Payroll in India constitutes an intricate function with various tasks, responsibilities, and compliance aspects to deal with. Missing out on a single aspect could count as non-compliance and translate to a massive pecuniary fine! Software-based payroll has simplified and streamlined payroll operations significantly. But payroll yet remains an arduous task. Outsourcing payroll services is a potential solution to tackling payroll complexities. But before we talk about it, let's look at statutory compliance in HR and payroll in India with this quick guide. What is Payroll in the Indian Context? In India, payroll involves a broad array of activities that include but are not limited to the following. The functions may vary or increase with the type of organization and its compliance requirements.
  • Develop payroll policies like leave encashment policy, flexible benefits, etc.
  • Define components in pay slips like basic, variable pay, LTA, and HRA.
  • Ensure accurate actual calculation of gross salary and statutory non-statutory deductions and then derive the net pay value
  • Manage other payroll aspects like meal allowances, conveyance, etc.
  • Process payroll on time and release salaries correctly.
  • Deposit TDS, PF, etc., with the concerned authorities and file returns
Payroll Calculation in India Payroll processing involves calculating the net pay and making the necessary tax deductions. Thus, net pay is gross income minus gross deduction. Gross income or salary refers to all types of regular income plus allowances plus any single-time payment or benefit. On the other hand, a gross deduction is all types of regular income plus statutory deductions and any single-time deductions. Various Salary Components in India Salary in India comprises various components. Let's overview each.
  • Gross Salary: Includes basic salary, allowances, overtime pay, bonuses, holiday pay, and other deductions.
  • CTC: The total amount spent on an employee is CTC or cost to the company. It refers to an employee's complete salary package.
  • Take Home Salary/Net Salary: The amount calculated after deducting TDS and other deductions.
  • Allowances: These are given over and above the basic salary and are mandatory benefits, either fully/partially taxable or wholly exempt from tax. Various allowances include medical, House Rent Allowance (HRA), conveyance, Dearness Allowance (DA), children's education, etc. 
  • Deductions: Some common deductions in the Indian payroll system include Provident Fund (PF), Professional Tax (PT), National Pension Scheme (NPS), Labour Welfare Fund, and Employees' State Insurance (ESI).
  • Pre-Requisites: These are fringe or non-cash benefits given to employees at or above a particular level in the hierarchy. It could include rent-free accommodation, a car for personal use, a premium or personal accident policy, etc. The financial value of these pre-requisites is added to the salary, and employees pay tax on them.
Some other components include form 16, incentives, bonuses, reimbursements, pay slips, income tax, ad-hoc pay, gratuity, and employee investment declarations. Labour Laws in India In India, payroll professionals have to deal with a multitude of labour laws placed into various categories. Let’s enlist those categories and laws. 1. Social Security
  • The Employees’ State Insurance Act, 1948
  • The Employees Provident Fund Act, 1952
  • The Labour Welfare Fund Act, 1965
  • The Payment of Gratuity Act, 1972
2. Wages
  • The Payment Wages Act, 1936
  • The Minimum Wages Act, 1948
  • The Payment of Bonus Act, 1965
  • The Equal Remuneration Act, 1976
3. Industrial Relations
  • The Trade Unions Act, 1926
  • The Industrial Disputes Act, 1946
  • The Industrial Employment (Standing Orders) Act, 1946
  • The Factories Act, 1948
  • Shops and Establishment Act
4. Women Benefits
  • The Maternity Benefit Act, 1961
  • The Equal Remuneration Act, 1976
  • The Sexual Harassment of Women at Workplace Act, 2013
Benefits of HR and Payroll Statutory Compliance Of course, the most significant and visible benefit is the prevention of fines and penalties. But the advantages transcend the commercial dimension. Some other benefits of HR and payroll statutory compliance include the following.
  • Enhanced Reputation
Compliance catalyses a better reputation. Of course, no one would congratulate a company or appreciate it for ensuring compliance. But the government will surely reprimand an organisation for non-compliance in the form of penalty, legal implications, etc. However, compliance contributes positively to reputation. Such companies have a better face in the market. Many prospective buyers are keen on factors like compliance and judge a company by them. 
  • Augmented Business Opportunities
A better reputation could translate to increased business opportunities. Companies with a clean slate are usually considered credible, responsible and serious about their business and client proposition. 
  • Higher Employee Retention and Satisfaction
Compliant HR functions and timely and accurate payroll processing foster employees' trust. Although it doesn’t directly contribute to employee retention, non-compliance could disappoint employees and discourage them from continuing in the company. Thus, compliance can be positive for employee morale and satisfaction in the long run. 
  • Increased Business Focus
With compliance taken care of or handled appropriately, companies can focus on their business and pay more attention to crucial aspects like quality, customer satisfaction, process enhancements, strategy, etc. Ensure Payroll Compliance Effectively with Payroll Outsourcing Services Are you a small-, mid-sized business, start-up or global enterprise feeling it challenging to handle payroll? Consider outsourcing your payroll operations. With years of experience and continually evolving expertise in both these areas, Paysquare can prove to be a bankable payroll partner. So, how does partnering with Paysquare help or benefit you? Paysquare covers a broad area of payroll services, including payroll-related compliance, leave and attendance management, labour law compliance, employee self-service portal, and client-admin self-service portal. Want to know more about payroll compliance or get a quote? Please write to sales@paysquare.com.

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CA. Vipul Gandhi

Associate Director

Khandhar Mehta & Shah - Chartered Accountants

‘Paysquare’ a perfect match for us as a consultant to deliver the best to our client. It extends User friendly portal for Employees and seamless processing of Payroll including statutory compliance on time! We

Parameshwer Matla

Human Resources

Columbus India

‘Paysquare’ a perfect match for us as a consultant to deliver the best to our client. It extends User friendly portal for Employees and seamless processing of Payroll including statutory compliance on The most valuable service that we get from you is "peace of mind." I know that once I submit our payroll information, everything will happen on time, payroll, pay slips, statutory reports, full and final settlement, returns and I know that we are and will be always in compliance with statutory laws regarding payroll.

Ramakrishna Dabbara

Sr. Manager – Finance

Sumtotal Systems

We would like to take this opportunity to thank you for your continual support till date! Your support especially during this pandemic has been awesome! Be it the TAT (turnaround time) you people are processing our requests, being accommodative in accepting the II, III payroll revisions, working late/ weekends, delivering the reports in time and minimal to zero errors are some of the examples of your commitment towards work & deliverables.

Abhijeet Shete

SENIOR MANAGER- HUMAN RESOURCE

Altra Industrial Motion India

We would like to take this opportunity to thank you for your continual support till date! Your support especially during this pandemic has been awesome! Be it the TAT (turnaround time) you people are processing our requests, being accommodative in accepting the II, III payroll revisions, working late/ weekends, delivering the reports in time and minimal to zero errors are some of the examples of your commitment towards work & deliverables.

Sukesh Baban Dhage

Manager Accounts

Hi Tech BioSciences India Private Limited

On behalf of Hitech Bio Sciences India Pvt. Ltd., Hi Tech Bio Laboratories, Hi Tech Analytical Works & Hi Tech Biosynth Pvt. Ltd., we appreciate your dedication to provide Payroll services to our companies from the approximately last 4 years. We acknowledge the fact that due to COVID-19, situation has become really tough across the globe. We all are forced to stay at our homes and take extra care of ourselves along with family members. It is a privilege to acknowledge you and your consultancy’s efforts and recognize the valuable service that you have provided to us. 

It is always gratifying to work with such great people with extraordinary abilities to provide good and quality service. The kind of response from your side get is fabulous and most memorable with professional culture. Specifically we would like to mention that, your approach towards the client is fantastic, for e.g. response to email is very prompt, continuous touch with client, on time response to queries or questioners’, on time and accurate report sharing. Flexibility to client requirement, Client / customer centric approach etc. Timely payment of salary gives a lot of confidence to all employees and it is due to our partners like Paysquare that Hi tech has never defaulted on its commitment of timely payment of salaries.

Ratnakar Dhakad

Senior Operation Manager

Tecknack Technologies Private Limited

We are very impressed with Paysquare team due to their ability to process payroll very efficiently. We found the implementation team very knowledgeable, supportive and very systematic.

Paysquare is a very matured payroll processing solution and they have well paid down processes to manage first time as well as every month's processing.

Monica Shah

HR Business Partner India

Victaulic Piping Products India Private Limited

Honestly , It has been an amazing experience working with Payroll team as on date . Deepika and Uma has been a strong support to us. They have always been very helpful and co-operative. I congratulate them to run payroll with zero error every month. And I expect the same level of support in future. I am happy to be associated with Payroll team.

Seagate India

Manager

I have been a client of Paysquare for 7 years and their services are fantastic. Migration from the old consultant to Paysquare was seamless. Soon after the migration, Paysquare team was up the learning curve. They never missed the deadlines provided by us. The team is always reachable, and they keep us informed about changes in taxes or government policies which impact payroll. I have complete confidence and trust in their payroll solutions, and we will always recommend them. Any company looking to ease their payroll burden with friendly service and a flexible, secure system should partner with Paysquare.