Online Payroll Software & Statutory Compliances in India (ESI, PF, PT, TDS)

By July 8, 2015 September 28th, 2020 Blog, ESI, Payroll, Provident Fund

Payroll is one of the key functions of an organization. Payroll processing involves many complex tasks such as entering the details of the new inductees, updating leave records, submission, and approval of timesheets for accurate computation, and dispensing off the salaries after making statutory (PF, ESI, PT, TDS)and non-statutory deductions.

Income Tax

The statutory compliances relating to payroll in India include health benefits covered under ESI, bonus, maternity benefits for women employees and superannuation benefits – Provident Fund, Gratuity and Tax Deduction at Source (TDS). TDS is deducted on the ‘cost to company’ (CTC) if the salary comes under the income tax slab. It is the total cost incurred by the employer inclusive of all the allowances, benefits and perquisites. Professional tax (PT) is another statutory deduction made from the gross salary of the employees. Women employees are also entitled for maternity benefits. The employees who put in extra hours at work are entitled to get overtime payment which is again a statutory requirement and is applicable primarily in manufacturing companies.

Initially, computation of these statutory compliances was done manually, involving lot of paperwork. Doing these complex calculations took up a lot of time and efforts of the concerned department employees. It also increased the probability of committing errors in salary and leave calculations.

These difficulties were somewhat minimised with the advent of computers. The Microsoft Excel spreadsheets eased the problems of the employees of the respective human resource and finance departments to some extent. They could enable faster calculations with the help of formulas in the spreadsheets. However, it did not free them of the hassles they faced in the computation of statutory compliances for all the employees of an organization. For example, let us consider that 15 employees in the production department of a manufacturing company are drawing CTC in the slab of 3 LPA to 6 LPA. The calculation of statutory deductions will not be the same for all the employees as they are drawing different CTC. Further, when an employee gets a raise or an increment in salary, the human resource division employees have to do the statutory deductions all over again as per the new compensation package. This is a tedious and time-taking exercise with the possibility of committing errors being high.

The employee grievances over the deductions made in their salary also increase due to lack of transparency. The respective employees flock to the human resource department with their escalations, which consumes a lot of time of the employees.

This is when the companies realise the importance of migrating to online payroll system to put an end to these complex issues faced during payroll processing. Moreover, it would minimise the chances of committing errors, leading to 100 percent accurate computation of salary. With all the salary details of the respective employees at one place inclusive of the statutory deductions, it will lend transparency to the whole system. This would, in turn, increase the efficiency and productivity of the employees. The human resource and finance department employees of an organization who were otherwise involved in working out long calculations can utilise their time in productive assignments. This enhances the overall profitability of the enterprise as the efficiency of the employees goes up.

With the cloud-based online payroll system, the computation of statutory compliances has become very easy and simple for the respective employees involved in the same. Further, the employees can also generate PF, ESI and bonus reports with full accuracy.

Online Payroll Software – Tax Deducted at Source (TDS) for salaries

  • Keep track of monthly TDS Challans paid
  • Generate FVU file for quarterly filing of TDS returns 24Q
  • Generate Digitally signed Form 16 with Part A and Part B

Online Payroll Software – Provident Fund (PF)

  • Generate KYC File
  • Generate monthly ECR File Electronic Return cum Challan File

Online Payroll Software – Employee State Insurance (ESI) for salaries

  • Generate Monthly Contribution File
  • Generate New Insured Person’s IP File

Online Payroll Software – Professional Tax (PT) for salaries

  • Generate Professional Tax Reports for respective states
  • Generate Professional Tax deduction reports for online filing

Organizations operating in different sectors, be it manufacturing, information technology, real estate, banking and finance, to name a few are governed by various legal provisions for safeguarding the interests of both, the company and its workforce. It prevents the ill-treatment of workers at the hands of their employers working at different tiers in the organization. All the organizations, whether small and medium enterprises or large corporate houses are mandated to strictly adhere by the provisions laid down in these labour legislations for the smooth running of their businesses. The company can get into serious trouble if found violating the provisions mentioned under the labour laws.

Statutory compliances play an important role in the payroll processing therefore they need to be implemented with great care and precision. Online payroll systems such as Brio’s Online Payroll application, have simplified the complex calculations involved in processing of payroll. Moving to an online payroll has helped the organizations to work within the provisions of the legal framework in a time and cost-effective manner with highest degree of accuracy. It’s time you switched over too if you are still maintaining your payroll on spreadsheets.

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