Understanding the Purpose of Payroll Management System

When you first started your business, you had this great idea in mind, or you just had the will to have something of your own. Hence, you picked the best industry you know in and started.

The first and second month was great. You got a few clients, and you were happy to cater to their needs through freelancers. However, eventually, your work grew, you started getting more and more work, so much so that your freelancing team was not enough.

Just like that, all of a sudden, you had to face the responsibility of hiring employees, managing them, offering them hike, providing them incentives, etc.

This seemed like an easy task at first, but with time, it started getting more and more complicated. You were trapped in between multiple responsibilities – dispatching salaries on time and taking business decisions. At the end of every month, you had to stay in the office till 10 or 11 PM to complete payroll.

Can you relate?

If you can, it is time to understand a few factors about the payroll management system in India. Below we have explained what payroll management in India is, what are the stages, and how you can manage everything with ease. 

So, without further do, let’s dive in and check what the payroll management system is.  

The objective of the Payroll System

The payroll management system is a set of processes that helps you streamline salaries, bonuses, deductions, taxes, and other necessary aspects of the net pay of all the employees in your organization.

There are two primary objectives of the payroll management system in India. One is the macro objective, which is related to sales, strategy, revenue, etc. Another is micro, which is associated with the daily tasks of the business.

The aim behind having a payroll management system is to automate and streamline micro tasks such that the HR team has time to focus on the macro tasks.

You don’t have to worry about handling, managing, and creating payslips, salaries, and deductions of the employees. The tax deductions are also automated or handled by the outsourcing team. You only have to focus on major tasks such as the efficiency of sales, revenue, strategy, etc.

Here are the benefits that are delivered by a payroll management system to the HR department and the organization:

You can improve employee morale because when payroll activities are streamlined, your employees get a proper payroll structure. This helps in developing trust in the employer because it improves the financial integrity of the employer. Don’t you think? If you transfer salaries on time, deduct the right tax, submit it, and offer regular bonuses or incentives on time, your employees are happier.

Every employer has to take care of several payroll compliance structures. For example, TDS, PF, ESI, and other requirements of the tax and labor laws of India. If the employer is not updated with the latest news, it is likely for them to miss some aspects of this compliance. This means that the employer may have to incur penalties on these laws, which can hamper the brand image. A payroll management system can help you reduce the chances of this happening.

Every new business can face issues in managing and securing employees’ data because there is too much to handle. When you use an outsourced payroll management system in India, it is likely for you to gain help in securing and managing this data.

Lastly, it is cost-effective and time-effective. You don’t have to hire a full team in-house to handle these requirements. You don’t even have to spend a huge amount of time on the payroll at the end of every month. This saves your money as well as time, which you can utilize in other important business decisions. 

Stages of Payroll India

Gather Information

To process payroll India of the employees of the organization, collect data. You need to know the time every employee has worked for, including full-day, half-day, paid leaves, short-leaves, etc. You can also capture this data directly from the biometric payroll management system.

If you are not using an automated system for payroll, you may have to spend some time collecting this data from manual sheets. 

If the data is manually captured, it is necessary to thoroughly verify the data to understand if everything is up to the mark. For example, you may have accidentally placed the leave of an employee in someone else’s column in the Excel sheet. So, you are required to cross-verify every entry with the leave applications, etc.

This is a hassle, which is why outsourced payroll management in India can be utilized. 


Now, this task also depends on the help you have. If you are using an automated payroll calculation system, then you can feed the above data to the system. But, if you have to calculate payroll manually, you need to spend some (Read: A lot) of time on the calculations.

You have to count the hours of the normal work cycle of the employee as per their attendance. These hours are charged as per the normal pay scale of each employee.

Then, you need to bifurcate the hours of overtime because those are usually paid separately with hiked pay. Most of the organizations pay double salary for the overtime. However, it depends on the position as well. If the employee is in a managerial position, then they may not receive overtime for a certain amount of hours. So, you have to consider that as well in the calculations.

Overtime is usually calculated with the gross pay of the employee rather than net pay. Hence, you need to calculate that further to move forward.

Lastly, remove deductions from this pay such as PF, ESI, TDS, etc. This step is essential because it is linked to several compliance regulations. If you don’t submit the PF but deduct it, you can not only suffer fines but also lose your reputation in front of employees. 


The final step of the payroll India process is to pay the employee. Send the payment electronically, schedule it, or visit the bank and transfer it before the salary day. Don’t leave this task for the end day as various circumstances can cause a delay in the payments of employees. 

Post Payroll Management India

Once you have dispatched the payroll to all the employees, you need to complete several other activities such as salary slip generation, taxes, PF, reports, etc.

But, first things first, so prepare salary slips of the employees electronically through your payroll management system and send it to employees. This should be correctly sent with the company watermark and seal.

Then recalibrate taxes, PF, and other requirements if it is the end of the quarter. Submit the taxes and deductions to relevant departments.

Every once in a while, the company also needs to submit returns on these submissions. Prepare for these submissions, generate forms, check it, and oversee the calculations with the accountant carefully.

Then, when you have finally completed all these tasks, prepare reports for macro analysis. For example, payroll reports, financial budget reports, PF and taxes report employee performance report, etc. All these reports can help you manage your payroll and macro sales and marketing goals with ease. 


The payroll management system of any organization impacts several other aspects such as employee satisfaction, employee trust in the organization, salary calculations, compliance, taxes, sales, revenue, and other such activities. If you fail to streamline your payroll services in India, it is highly likely for you to face reputation damage in front of employees and company stakeholders,

Hence, the importance of the payroll management system in India and outsource your tasks. This can help you reduce costs and efforts spent on the management of these tasks. You can pay for the services you have acquired and leave the management and handling of employees on the outsource payroll management in India.

Paysquare is a payroll outsourcing organization in India. With our skilled employees and industry experience, we can help you streamline your payroll management in India. Reach out to us anytime, and our team will get back to you to hear your requirements. With us, you can leave your payroll-related worries behind and focus on the important decisions of your business. 

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