Payroll processing

Jon Boyes
Employability and Graduate Development
CHMP
www.hrspot.co.in
Kolkata | Bhubaneswar | Hyderabad
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Payroll Processing
Certified Human Resource Management Professional
Payroll Processing 1

Payroll Processing
Payroll Processing
Introduction to
Compensation and Benefits

Payroll Processing
 Company provides a return to its employees for the services rendered by them
towards the fulfilment of organization goal
 Return in the form of monitory or non monitory or is a mixture of both

Payroll Processing
Monetary returns are
known as
COMPENSATIONS
Non Monetary returns are
known as
BENEFITS

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Payroll Processing
Objectives of

Payroll Processing
C&B Program is a tool used by employers
to effectively attract, retain and motivate employees

Payroll Processing
Payroll Processing
Different Components of

Payroll Processing
 Salary/Remuneration
 Overtime
 Incentive
 Bonus
 Commission
 Leave Encashment
Compensation

Payroll Processing
 Pick up and Drop
 Work from Home
 Free Lunch and Dinner
 Corporate Mediclaim
 Preferable Week off
 Holiday Package
 Free Phone
 Life Insurance
 Club Membership
 Free Training
Benefits

Payroll Processing
Payroll Processing
Introduction
to CTC

Payroll Processing
 CTC is a term for the total salary package of an employee.
 It indicates the total amount of expenses an employer spends on an employee
during one year.

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Payroll Processing
Features and Components
of CTC

Payroll Processing
Components Features
Basic Preferably (30 – 60) % of CTC in most cases; fully taxable
House Rent Allowance 40% of Basic in Non Metro Location; 50% of Basic in Metro
Location; partially taxable
Leave Travel Allowance LTA is exempted from tax twice in a 4 years block
Conveyance Allowance Earlier [INR. 19,200 per Annum is exempted from Tax]; Now [CA
and MA cumulatively 40,000 per Annum is exempted from Tax]
Medical Allowance Earlier [INR. 15,000 per Annum is exempted from Tax]; Now [CA
and MA cumulatively 40,000 per Annum is exempted from Tax]
Other Allowance The Balance (CTC – Everything); fully taxable
Provident Fund Earlier [13.15% (employer’s contribution) of Basic]; Now [13%
(employer’s contribution) of Basic]; fully tax exempted
Gratuity 4.81% of Basic; fully tax exempted
Employee State Insurance 4.75% (employer’s contribution) of Gross Pay, only if Gross Pay is
less than 2,52,000 per Annum; fully tax exempted

Payroll Processing
Payroll Processing
Gross Pay and Gross Salary

Payroll Processing
 Cost To Company = The entire package
 Gross Pay = CTC – (Employer’s PF + Gratuity + all other deductions, if
any, except ESI)
 Gross Pay is required for ESI calculation

Payroll Processing
 Gross Salary = CTC – All Deductions (Employer’s PF + Employer’s ESI +
Gratuity + all other deductions, if any)
 Net Salary = CTC – All Deductions (Employer’s PF + Employer’s ESI +
Gratuity + Employee’s PF + Employee’s ESI + all other deductions, if any)

Payroll Processing
Cost To Company
Employee Receivable
Employee
NOT
Receivable
Employer Contribution
to Govt.
to Self
Basic
HRA
Leave Travel Allowance
Conveyance Allowance
Medical Allowance
Other Allowance
Provident Fund
(Employer)
Employee State Insurance
(Employer)
Gratuity

Payroll Processing
Gross Pay = CTC – All Employee Not Receivable (Except ESI)
Employee Receivable
Employee
NOT
Receivable
to Govt.
to Self
Basic
HRA
Medical Allowance
Other Allowance
Provident Fund
(Employer)
(Employer)
Gratuity

Payroll Processing
Gross Pay = CTC – All Employee Not Receivable (Except ESI)
Employee Receivable
Basic
HRA
Medical Allowance
Other Allowance
(Employer)
Gross Pay is important for
ESI eligibility check only
If GP is more than Rs. 2,52,000
not eligible for ESI

Payroll Processing
Gross Salary = CTC – All Employee Not Receivable
Employee Receivable
Employee
NOT
Receivable
to Govt.
to Self
Basic
HRA
Medical Allowance
Other Allowance
Provident Fund
(Employer)
(Employer)
Gratuity

Payroll Processing
Gross Salary = CTC – All Employee Not Receivable
Employee Receivable
Basic
HRA
Medical Allowance
Other Allowance

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Payroll Processing
CTC Designing

Payroll Processing
Payroll Processing
CTC Designing
Example 1

1,80,000*40/100
= 72,000
Basic
40% of CTC
Payroll Processing
CTC Structure: INR 1,80,000 per annum in Kolkata

72,000*50/100
= 36,000
HRA
50% of Basic
Payroll Processing

72,000*13/100
= 9,360
Provident Fund
(Employer)
13% of Basic
Payroll Processing

72,000*4.81/100
= 3,463
Gratuity
4.81% of Basic
Payroll Processing

1,80,000 – 9360 – 3463
= 1,67,177
Gross Pay
(CTC – PF – Gratuity)
Payroll Processing

Employees State Insurance
(Employer)
4.75% of Gross Pay
Payroll Processing
1,67,069*4.75/100
= 7,941

16,000Leave Travel Allowance
Payroll Processing

19,200Conveyance Allowance
Payroll Processing

15,000Medical Allowance
Payroll Processing

1,036Other Allowance
Payroll Processing

1,80,000 – 9360 – 3463 – 7941
= 1,59,236
Gross Salary
(CTC – PF – Gratuity – ESI)
Payroll Processing

Payroll Processing
CTC Structure: INR. 1,80,000 per annum in Kolkata
.
Components Amount
Basic (40% of CTC) INR. 72,000
HRA (50% of Basic in Metro Location) INR. 36,000
LTA INR. 16,000
Conveyance INR. 19,200
Medical INR. 15,000
OA INR. 1,036
PF (employer) (13% of Basic) INR. 9,360
Gratuity (4.81% of Basic) INR. 3,463
ESI (employer) (4.75% of Gross Pay) INR. 7,941
Gross Pay = CTC – PF - Gratuity

Payroll Processing
CTC Structure: INR. 1,80,000 per annum in Kolkata
Components Amount
Basic INR. 72,000
House Rent Allowance INR. 36,000
Leave Travel Allowance INR. 16,000
Conveyance Allowance INR. 19,200
Medical Allowance INR. 15,000
Other Allowance INR. 1,036
Provident Fund INR. 9,360
Gratuity INR. 3,463
Employees State Insurance INR. 7,941
Total INR. 1,80,000
CTC= 1,80,000
Gross Pay (CTC – PF – Gratuity)=
1,80,000 – 9360 – 3463= 1,67,177
Gross Salary (CTC – PF – Gratuity –
ESI)= 1,80,000 – 9360 – 3463 –
7941= 1,59,236

Payroll Processing
Payroll Processing
CTC Designing
Example 2

6,00,000*50/100
= 3,00,000
Basic
50% of CTC
Payroll Processing
CTC Structure: INR 6,00,000 per annum in Bhubaneswar

3,00,000*40/100
= 1,20,000
HRA
40% of Basic
Payroll Processing

1,80,000 (maximum ceiling
limit)*13/100
= 23,400
Provident Fund
(Employer)
13% of Basic
Payroll Processing
CTC Structure – INR 6,00,000 per annum in Bhubaneswar

3,00,000*4.81/100
= 14,430
Gratuity
4.81% of Basic
Payroll Processing

6,00,000 – 23,400 – 14,430
= 5,62,170
Gross Pay
(CTC – PF – Gratuity)
Payroll Processing

Employees State Insurance
4.75% of Gross Pay
Payroll Processing
Gross Pay more than 2,52,000
per annum, so ESI is 0

1,00,000Leave Travel Allowance
Payroll Processing

20,000Conveyance Allowance
Payroll Processing

20,000Medical Allowance
Payroll Processing

Other Allowance
Payroll Processing
2,170

6,00,000 – 23,400 – 14,430 – 0
= 5,62,170
Gross Salary
(CTC – PF – Gratuity – ESI)
Payroll Processing

Payroll Processing
CTC Structure: INR. 6,00,000 per annum in Bhubaneswar
Components Amount
Basic (50% of CTC) INR. 3,00,000
HRA (40% of Basic in Non Metro Location) INR. 1,20,000
LTA INR. 1,00,000
Conveyance INR. 20,000
Medical INR. 20,000
OA INR. 2,170
PF (employer) (13% of Basic: more than 1,80,000) INR. 23,400
Gratuity (4.81% of Basic) INR. 14,430
ESI (employer) (4.75% of Gross Pay: more than 2,52,000) INR. 0
Gross Pay = CTC – PF - Gratuity

Payroll Processing
CTC Structure: INR. 6,00,000 per annum in Bhubaneswar
Components Amount
Basic INR. 3,00,000
House Rent Allowance INR. 1,20,000
Leave Travel Allowance INR. 1,00,000
Conveyance Allowance INR. 20,000
Medical Allowance INR. 20,000
Other Allowance INR. 2,170
Provident Fund INR. 23,400
Gratuity INR. 14,430
Employees State Insurance INR. 0
Total INR. 6,00,000
CTC= 6,00,000
Gross Pay (CTC – PF – Gratuity)=
6,00,000 – 23670 – 14430=
5,62,170
Gross Salary (CTC – PF – Gratuity –
ESI)= 6,00,000 – 23400 – 14430 –
0= 5,62,170

Payroll Processing
Payroll Processing
Class Activity

Payroll Processing
CTC Structuring
All Students will be asked to make CTC structure for different Metro and Non
metro locations.
1.CTC 2,50,000; location Kolkata; Basic 35%
2.CTC 3,25,000; location Bhubaneswar; Basic 45%
3.CTC 4,75,000; location Hyderabad; Basic 55%
4.CTC 1,75,000; location Noida; Basic 40%
5.CTC 6,55,000; location Thiruvananthapuram; Basic 50%
Individual Activity: 120 min

Payroll Processing

Payroll Processing
Payroll Processing
Definition of
Attendance Management

Payroll Processing
 Attendance management is the act of managing attendance or presence in a
work setting to minimize loss due to employee downtime
 Processing monthly attendance for the employees and deciding number of days
worked to process salary

Payroll Processing
Payroll Processing
Types of
Attendance Management

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Manual
Attendance
System
Automated
Attendance
System

Payroll Processing
Payroll Processing
Definition of
Leave Management

Payroll Processing
Leave Management
encompasses the processes employees use to request time away from work and
supervisors use to grant or deny leave based on organization policies

Payroll Processing
Payroll Processing
Different Types
of Leaves

Casual Leave
Payroll Processing
Sick LeavePrivilege Leave

Payroll Processing
 Calculated on calendar year basis
 Pro rata basis i.e. In proportionality to some factor that can be exactly calculated
 All leave for the year can not be taken at the beginning

Payroll Processing
Unapproved Leaves
Leave Without Pay
Unsolicited absent
Leave beyond eligibility limit

Payroll Processing
Payroll Processing
Leave Carry Forwarding

Payroll Processing
 Any Earned leaves/Privilege leaves are the leaves which are earned in the previous
year and enjoyed in the preceding years
 Privilege leaves can be carry forwarded for the quantum upto the total of three years
and vary from state to state as per the shop and establishment act

Payroll Processing
Payroll Processing
Leave Encashment

Payroll Processing
 Employee gets cash payments for unavailing of allowed leaves in each year that he has
accumulated
 Monitory payment availed by the employee in return of the unavailed leave is known
as leave encashment
 Applicable on unavailed privilege leaves

Payroll Processing
Payroll Processing
Definition of
Payroll Management

Payroll Processing
The administration of the financial record
of employees' salaries, allowances and deductions

Payroll Processing
Payroll Processing
Input and Output of
Payroll Management

Input
Payroll file including all the
details of different monthly
component
Payroll Processing
Output
Pay slip including all the
details of the salary of the
month

Payroll Processing
Payroll Processing
Introduction to
Monthly Payroll Processing

Payroll Processing
 Calculating and processing monthly payroll
 Calculating number of days Present and Absent
 Monthly Components like Basic, HRA and Allowances are considered

Payroll Processing
 Components like PF (Employer's Contribution), ESI (Employer's Contribution), and
Gratuity, Not included
 Employee’s Contribution of PF and ESI will get deducted
 Professional tax deduction done as per Professional Tax slab

Payroll Processing
 Payroll is calculated on Salary Days
 Salary Days = Total days in a month – days absent + paid leaves
 Issuing payslip as a salary proof and explanation

Payroll Processing
Monthly
components amount
X
No. of
working days in the
monthTotal no. of
days in the month

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Payroll Processing
Professional Tax Slab

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West Bengal Professional Tax Slab
Monthly gross salary Deduction amount
0 – 10,000 NIL
10,001 – 15,000 Rs. 110
15,001 – 25,000 Rs. 130
25,001 – 40,000 Rs. 150
Above 40,001 Rs. 200

Payroll Processing
Odisha Professional Tax Slab
Upto 13,304 NIL
13,305 – 25,000 Rs. 125
25,001 and Above
Rs. 200 and Rs. 300
[P.Tax will be payable Rs. 200 for first 11
months and Rs. 300 in the last month]

Payroll Processing
Telangana Professional Tax Slab
Upto 15,000 NIL
15,001 – 20,000 Rs. 150
20,001 and Above Rs. 200

Payroll Processing
Payroll Processing
Net or Take Home Salary

Payroll Processing
 Net salary, more commonly known as Take-Home Salary, is the income that the
employee actually takes home once tax and other such deductions are carried
over with
 It refers to the in-hand figure that is calculated after deducting Income tax at
source (TDS) and other deductions as per the relevant company policy

Payroll Processing
Payroll Processing
Payroll Processing
Example

Payroll Processing
Convert yearly amount to monthly amount: divided by 12
Convert monthly amount to daily amount: divided by no. of days in a month
Daily amount * Number of salary days
Calculation to be done for each monthly component of CTC
Components Yearly Monthly (30 days) Daily
Basic 3,00,000 25,000 833
HRA 1,20,000 10,000 333
LTA 1,00,000 8,333 278
Conveyance 20,000 1,667 56
MR 20,000 1,667 56
Other Allowance 2,170 180 6
PF (employer’s) 23,400 - -
Gratuity 14,430 - -
Monthly deduction of employee’s PF (12%) N/A 1,800 60
Total 6,00,000 45,047 1,502

Payroll Processing
Lets assume an employee has worked only 25 days in a month of 30 days
He had 2 approved paid leaves which he has taken that month
So salary will be calculated: days in month – total absent + no. of approved paid
Leaves = 30 - 5 + 2= 27
Components Daily Payout Salary Days Monthly Payout
Basic INR. 833 27 INR. 22,491
HRA INR. 333 27 INR. 8,991
LTA INR. 278 27 INR. 7,506
Conveyance INR. 56 27 INR. 1,512
MR INR. 56 27 INR. 1,512
Other Allowance INR. 6 27 INR. 162
Deduction of employee’s PF INR. 60 27 INR. 1,620
Net Salary INR. 40,554

Payroll Processing
Monthly Payroll Processing Calculation
All Students will be asked to make CTC designing, calculate yearly gross
salary, monthly gross salary, monthly net salary for different Metro and Non
metro locations.
1.CTC 2,50,000; location Kolkata; Basic 35%
2.CTC 3,25,000; location Bhubaneswar; Basic 45%
3.CTC 4,75,000; location Hyderabad; Basic 55%
Calculate the net salary for June where LWP is 0 and net salary of July
where
LWP is 2 for above CTC.

Payroll Processing

Payroll Processing
Payroll Processing
Importance of Payslip

Payroll Processing
 A payslip serves as the proof of the salary that a person draws from the employer
 Apart from this, a payslip can be an important document when a person applies
for a loan or mortgage
 Payslip is important when the person is applying to another company

Payroll Processing
Payroll Processing
Payslip Structure
and Designing

Payroll Processing
 An official document of the monthly salary
 Explanation of salary details and deduction
 Details of various components of salary of a particular month
Information Section
Earning Section Deduction Section
Remarks Section (If any)

Payroll Processing
Information Monthly Earning Monthly Deduction Remarks
Name
Designation
Department
Month Days
Absent Days
Salary Days
Basic
HRA
All Allowances
Incentive
Commission
Employee’s PF
Employee’s ESI
Loans
Advances
Taxes
Any remarks by the
employer

Payroll Processing
Payroll Processing
Payslip Generation

Payroll Processing
Name Payslip for
Month
Employee
ID
Designation
Earning Deduction
Basic PF
HRA ESI
Allowances P. Tax
Total Earning Total Deduction
Net Salary Total Earning – Total Deduction

Payroll Processing
Payroll Processing
Mail Merge

Payroll Processing
 Mail merge is a process to create personalized letters and pre-
addressed envelopes or mailing labels for mass mailings from a form letter
 The feature is usually employed in a word processing document which contains
fixed text (which is the same in each output document) and variables (which act as
placeholders that are replaced by text from the data source)

Payroll Processing

Payroll Processing
Payroll Calculations and Payroll File Preparation
All Students will be asked to prepare payroll file in MS Excel file Including
all the yearly components, monthly components and earned components for
at least 5 employees taking 5 different CTCs.
Mail Merge Demo
All Students will be asked to give demo on Mail Merge Process to generate
Payslip.

Payroll processing

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Payroll processing