Digitization of Human Resource Management (HRM) processes hasfast-tracked accurate payroll management, along with simplifying other HR processes. It goes without saying that when employees enjoy a prompt and fair salary disbursement, they are likely to be satisfied with their employee.
The ease of payroll management can be the reason why the industry has been witnessing a massive growth of HRMS (Human Resource Management) suites. The HRMS market is projected togrow by 12.7% CAGR between 2023 and 2030. Already, as of2023, the sector was worth a staggering $24.25 bn.
In this blog, we will discover how software-powered payroll management can ensure accurate and compliant payroll management.
Streamlining Payroll Calculation via Digitization
Here are different components of a pay slip which can be computed effortlessly by apayroll software:
EPF (Employee Provident Fund) and ESI (Employee State Insurance)
Apart from contributing to the EPF and ESI funds, employers also have to deduct a certain sum from their employees’ salaries. To avoid any legal issues,the figure deducted as well as the employee contribution summust be accurate. The figures are based on the gross pay of an employee, which in turn is calculated as per the employees’ attendance, overtime contributions, etc.
Manually tracking attendance and the calculation of these contributions can be cumbersome, particularly for a large-scale workforce. More importantly, when these figures are generated for several employees within a tight deadline, the HR team is likely to make errors which can incur legal issues. This is where digitization powered by a payroll management system can makeadherence to compliance effortlessby automating the payroll process end-to-end.
Professional Tax
Professional taxes are often paid off at the employers’ end, resulting in a deductible component of the monthly CTC. This is why accurately determining the taxable amount is essential for ensuring a transparent payroll management process. However, calculating professional tax is easier said than done as the taxable amount is subject to the net payable amount after certain deductions. These deductions include components such as EPF contributions, gratuity, leave deductions, any past loans taken from the employer, etc., which are computed against total work hours, overtime pay, and paid leaves. Additionally, the rates and slabs of professional tax also can vary periodically.
Therefore, given that professional tax amount is calculated based on multiple factors, doing it manually can be laborious.A strong HR and payroll software can digitize the process of levying the exact professional tax, saving precious business hours. Most importantly, accuracy in this tax calculation is needed to ensure compliance with legal regulations and minimize the risk of errors or omissions in tax deductions. Thereby the digitization process also aids in avoiding potential penalties or legal issues.
Leave Encashment
Many companies have a robust leave encashment policy which strives to recognize and fairly compensate the employee for their dedication. Often the compensation for working on a holiday as opposed to clocking in hours on a paid leave day varies, making the manual computation of leave encashment a complicated affair. At the same time, these extra hours are also subject to the manager’s discretion, further proving the tracking process more complex and error prone.
A robust payroll software can automate the salary calculation by digitizing the leave encashment process in the following two-step process:
- The software creates a consolidated digital touchpoint for time tracking, leave approvals, etc. This can empower companies to get a snapshot of the employee’s accrued leave balances.
- The software directly applies the appropriate conversion rates on holidays and paid leave days which are being enchased, offering a transparent view of the payroll.
Work Hours and Loss of Pay
Many a time companies have tabulated loss of pay policies against clocking-in frauds, early departure from work, late coming beyond a threshold, etc. This is where tracking work hours digitally to account for loss of pay can be vital in complying with company policies. A payroll management software where an employee fills in timesheets as well as logs in and out can simplify the identification of the following:
- Unpaid leaves
- Work hours
- Loss of pay figures
As opposed to manual time tracking, this digitized process can help employers avoid discrepancies in productivity tracking. This also ensures transparency in payroll calculation, largely keeping any potential conflict between employees and employers at bay.
Automatic Generation of Overtime Pay
Calculating overtime pay is necessary for more than just compliance purposes. While the amount payable is calculated as per company policies and regulations set by labour laws, a secondary level of computation needs to be followed to strategically help the company grow. This secondary-level calculation will help HR teams and decision-makers understand whether the employee’s productivity justifies the overtime pay, thus influencing future permissions for overtime work. Comparing productivity against overtime pay is also important for identifying the key players in a team and for gauging the need for workforce expansion.
Given its importance, accuracy in overtime calculation is paramount. However, manual calculation of overtime pay can be complex, especially when considering factors such as overtime rates, eligibility criteria, and overtime limits. This is where digitization of payroll management can be a game-changer, as the payroll software automatically marks eligible overtime hours and generates accurate overtime pay statements. Further, in terms of employee experience, fair compensation for extra efforts by employees’ signals that the company values their hard work, thus fostering loyalty towards the organization.
Income Tax
Digitizing payroll can automate the computing and deduction of taxes from employee wages, reducing any form of human error that manual processes are prone to. The software-enabled process helps organizations stay abreast with the latest rules and regulations, ensuring compliance with evolving labour laws and the workforce expenditure that comes with them. Thus, for simplifying TDS (Tax Deducted at Source) based on employee’s income, a software for managing payroll is vital.
Easy Payroll Management with EmployWise
EmployWise strives to streamline payroll management by automating EPF, ESI, professional tax, leave encashment, overtime pay, and income tax deductions. Time tracking is a major factor in calculating the different components of a salary slip. This is why our Talent Management module has a featurecalled Timesheets which supports accurate time and productivity tracking. On the other hand, the HR and Payroll management module of our HRMS suite accounts for the payable hours and ensures accuracy, compliance, and transparency in salary slip generation.
With our HR payroll software, you can implement a fair, timely, transparent, and simple salary cycle and foster employee satisfaction and trust.
Curious to know more? Contact us today!
Reference
https://www.grandviewresearch.com/industry-analysis/human-resource-management-hrm-market
