Alok Patnia founded Taxmantra.com, an expert in tax advisory & compliance. He is a Chartered Accountant having prior exposure with Ernst & Young & KPMG.
HR Management & Payroll Processing
When it comes to payroll and human resource management, there are various ways and methodologies that startups and small businesses use to nurture and develop their workforce. However, there are a few things that have become quite important for organizations, especially with the short supply of good talent.
Though most employees in a startup usually have more than a single role, the top performers can be given decision-making tasks. You can also sit and discuss their career path in the company. In addition, you can have clearly defined career paths for all your employees.
What you understand by a Payroll?
A payroll is a system in which all records and data for salaries, tax deductions, bonuses etc. are usually stored or maintained for each employee of a company or you can say that the payroll refers to all records of salaries, wages, bonuses and deductions for an employee. Actually, these salaries and wages are a part of employment in which a company pays a certain amount of money to the employees for their services they provide to the company for the certain period of time.
Related Article: Why Should You Register Your Startup As A Company?
Why payroll is so important for startups and small businesses
For small business owners, keeping enough cash to pay all employees is often one of their highest priorities. Even if the business itself hasn’t become profitable, employees must still be compensated for their services. This is why many smaller companies prefer to keep their payroll obligations as low as possible until they’ve reached a certain level of profitability. It’s not unusual for small business owners to forgo their own salaries in order pay their employees.
Roles and Responsibility for Managing Payroll:
One of the most important functions of the payroll department of an entity is to ensure the timely and accurate payments to the employees. Accurate payment refers to the finalized payments that are paid to the employees depending on their designation and salaries after calculating all deductions, taxes, incentives etc. Deductions and bonuses are subject to leaves taken, TDS as well as employment agreement between employee and employer.
Having a payroll system is important for an organization for many reasons:
- Compliance under Statutory laws: In a country where there are well-defined labor and social security laws to protect the rights of both the skilled/unskilled manpower, the onus is on the organization to comply the requirements under each of such regulations. The payroll software has in-built technology which will make necessary deductions, give essential alarms and do calculations as per the statutory requirement. Further, the software can be customized as per the structure, industry and requirement of the given organization.
- Compliance under Income Tax Act: There are ‘n’ numbers of provisions under the Income Tax Act which are to be on tips for ascertaining the amount of deduction of income tax for each employee, various exemptions are to be kept in mind and calculations has to be done for the income tax payable during the year or paid for the month. With the payroll software in place, all these critical issues will be sorted by your fingertips. Once the details and data will be inserted in the system, the software will make necessary deductions from the particular employee’s salary packet until their circumstances change.
- Leave & Attendance Management: With the increase in number of employees following the growing business needs, ascertaining and calculating the work hours for each employee is a tedious job. Hours are required to be spent inputting data for such work hours. Now if the payroll software is installed by your organization, it will be linked to the time sheet system of the employees and thus it will do both the attendance and leave management as per the Company norms.
- Generating Salary Reports: The given software will generate monthly pay slips and also year to date salary statements to the employees which will save them from running to the payroll department, each time to determine their payment/benefits status.
- Complete database of employees at one place and at one tab: The detailed record of each employee, comprising of personal and professional information and also their appraisal information can be maintained at a single place. On need basis it can be derived on just few clicks of the mouse.
- Cost Saving: In a mid or large sized organization, if the whole payroll function is performed manually, it will involve hiring of number of people for maintaining various records and doing necessary calculations etc. However, with the given software in place all this range of activities can be performed by a very limited payroll staff, resulting in cost saving for the organization.
- Security of information: Under the payroll software, the authorization to access the software is given to limited and dedicated staff only, which will result in maintaining the security of the given information.
- It is beneficial for both, the company as well as for employees as a payroll has all information related to salaries and deductions so there will be no confusions.
- Payroll directly affects the net profits or turnover of the most companies and is subject to rules and regulations as per the Law.
- Payroll has importance for employees also as it maintains the records of their responses to payroll queries, mistakes as well as irregularities.
- Payroll helps in maintaining punctuality and a proper system of payments having transparency regarding salary deductions etc. that creates a healthy environment between employer and employees and maintain employee morale.
- Happy employees, growing business: Last but not the least, employees are the human capital of an organization, if they are satisfied on part of timely receiving their salaries, benefits, reimbursements, effective appraisals, due completion of trainings etc., they can concentrate more on their assigned responsibilities, which will ultimately and collectively result in the growth and rising of your organization.