately.

Integration with Time, Attendance and Leave Management System

Time Management

In most cases, this module is used to track time spent on projects or specific tasks. Companies managing critical projects, such as audit firms, specialist doctors, etc., need a time management module that can track time and bill clients.

Attendance

Many small organizations still rely on manual attendance systems, but medium and large organizations have adopted automated methods such as biometrics, auto-tracking via system login, access cards, iris recognition, etc. There is a system that stores the data and links it to a payroll program that calculates attendance days, overtime, etc. For seamless payroll processing, ensure that the software supports attendance management and can be integrated with access control systems.

Leave Management

Employees in every organization are entitled to various types of leave, such as privilege or annual leave, casual leave, sick leave, and holiday leave.

The HR department can directly credit these vacation days to the accounts of all eligible employees if the software has a leave management feature. Employees can request leave online as needed. Additionally, the system should be able to define a workflow so that the manager can approve or reject the employee's request. Payroll software with leave management features can help you achieve accurate payroll.

Integration with the Accounting System

Accounting/ERP systems need to maintain every financial transaction, including payroll information, such as departmental employee costs, individual payroll components, such as reimbursements, tax due and paid, etc. There are some payroll software solutions that integrate with accounting software using APIs (a way to push data directly from one software to another).

Without such integration, the payroll officer must provide all transaction details to the accounts department. Accounting/ERP software such as Tally ERP, SAP, Quickbooks, etc., are used to manually post it in the form of journal entries. Integrating finance and payroll can help finance and payroll teams work together and eliminate data entry errors.

Cloud-Based Software over On-Premise Solutions

This market is rapidly evolving. Businesses are switching to cloud-based solutions due to their advantages over on-premise software solutions.

Ability to Access the Data at Any Time and From Anywhere

Using a cloud-based software, you can access payroll data and employee information without being in the office. As with Gmail, you can log in from anywhere at any time.

The Advantage over the Inherent Limitations of On-Premise Systems

On-premise systems have their limitations, such as the possibility of data loss due to fires, floods, etc. Also, the setup cost of these systems is high, and they have an initial operation limit. Maintenance costs can be quite high as well. On the other hand, cloud solutions are built upon this technology, which means you can always upgrade to a higher level of service at any time. Due to the fact that cloud solutions have data centers located at multiple locations, your data is safe even in the event of fire, flood, etc.

-explaining-electronic-payroll-from-a-to-z

This article is for those of you who find themselves concerned about the new resolution for electronic payroll implementation and are considering how beneficial it can be. In this guide, we will explain what electronic payroll is, what the benefits are, and what the requirements are. Read on to learn more.

What is Electronic Payroll?

Payment confirmation is an electronic document that supports payments made to your employees so that they can be accepted as tax discounts when declaring income or VAT.

Additionally, it is a great way to keep track of your payroll, and if you already invoice electronically, you will have almost everything ready because the payroll enablement process is the same as invoicing. 

How does payroll relate to electronic invoicing?

Electronic payroll is conceived from the moment an electronic invoice is generated. Article 116-1 of the Tax Statute expresses that this billing system also applies to other operational activities, including payroll payments.

In the same manner, entrepreneurs who are not required to issue invoices electronically, but are employers under employment relationships and contracts, must issue payroll electronically to their collaborators; and on the other hand, those who must issue invoices electronically and under contract comply with labor relations must also do so.

In the link, you can find more information about Colombian employment contracts.

Are there any requirements for implementing electronic payroll?

Even if you do not believe it, you will save a lot of time and energy by using it. Below, we have presented the requirements demanded by the DIAN, which you must take into account and comply with, for the electronic payroll support document; among them are:

Company name

Company identification

Software Information

An electronic payroll software provider, such as Siigo Cloud, is involved in the transmission process

during the liquidated period

Currency of the country

Company Address

Date of issue of the document

CUNE (Unique Electronic Payroll Code)

The following employee and/or worker data is stored: identification, address, name, internal code

code

code, payment method

method

method, and date of payment

for employee income and deductions

is provided in this link.

How does payroll relate to electronic invoices?

Accordingly, the electronic payroll is considered from the moment that the electronic invoice was created; in article 116-1 of the Tax Statute, it states that this billing system applies to other operational activities, such as payroll payment, and that this would also be handled electronically.

Therefore, all entrepreneurs who are not legally required to invoice electronically but who generate employment under employment relationship and contract must also generate payroll electronically to their collaborators; on the other hand, those who by law must invoice electronically and who in their businesses and 100% companies comply with labor relations governed by contract must also generate payroll electronically.

What is the electronic payroll support document?

Payroll detachable is the detachable payroll you issue to your employees when you support values for work remuneration, overtime, bonuses, deductions, vacation settlements, social security discounts, and social benefits.

How was the electronic payroll decreed?

Colombia has signed two resolutions to implement electronic payroll, which require all companies with one or more employees to issue a supporting document in support of the payroll payment process.

In this way you will know the resolutions that support the Payroll Resolution of the DIAN:

This regulation amends resolution 042 of 2020 to include not only some adjustments to electronic invoicing, but also the electronic payroll payment document for those who are not obliged to invoice electronically, but generate employment, and those who are, but are employers and maintain an employer-employee relationship; The regulation also adds those buyers who must issue an invoice to their suppliers from June 30, 2021.

Resolution 000013 of February 11, 2021 on electronic payroll: This resolution considers electronic payroll as another important product within invoicing; all companies must issue it to support their employees' paychecks and to discount tax items such as income and VAT.

Resolution 000063 of July 30, 2021: this resolution modified the deadlines for implementing payroll that were established in the previous resolution. All companies required to enable this IT service must begin the process as of August 18, 2021, according to this update.

Calendar to implement electronic payroll in your company

Legally, all companies must issue electronic payroll, unless you are an employer and do not declare income, so it is crucial that you comply with the deadlines in order to avoid penalties and setbacks. According to the number of employees you have, the DIAN has arranged the following dates:

Permanent implementation schedule

Employers with more than 250 employees have until the permanent implementation calendar to enable them to generate the electronic payroll support document and its corresponding adjustment notes.

For this type of entrepreneur, the date of authorization is 2 months after the date the payments are made. Moreover, all taxpayers who have an employment relationship, employer - employee, will have a deadline for transmitting the electronic payroll payment support document and adjustment notes, if required, within the first 10 days of the following month.

A payroll data file was created for the employee.

You only have to send the DIAN an electronic payroll payment support document if you pay the payroll biweekly.

Who is required to issue electronic payroll?

In accordance with law, the following persons are required to issue electronic payroll:

Employers who remunerate (employers - employees) according to the Substantive Labor Code through an employment contract.

Individuals who support income tax or VAT but are not required to invoice electronically, but who have employees in their company, in order to qualify for tax discounts.

Pensioners' employers.

"In other words, all those people who are entrepreneurs and have employees, even if it is only 1, under an employment contract must generate and transmit electronic payroll."

Note

With this webinar, which we prepared for you, you will gain a better understanding of electronic payroll and clear all your doubts."

What are the steps for implementing electronic payroll? See this step-by-step guide."

It may seem like an odyssey to implement electronic payroll in your organization, but the good news is that it is a very simple process, requiring only three steps. Here's how:

 Step First: Enabling

To create an electronic payroll, the first thing you have to do is enable yourself to do so in DIAN

• Join the DIAN
  
• Select the option of 'Electronic Payroll Document'
• Make a decision about how you will comply with the obligation to generate electronic payrolls.
• Provides information regarding whether it owns the software used for payroll generation or if it is provided by a third party
• Complete all fields (Name, surname, NIT, company name, software codes)
• Run the tests
• Confirm if your test result is successful
• After you have been enabled, you can go into production.

Step Two: Generating and transmitting

in compliance with DIAN 013.

Each employee must submit the supporting documents.

Step Three: Validation

A DIAN generates an electronic document for validation of your electronic payroll support documents, provided you have the necessary rules.

How much does it cost to implement electronic payroll in your business?

You must pay a certain amount if you want to use electronic payroll software. The implementation cost is, therefore, the price charged by the technology provider so you can generate and issue the support document. It is typically a one-time cost.

Based on your company's size, we present the range of implementation costs of the main electronic payroll providers in Colombia.

In light of this data, it is estimated that the cost of payroll per employee ranges between $5,500 and $7,000 pesos. In addition, some technology companies offer microenterprises (such as those in group 4) plans that are free or very affordable.

Now that you know a little more about payroll and the laws that regulate it, we invite you to revisit Resolution 042 and, based on the size of your company, determine if you should issue electronic payroll in August. Make sure you follow the regulations for this 2021 and take advantage of the support provided by Siigo electronically.

What are the benefits of electronic payroll?

The following are the 3 key advantages you will enjoy when you issue your payroll electronically:

Updated payroll support documents

As soon as the payment support document is issued, you will be able to make adjustments in case of errors or system instability; something similar to what happens with the electronic invoice via the credit note and debit note.

When is there a need to make these adjustments?

• Did you discount something that wasn't relevant?
• In the accounting of the concepts to be paid or the concepts to be paid, there were arithmetic errors.
• None of the concepts were included.
• Technical problems were encountered.

In order to prepare these modifications, the document must already have been validated by the DIAN. On the other hand, the document that makes these adjustments is called: Notes of adjustments to the electronic payroll payment support document, and it replaces the previous one, that is, the one issued first.

Can I permanently delete an electronic payroll support document?

Remember that the last document you issue will be considered final by the DIAN, so if you made a correction to the first document, only the new document where you made the correction will be taken into account.

How to implement electronic payroll in your company?

To implement electronic payroll in your company, you need a technology provider that helps you to control the payroll of your employees, streamlining your processes and increasing your company's productivity.

Which electronic payroll software to choose?

Make sure that your electronic payroll provider is intuitive and simple so you can quickly issue payroll payments to your employees and you can access training on how to handle them.

Similarly, it is essential that it is a software that is in the cloud so that the information of your employees is safe and can be accessed easily and in real time. Furthermore, the technical support is also important, as failures can occur in the system.

In Siigo, you can set up the settlements and generate reports, customize the payroll according to the data of each collaborator and automatic updates, we also cover changes in the law as we update each parameterization with the latest changes or novelties.

The 5 functions that make Siigo different in your payroll system

1. Automatic settlement:

You can automatically liquidate an item once you have entered the data of your employees and the concepts you pay in your payroll.

2. STACK Files

Utilize Siigo's electronic payroll software to report your contributions quickly, safely, and easily.

3. Send vouchers to your employees:

You are able to send the electronic payrolls to all your employees by email in PDF format

4. Accounting:

Siigo's electronic payroll software eliminates operational tasks related to payroll accounting

5. Holiday book:

By keeping a vacation book, you will be able to keep track of your employees' vacations and how much you paid for them.

This information should be of value to you and help you understand more clearly the new payroll system that will be implemented electronically.