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10 Essential Guidelines for Establishing Payroll Service for a New Business
Is your company employing people?
But first, you must establish a payroll system for your company.
Establishing a payroll for the first time could be daunting, but it will be worthwhile if you have more hands supporting your company.
Do not wait any longer.
Whether your company is new or old, running any kind of business depends on having a payroll system.
Read on to discover how to establish a payroll, issues encountered with manual payroll, and other elements of configuring your payroll system.
Starting immediately, let’s walk the procedures needed to establish a payroll system for your small company. Connect 2 Payroll Service Provider in Ahmedabad, and, India.
Steps to establish a payroll system for new company
Any company absolutely has to set up a payroll system. The payroll system has changed and totally transformed several times until date. Boom! The new payroll systems contain all the functionality needed for the staff. It greatly speeds up the processing of employee departures and compensation. The finest element is that it promptly and precisely calculates employees’ salary, allowing them to see their account at any time.
These 10 essential suggestions will help you establish your small company payroll system.
Request TAN (Form 49 B) Get an Employment Identification Number (EIN)
Collect Staff Data Determine if you require Local or State IDs.
Classify your staff members Establish a policy for leave, attendance, shifts, etc. and complete leave year. Choose a pay period
Meticulously record your terms of employee compensation.
Choose a Payroll System
Execute a Payroll Cycle
Keep Records Regularly
Payroll Tax Reporting
1. Apply for TAN (Form 49B)
When you engage staff members, as an employer you must pay them a salary. While doing so you must collect or deduct tax at source under the Indian Income Tax Act 1961. For an employer, TAN registration is extremely crucial for this reason. TAN Stands for Tax Deduction and Collection Account Number (TAN) which you may apply online or offline. Allotted by the Income Tax Department of India, this is a ten digit alphanumeric number.
Although you might not require TAN number at the beginning of your company, it is always a good idea to obtain the TAN in advance since you surely need it later.
The GST number is also required together with TAN number; so, apply for GST number.
2. Collect Staff Data
Your employee’s taxes are your responsibility, so compile personal and professional information on those working with you. Here is the data you must gather:
Complete Name
Aadhar Card No.
PF Universal Account Number (UAN) Permanent Account Number (PAN)
Birth Date Current Address Permanent Address Declaration form 12B
You need all these data to input the employee information for Payroll operation. Form 12B is used to compute total tax liability if an employee joined in the middle of the financial year; remaining TDS is then deducted and deposited.
3. Classify your staff members
Indian companies run several different employee payroll systems. Therefore, categorize your staff according to a permanent, freelance, part-time and hourly based worker. This will enable you to see how they affect taxes. Observe the tax slab in which the employee falls and their grade.
4. Establish a leave, attendance, shift, etc. policy and complete leave year.
Most Indian companies choose the calendar year, from April Ist to March 31. For payment, this is deemed a leave year and financial year. Three months’ interval (January to March) allows for year-end leave finalization. Should management agree this policy, payrolldept.consider this as a foundation for tax computation and monthly payroll. Simultaneously, you may choose the infrastructure your company needs to track employee attendance.
5. Choose a Pay period
Choosing the pay period for your staff members is rather crucial. Many nations operate payroll daily, bi-weekly, weekly, monthly, etc. In India, however, usually monthly payroll is employed, or 1st–30th/31st of a month.
6. Document Your Employee Compensation Terms Carefully
Describing your staff pay is really vital. Therefore, monitor employee hours, paid time off, overtime, and other criteria so you may easily follow the Industrial labor regulations.
Remember to include deductibles such health plans, retirement contributions, food coupons, transportation allowances, Provident fund (PF) contributions, etc.
Tell your staff members about these deductible items particularly to the new joinee so they should not be surprised when their take-home pay is lower than what they anticipated.
7. Choose a Payroll System
Payroll administration emphasizes accuracy, thus do your homework and choose the one that helps your company. The ideal approach is to ask other business owners about the techniques they use and apply the advice they provide in establishing and managing payroll.
Payroll can be handled in-house or outsourced. Every option has benefits and drawbacks of its own. While with the payroll service provider you receive the lead time of three to five days for providing all the information, handling payroll in-house allows you more freedom about the processing time of the paycheck. Should you miss their specified deadline, the payroll service provider levies significant costs.
The payroll service provider, nevertheless, assumes full responsibility for the timely submission of tax payments and returns. As an employer, any payroll system you use will determine your reporting and payment of all payroll taxes.
8. Execute a Payroll Cycle
Once you have collected all the papers and data, you may begin processing payroll. Depending on your choice of payroll technique, you may either input it yourself or provide the data to your accountant.
9. Keep Records Regularly
The law mandates that you retain such records for certain timeframes. For instance, employee number, fundamental payroll records, submitted tax forms, receipts indicating taxes paid at any moment.
These records are unlosable. You may really preserve copies of every document and store them in a distinct, safe place. Should you misplace certain papers, this enables you to restore the database and resume your course fast.
10. Difficulties Encountered Running Payroll Manually
Processing payroll manually is not just a time-consuming chore but also somewhat difficult for the company. Everything is done by hand, hence manual payroll leaves possibility for human mistake. Payroll includes sensitive information, hence the problem of data security is more important as it makes outsourcing to service providers more difficult.
If you have just a few staff members, the manual payroll method can be efficient. More staff means more manual tracking of their hours and prices. Manual payroll makes monitoring time disbursements with appropriate deductions a difficult chore.
Some of the difficulties encountered in manual payroll processing companies are listed here.
1.Human Mistake
A manual payroll system raises the possibility of human mistake as all the entries are done manually. Even with the greatest HR and finance teams, truth is that errors can still occur.
A totally erroneous record might be caused by minor errors or incorrect entries. Finding the source of error would be time-consuming; if one could not be found, data would need to be recalculated. This is a total waste of time that might have been spent on more strategic activities otherwise.
2.Safety
Mostly payroll contains private employee data such social security number, bank account, and address. Very vital is the management of the significant personnel data in a physical copy or excel spreadsheet. Processed manually, the likelihood of information falling into the hands of the incorrect person is great. Therefore, it might quickly lead to data loss and potentially harm companies.
3. Staff Output
Typically, employee data including leaves, reimbursements, overtime are recorded and uploaded manually in a manual payroll system. Keeping such comprehensive data in an excel spreadsheet calls for much administration.
A little adjustment to the algorithm might lead to erroneous payouts. Doing such detailed input repeatedly is time-consuming and takes many days to calculate pay. Employees’ productivity and morale suffer when they waste their precious important time performing the same duties repeatedly.
4. Time and Attendance
Many staff members became ill or took holidays. Payroll should additionally monitor this time off information. Tracking every employee’s time and attendance manually might be laborious and daunting with the possibility of errors.
Poor data tracking could affect payroll computation generally. Miscalculation could cause workers to be overpaid or underpaid relative to their entitlement. This reduces retention rates and increases employee dissatisfaction.
5. Not following rules
In company, a little payroll mistake might be rather expensive for you. Not following statutory requirements might result in significant fines and penalties for you.
Indian payroll calls for a lot of legislative compliance. You must set aside time and give extra attention to be current on every rule and regulation.
6. Chaotic payroll processing
Manual payroll processing calls for several spreadsheets to keep employee data including paycheck, leave, claims, and other information.
7. Lacking capacity
Payroll’s manual processing has extremely limited capacity. Tracking time off data of employees using paper copies of forms and annual tax returns must be done well in advance to satisfy legal requirements. A touch of a button does not produce several reports including itemized payslips, bank GIRO files, CPF files, and year to date reports.
Final thoughts
Deliberate on which payroll system you will manage to guarantee you prevent the most frequent issues. Should you like to Connect 2 Payroll Service Companies in Ahmedabad, and, India. They will provide you complete payroll solution.
