Indian payroll management system

Things to look out for in a statutory compliant Indian payroll management systemDownload PDF

Multiple calculations and statutory compliance requirements makes calculating a payroll a complex process.

What is Statutory Compliance?

Statutory compliance refers to the legal framework which organizations must abide, in the management of their employees.

Every country has several tons of federal and state labor laws that companies need to align with. This list is forever being incremented.

Adhering to statutory compliances is essential for all big and small companies.

When it comes to Indian Payroll Management, companies have spent significant time to ensure that they are compliant with all the legal regulations.

1.1 Things to look out for in a statutory compliant Indian payroll management system

Ideal payroll software should be competent enough to carry out accurate payroll calculations, disbursal along with generation of pay slip and management of taxes.

Some common statutory requirements for payroll management in India are listed below:

TDS deduction

An employer paying salary to employees has to deduct TDS under section 192 of the Income-tax Act, 1961 if the salary is more than the maximum amount exempt from tax. The employers also need to generate Form 24Q and Form 16. Some of the salary components which impact TDS deduction are HRA, Medical allowance, Special allowance, Leave or travel allowance, Children education allowance and Investments.

ESI fund and PF deduction

ESI fund is maintained by ESIC is applicable to employees earning Rs 15,000 or less per month to provide the cash and medical benefits to them and their families.

PF is a compulsory contributory fund for the future of employees after their retirement or for their dependents in case of their early death

Professional Taxes

Professional tax is a state-based tax and is one of the statutory deductions from the gross income before computing the tax.

Ideal payroll management software needs to seemingly integrate all these aspects of payroll processing.

Choosing the right payroll software can save your time, efforts and increase productivity. Apart from being statutory compliant a payroll system has to have these essential traits:

Automated Payroll software needs to have a repository to create a salary structure that suits your business needs or industry along with legal regulations.

To successfully calculate accurate payroll based on the employee attendance there has to be seamless integration of leaves and attendance information of the employee on payroll.

There has to be a smooth integration between payroll and finance module of the company

ESS Portal to view pay slips allows employees to view their latest pay slips.

Regulations for a software to be statutory compliant:

  • Factories Act
  • PF & Misc
  • Provision Act
  • ESI Act
  • Minimum Wages Act
  • Bonus Act
  • Professional Tax Act
  • Labor Welfare Fund
  • Maternity Benefit Act
  • Payment of Wages Act