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Allied payroll processes for ensuring accurate payroll

Payroll process

One would imagine that the activities of a pay master begins only during the last week of the month starting with collecting inputs from various sources, feeding them into a payroll system and generating outputs at a click of a button and that is the end of the whole process. It all sounds so simple, right? Though it is true in some sense, it broadly forms the main role of a pay master. However apart from the above, there are numerous sub-processes that form a majority of payroll activities which keeps the pay master busy all the time. Let us view some of the sub activities.

Monitoring Attendance, Loss of pay, LOP reversals, excess leaves, etc

Though time-keeping activity may not form a part of the role of a pay master in many organisations, the attendance / absenteeism data available for the purpose of salary payment needs to be validated to ensure employees are paid according to the records. Many a times, the attendance record may show negative data due to absenteeism or travel or in some cases, neglect by employees leading to loss of pay for those number of days. However, once the employee realises the pay cut, they tend to update their records in the subsequent month. This will lead to reversal of loss of pay and the employee needs to be reimbursed accordingly.

The attendance records also help the pay master to generate Overtime input data. These records are often inspected by labour inspectors for compliance.

Leave tracking modules need to be calibrated once a year by the pay master in order to credit fresh annual quota of leaves to employees. The pay master also has to review excess of leaves taken by an employee and adjust the same in the payroll.

Statutory compliances and computations

It is the expectation of a pay master to keep the organisation fully compliant with labour laws. The pay master needs to watch for any changes to statutory rules or laws that impact payroll and its activities. While most of the information is available on the websites of government agencies, it is a good practice to consult with internal advisors or professional consultants for obtaining updates on a regular basis or to seek clarification. Any misinterpretation or misunderstanding of laws can lead to unpleasant consequences to the organisation as well as the payroll team.

While it is a good practice to have segregation of duties where payroll inputs are provided by sources other than payroll members, there are certain input data that they are expected to self-generate. For example, organisations making profit are expected to pay a bonus to eligible employees under the Payment of Bonus Act. The same needs to be computed by the pay master as and when approved by the management and include it in their salaries. Certain organisations have target-based incentives to be paid to their sales or production teams. The same needs to be computed by the pay master based on formulae and raw inputs received from the teams.

Garnishments & other non-statutory remittances

Pay masters are often required to abide by instructions from financial institutions such as scheduled and cooperative banks to deduct and remit certain amount from an employee’s salary towards loan default repayments. These instructions or garnishment orders are either time-bound or amount specific or number of instalments. Hence, these needs to be monitored closely by the pay master.

Certain other deductions made from the salaries such as insurance premium, food subsidies, transport fees, etc need to be reconciled and remitted to relevant parties or appropriate vendors.

Some perquisites provided to certain sections of employees such as car lease or company lease deductions too need to reconciled and remitted to the vendors.

Some basic checks and balances

While pay masters may not be required to follow up regularly with stakeholders for inputs, they may have to check & obtain certain inputs mandatorily such as PAN, AADHAAR and Bank details from employees, which otherwise may lead to disruption of process.

Whenever payroll system or software upgrades occur or statutory tables are updated, the onus of testing and approving it lies with the pay master to avoid errors and miscalculations. Moreover, if there are upgrades to employee or manager self service modules, then a comprehensive training program or communication is expected from the pay master for a smooth launch.

Vendor management

A few organisations might have outsourced their entire payroll processes or a part of it to vendors. These could include consultants and professional advisors too. The pay master is expected to conduct regular reviews of their performance according to their contracts and also approve their invoices for payments.

Other engagements

Certain other unscheduled engagements do occur in the midst of normal schedules and activities of a pay master. Audits, inspections by government agencies, appearing for assessments or hearings in tax or compliance related matters, employee grievances, etc for which a pay master must prepare for and represent the organisation.

Employee engagements such as setting up of helpdesks, sending communications, attending round table meetings or town halls, etc would also be a part of activities of a pay master.

A smart payroll system or software will support the pay master in monitoring the above critical activities and data.

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